<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
IVAC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3841 13-3800335
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
--------------------------
IVAC OVERSEAS HOLDINGS, INC.
(Exact name of additional registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3841 13-3800332
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
--------------------------
IMED INTERNATIONAL TRADING CORP.
(Exact name of additional registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3841 33-0712032
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
--------------------------
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121
(619) 458-7000
(Address, including ZIP Code, and telephone number, including area code,
of each registrant's principal executive offices)
------------------------------
DANIEL A. ETNA, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
(212) 626-0872
(Name, address, including ZIP Code and telephone number, including area code, of
agent for service)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon the effectiveness of this registration statement, IVAC Holdings,
Inc. will offer to exchange its 9 3/4% Senior Subordinated Notes due 2006, which
will have been registered under the Securities Act of 1933, as amended, for any
and all of its outstanding 9 3/4% Senior Subordinated Notes due 2006.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE TO BE AGGREGATE PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes due 2006........... $200,000,000 100% $200,000,000 $60,606.07
Guarantees of 9 3/4% Senior Subordinated Notes due
2006.............................................. -- -- -- None(2)
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f) of the Securities Act of 1933.
(2) No fee required pursuant to Rule 457(n).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 24, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
IVAC HOLDINGS, INC.
OFFER TO EXCHANGE ITS
9 3/4% SENIOR SUBORDINATED NOTES DUE 2006,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2006
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
------------------------
IVAC Holdings, Inc., a Delaware corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 9 3/4% Senior
Subordinated Notes due 2006 ("New Notes"), registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to the Registration
Statement (as defined) of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 9 3/4% Senior Subordinated Notes due 2006
("Old Notes," and, together with New Notes, "Notes"), of which $200.0 million
aggregate principal amount is outstanding. The form and terms of the New Notes
are identical in all material respects to the form and terms of the Old Notes
(which they replace), except that the New Notes (i) have been registered under
the Securities Act and, therefore, do not bear legends restricting their
transfer and (ii) do not contain certain provisions providing for the payment of
Liquidated Damages (as defined) under certain circumstances relating to the
Registration Rights Agreement (as defined). The New Notes will evidence the same
debt as the Old Notes (which they replace) and, except as set forth in the
immediately preceding sentence, will be entitled to the benefits of the
Indenture (as defined), under which both the Old Notes were, and the New Notes
will be, issued. See "The Exchange Offer" and "Description of Notes."
Interest on the New Notes will accrue from November 26, 1996, the date of
the original issuance of the Old Notes, and will be payable in cash
semi-annually in arrears on June 1 and December 1 of each year, commencing June
1, 1997. No interest will be payable on the Old Notes accepted for exchange. The
Company will not be required to make any mandatory redemption or sinking fund
payment with respect to the New Notes prior to maturity. The New Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after December 1, 2001 at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of redemption. In addition, at any time
prior to December 1, 1999, the Company may, on one or more occasions, redeem up
to $70.0 million in aggregate principal amount of the Notes with any of the net
proceeds of one or more public or private offerings of common stock of (i)
Advanced Medical, Inc., a Delaware corporation ("Advanced Medical"), or any
other corporate parent of the Company to the extent the net proceeds thereof are
contributed to the Company as a capital contribution to common equity or (ii)
the Company, in each case, at a redemption price of 109.75% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the applicable date
of redemption; PROVIDED that at least $130.0 million in aggregate principal
amount of the Notes remain outstanding immediately after the occurrence of each
such redemption; PROVIDED, FURTHER, that, with respect to a private offering of
the common stock of the Company, such common stock shall be issued at a price no
lower than the fair market value thereof, as evidenced by an independent
investment banking firm of national standing delivered to the Trustee (as
defined). In the event of a Change of Control (as defined), the holders of the
New Notes will have the right to require the Company to purchase their New
Notes, in whole or in part, at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. See "Description of Notes."
The New Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company, including indebtedness pursuant to the New Credit
Facility (as defined). The New Notes will be guaranteed (the "Subsidiary
Guarantees"), jointly and severally, on a senior subordinated basis by certain
of the Company's domestic subsidiaries (which are the only subsidiaries that
guarantee the Company's obligations under the New Credit Facility) (the
"Guaranteeing Subsidiaries"). As of the date of this Prospectus, the
Guaranteeing Subsidiaries are IMED International Trading Corp., a Delaware
corporation, and IVAC Overseas Holdings, Inc., a Delaware corporation. The
Subsidiary Guarantees will be subordinated in right of payment to all existing
and future Senior Debt of the Guaranteeing Subsidiaries, including the
guarantees of the Guaranteeing Subsidiaries of the Company's obligations under
the New Credit Facility. At September 30, 1996, on a pro forma basis, the
Company would have had approximately $210.6 million of Senior Debt outstanding
and the Guaranteeing Subsidiaries would have had no Senior Debt outstanding
(excluding guarantees by the Guaranteeing Subsidiaries of the Company's
obligations under the New Credit Facility). See "Description of Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires (the "Expiration Date"), which will be
, 1997, unless the Exchange Offer is extended. Tenders of Old Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. The Exchange Offer,
however, is subject to certain customary conditions which may be waived by the
Company. Old Notes may be tendered only in integral multiples of $1,000. See
"The Exchange Offer."
2
<PAGE>
The Old Notes were sold by IMED Corporation ("IMED") on November 26, 1996 to
the Initial Purchasers (as defined) in a transaction not registered under the
Securities Act in reliance upon an exemption under the Securities Act (the
"Offering"). The Initial Purchasers subsequently placed the Old Notes with
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act ("Rule 144A") and with a limited number of institutional accredited
investors that agreed to comply with certain transfer restrictions and other
conditions. Accordingly, the Old Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The New Notes are being offered hereunder in order
to satisfy the obligations of the Company and the Guaranteeing Subsidiaries
under the Registration Rights Agreement. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company or either of the Guaranteeing
Subsidiaries within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, PROVIDED that such New Notes are acquired in the ordinary course
of such holder's business and such holder has no arrangement or understanding
with any person to, and does not intend to, participate in the distribution of
such New Notes. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer" and "The Exchange Offer--Resale of the New Notes." Each broker-dealer (a
"Participating Broker-Dealer") that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities. The Company
and the Guaranteeing Subsidiaries have agreed that, for a period of 180 days
after the Expiration Date, they will make this Prospectus, as it may be amended
or supplemented from time to time, available to any Participating Broker-Dealer
for use in connection with any such resale. See "Plan of Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Old Notes
are designated for trading in the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market. There is no established trading market for
the New Notes. The Company does not currently intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. Accordingly, there can be no assurance as to the development
or liquidity of any market for the New Notes. Moreover, to the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
The New Notes will be available initially only in book-entry form and the
Registrants expect that the New Notes issued pursuant to the Exchange Offer will
be issued in the form of a Global Note (as defined), which will be deposited
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Note representing the New Notes will be shown on, and
transfers thereof will be effected through, records maintained by the Depositary
and its participants. After the initial issuance of the Global Notes, New Notes
in certified form will be issued in exchange for the Global Notes only under the
limited circumstances set forth in the Indenture. See "Description of
Notes--Book-Entry; Delivery and Form."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
3
<PAGE>
AVAILABLE INFORMATION
The Company and the Guaranteeing Subsidiaries have filed with the Commission
a registration statement on Form S-4 (together with all amendments, exhibits,
schedules and supplements thereto, the "Registration Statement") under the
Securities Act covering the New Notes being offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement. For
further information with respect to the Company, the Guaranteeing Subsidiaries
and the Exchange Offer, reference is made to the Registration Statment.
Statments made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, aggreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Registration Statement, including the exhibits thereto, can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional
Offices of the Commission at 75 Park Place, New York, New York 10007 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov.
As a result of the filing of the Registration Statement with the Commission,
the Company and the Guaranteeing Subsidiaries will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Company and the Guaranteeing Subsidiaries to file periodic reports and other
information with the Commission will be suspended if the Notes are held of
record by fewer than 300 holders as of the beginning of any fiscal year of the
Company and the Guaranteeing Subsidiaries other than the fiscal year in which
the Registration Statement is declared effective. The Company and the
Guaranteeing Subsidiaries will nevertheless be required to continue to file
reports with the Commission if the New Notes are listed on a national securites
exchange. The Company has agreed pursuant to the Indenture that, whether or not
required by the rules and regulations of the Commission, for so long as any
Notes are outstanding, the Company shall furnish to the holders of the Notes (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of the Company and its Restricted
Subsidiaries (as defined) and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company was required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. Moreover, the Company and the Guaranteeing Subsidiaries have agreed
that, for so long as any Notes remain outstanding, they will furnish to holders
of the Notes and to securities analysts and prospective investors, upon their
request, the information required to be delivered by Rule 144A(d)(4) under the
Securities Act.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
DATA APPEARING ELSEWHERE IN THIS PROSPECTUS AND THE DOCUMENTS REFERRED TO
HEREIN. IMMEDIATELY FOLLOWING THE CLOSING OF THE OFFERING, A SERIES OF MERGERS
(COLLECTIVELY, THE "MERGER") WERE EFFECTED PURSUANT TO WHICH THE OPERATIONS OF
IMED AND IVAC MEDICAL SYSTEMS, INC. ("IVAC MEDICAL SYSTEMS"), FORMERLY KNOWN AS
IVAC CORPORATION AND A SUBSIDIARY OF IVAC HOLDINGS, INC. ("IVAC HOLDINGS"), WERE
TRANSFERRED TO IVAC HOLDINGS AND IVAC HOLDINGS BECAME A WHOLLY OWNED SUBSIDIARY
OF ADVANCED MEDICAL. AS A RESULT OF THE MERGER, THE COMPANY BECAME THE SUCCESSOR
OBLIGOR WITH RESPECT TO THE OLD NOTES. REFERENCES HEREIN TO THE "COMPANY" REFER
TO IVAC HOLDINGS AFTER THE MERGER. REFERENCES HEREIN TO "IMED" REFER TO IMED
CORPORATION AND ITS SUBSIDIARIES PRIOR TO THE MERGER. REFERENCES HEREIN TO
"IVAC" REFER TO IVAC HOLDINGS AND ITS SUBSIDIARIES (OTHER THAN RIVER MEDICAL,
INC. ("RIVER"), THE OPERATIONS OF WHICH WERE DISCONTINUED BY IVAC IN JUNE 1996
(THE "RIVER DIVESTITURE")) PRIOR TO THE MERGER.
THE COMPANY
The Company is the leading provider of infusion systems and related
technologies to the United States hospital market, with the largest installed
base of pump delivery lines ("channels"). In addition, the Company is a leader
in the international infusion systems market with a number one or two market
position based on installed base of infusion pumps in eight Western European
countries, the largest installed base of infusion pumps in Australia and Canada,
and an established position in Latin America and Asia. The Company's infusion
systems, which are used to deliver fluids, generally pharmaceuticals or
nutritionals, accurately and safely to patients, consist of single and
multi-channel infusion pumps and controllers, and proprietary and
non-proprietary disposable administration sets (plastic tubing and pump
interfaces). In addition, the Company is a leading provider of vital signs
measurement products that measure and monitor temperature, pulse and blood
pressure, with the largest installed base of hospital thermometry systems in the
United States.
The Company sells a full range of products through a direct sales force
consisting of over 230 salespersons and through more than 150 distributors to
over 5,000 hospitals worldwide. On a pro forma basis, the Company's United
States sales and sales to customers located outside of the United States would
have accounted for approximately 72% and 28%, respectively, of the Company's pro
forma net sales for 1995. For the twelve months ended September 30, 1996, on a
pro forma basis, the Company would have had net sales of $347.2 million and
Adjusted EBITDA (as defined) of $86.4 million.
Infusion Systems. At September 30, 1996, the Company had approximately
205,000 single and multi-channel large volume infusion pumps installed in the
United States, with a market share of approximately 40% of all installed
channels in the United States. The Company offers a wide variety of infusion
pumps designed to meet the varying price and technological requirements of its
broad array of customers. These infusion pumps include the Gemini series,
consisting of single, dual and four channel infusion pumps designed for use in
all hospital settings by customers with sophisticated technological
requirements; Signature Edition, a versatile, user-friendly single and dual
channel infusion pump for use in general medical and surgical settings;
MedSystem III ("MS III"), a compact, lightweight, programmable three channel
infusion pump targeted for the hospital critical care setting; and the 560/570
Series and the 590/599 Series, consisting of single channel infusion pumps
designed for the price-conscious customer. In addition, the Company offers the
ReadyMED ambulatory infusion pump, which is compact, lightweight and disposable,
for use in the alternate site market and a variety of syringe infusion pumps for
use primarily outside the United States.
------------------------
The Company has registered or applied to register the following trademarks:
IMED-Registered Trademark-, Accuset-Registered Trademark-,
Graviset-Registered Trademark-, Microset-Registered Trademark-,
Flo-Stop-Registered Trademark-, Gemini-Registered Trademark-, Gemini
PC-1-Registered Trademark-, Gemini PC-2-Registered Trademark-, Gemini
PC-4-Registered Trademark-, Gemini PC-2TX-Registered Trademark-,
PC-1-Registered Trademark-, PC-2-Registered Trademark-,
PC-4-Registered Trademark-, Autotaper-Registered Trademark-,
Versataper-Registered Trademark-, microSTAR-Registered Trademark-,
ReadyMED-Registered Trademark-, VersaSafe-Registered Trademark-,
IVAC-Registered Trademark-, IVAC MEDICAL SYSTEMS-TM-,
CORE-CHECK-Registered Trademark-, DYNAMIC MONITORING-TM-, MEDSYSTEM III-TM-,
PCAM-TM-, SIGNATURE EDITION-TM-, TEMP-PLUS-Registered Trademark-,
VITAL-CHECK-Registered Trademark-, SPACE-SAVER-Registered Trademark-,
ACCUSLIDE-TM- and SmartSite-TM-. SAFSITE-Registered Trademark- is a registered
trademark of B. Braun, Inc.
4
<PAGE>
The Company manufactures higher margin proprietary disposable administration
sets which can only be used with the Company's large volume infusion pumps.
Since the useful life of the Company's infusion pumps is typically seven to ten
years, the Company's industry-leading installed base allows it to generate
stable, predictable and recurring revenues from sales of disposable
administration sets. In 1995, the Company sold approximately 47.5 million
proprietary and 7.5 million non-proprietary disposable administration sets. The
Company's disposable administration sets offer protection features designed to
prevent the unregulated flow of fluids into a patient's blood stream ("free
flow"). In addition, the Company has recently introduced several enhancements to
its disposable administration sets, including needleless access systems that are
designed to reduce the risk to health care providers of diseases, such as AIDS
and hepatitis, that may be transmitted through accidental needlesticks and, in
the case of the SmartSite System, to eliminate patient exposure to latex which
can cause severe allergic or anaphylactic shock reactions. These features
continue to provide the Company's customers with the latest cost-effective
technology for the Company's installed base of infusion pumps. For the twelve
months ended September 30, 1996, on a pro forma basis, the Company's infusion
systems net sales would have been approximately $293.6 million, representing
approximately 85% of the Company's pro forma net sales.
Vital Signs Measurement Products. The vital signs measurement products
market consists of discrete market niches, each of which has different
competitive dynamics. The Company primarily operates in the United States,
Canada and Western Europe in two market niches of the vital signs measurement
products market: (i) hospital thermometry systems and (ii) stand-alone,
non-invasive, multi-parameter instruments used to measure and monitor a
combination of temperature, pulse and blood pressure. The Company's large base
of installed hospital thermometry instruments allows it to generate stable,
predictable and recurring revenues from sales of related disposable probe
covers. In 1995, the Company manufactured and sold over 630 million proprietary
disposable probe covers. For the twelve months ended September 30, 1996, on a
pro forma basis, the Company's vital signs measurement products net sales would
have been approximately $33.2 million, representing approximately 9.6% of the
Company's pro forma net sales.
At December 31, 1995, the Company's installed base of thermometry
instruments constituted approximately 43% of the United States hospital
electronic and infrared thermometry market, making the Company the largest
provider of hospital thermometry systems in the United States. The Company's
principal thermometry instruments are TEMP-PLUS II, an electronic thermometer,
and CORE-CHECK, an infrared thermometer, both of which are widely used in
hospitals and alternate site settings. The Company is also the second largest
participant in the United States infrared thermometry market, the fastest
growing segment of the hospital thermometry market, and, at December 31, 1995,
had approximately 31% of the United States hospital installed base. In addition,
the Company's hospital installed base of stand-alone, non-invasive,
multi-parameter instruments, which measure and monitor temperature, pulse and
blood pressure, is the second largest in this market niche in the United States.
The Company's principal executive offices are located at 10221 Wateridge
Circle, San Diego, California 92121 and its telephone number is (619) 458-7000.
OPERATING STRATEGY
The Company believes that the Merger will enable it to: (i) significantly
expand the breadth of its product lines; (ii) capitalize on its established
global distribution network; (iii) enhance existing products and introduce new
products through the use of complementary patents and other proprietary
technologies; (iv) benefit from the combined experience of IMED and IVAC senior
management teams; and (v) identify and realize cost savings through synergies
and economies of scale. The Company believes that these benefits will enable it
to achieve increased sales and Adjusted EBITDA in future periods.
The Company's goals are to: (i) enhance its worldwide position as a leading
provider of cost-effective, high-quality infusion systems in the hospital
setting; (ii) expand its presence in the alternate site market; (iii) expand its
product lines through strategic acquisitions and alliances; and (iv) increase
profitability and
5
<PAGE>
Adjusted EBITDA. In order to achieve these goals, management will focus on
implementing the following strategies:
Expanding Internal Growth. The Company will seek to expand internal growth
by continuing to develop, manufacture and market new products while also making
innovations to its existing product lines in order to respond to evolving
customer preferences, changing market dynamics and technological advancements.
Moreover, the Company will introduce certain of its products to geographic and
user markets that have traditionally not used such products as part of their
therapeutic programs. The Company will strive to introduce and market products
with innovative features that are not presently available while manufacturing
these products at a reasonable cost. The Company is currently developing several
new products and product line extensions, including: (i) a modular infusion pump
that incorporates innovations in microprocessor and electromechanical technology
and will offer advanced programming features, compact size and a one to four
channel capability; (ii) an electromechanical ambulatory infusion pump, targeted
for the alternate site market, that is lightweight, compact and capable of
performing multiple therapeutic applications and other advanced functions; and
(iii) a single channel infusion pump designed for the price-conscious customer.
The Company believes that, in addition to increasing revenues from infusion pump
sales, to the extent the introduction of these new infusion pumps increases its
installed base of infusion pumps, the Company will benefit from increased cash
flows attributable to sales of higher margin proprietary disposable
administration sets used in connection with these new infusion pumps.
Increasing International Operations. The Company believes that sales of
products outside of the United States represents a significant potential source
of growth. For the nine months ended September 30, 1996, sales to customers of
IMED and IVAC located outside of the United States represented 21% and 33% of
their respective net sales. The Company intends to expand its global presence
and increase its penetration in markets where it does not currently enjoy
significant market shares by: (i) cross-selling the full range of IMED and IVAC
products to the Company's expanded customer base; (ii) establishing distribution
channels through strategic partnerships and direct sales forces in countries
where the Company has little or no existing distribution network; (iii)
establishing direct distribution systems in markets where the Company utilizes
local distributors; and (iv) developing products or modifying existing products
to satisfy local market preferences or requirements.
Reducing Production and Operating Costs. The Company will seek to
significantly reduce production and operating costs following the Merger by
eliminating redundant expenses and by monitoring and controlling fixed and
variable operating expenses. To achieve these cost reductions, the Company will
focus on implementing the following programs: (i) reducing overall head count
through termination and attrition; (ii) consolidating supply sources; and (iii)
rationalizing underutilized assets, including consolidating executive offices
and manufacturing facilities. IVAC's and IMED's executives have demonstrated an
ability to enhance productivity and reduce costs as indicated by their
respective improvements in Adjusted EBITDA. IVAC's Adjusted EBITDA margin
improved from 3.4% in 1994 to 20.2% for the nine months ended September 30,
1996. IMED's Adjusted EBITDA margin improved from 17.3% in 1993 to 22.6% for the
nine months ended September 30, 1996. The Company believes that a low-cost
manufacturer should be well positioned to succeed in the current cost-conscious
health care environment through aggressive pricing while maintaining
profitability.
Capitalizing on Strategic Acquisitions. The Company intends to supplement
internal growth by engaging in strategic product, technology and business
acquisitions focused primarily on complementing the Company's existing product
lines. Acquisition candidates will be assessed primarily based on: (i)
opportunities for improving the Company's established United States and
international sales presence; (ii) market leadership potential; (iii) ability to
increase the Company's revenue per account; (iv) ability to access niche
markets; and (v) synergy with the Company's existing technological base and
manufacturing capabilities. The acquisition of products used in the alternate
site market will also be a priority.
6
<PAGE>
FUNDING OF THE MERGER AND RELATED TRANSACTIONS
IMED used the net proceeds of the Offering, borrowings of $204.2 million
under the New Credit Facility, the proceeds of a capital contribution (the
"Capital Contribution") of approximately $19.6 million from Advanced Medical and
existing cash balances to: (i) pay the cash portion of the Merger Consideration
(as defined); (ii) refinance (the "Refinancing") IMED's and IVAC's existing bank
indebtedness; (iii) repurchase the Existing Senior Notes (as defined) pursuant
to the Debt Tender Offer and Consent Solicitation (as defined); (iv) repay the
13.2% Junior Subordinated Notes due 2006 of IVAC Holdings (the "Junior Notes
Repayment"); and (v) pay transaction fees and expenses.
The Capital Contribution was funded in part through the sale to Decisions
Incorporated ("Decisions"), a corporation wholly owned by Advanced Medical's
principal stockholder, by Advanced Medical of 13,333,333 shares of its common
stock for aggregate proceeds of $40.0 million (the "Decisions Contribution").
The balance of the Capital Contribution was funded with existing cash balances
of Advanced Medical. The portion of the net proceeds of the Decisions
Contribution not applied to make the Capital Contribution was used by Advanced
Medical to redeem approximately $22.0 million principal amount of its 15%
Subordinated Debentures due 1999 and fund the redemption of Advanced Medical's
outstanding preferred stock. In connection with the Decisions Contribution,
Decisions exchanged an aggregate of $37.5 million in principal amount of
convertible promissory notes issued by Advanced Medical for 29,416,086 shares of
Advanced Medical common stock.
The Merger, the Offering, the Capital Contribution, the Refinancing, the
Debt Tender Offer and Consent Solicitation and the Junior Notes Repayment are
collectively referred to herein as the "Transactions."
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
NOTES........................................ The Old Notes were sold by IMED on November
26, 1996 to Donaldson, Lufkin & Jenrette
Securities Corporation, BT Securities
Corporation, Bear, Stearns & Co. Inc. and
Paribas Corporation (collectively, the
"Initial Purchasers") pursuant to a purchase
agreement dated November 19, 1996 (the
"Purchase Agreement") by and among IMED, IMED
International Trading Corp. and the Initial
Purchasers. The Initial Purchasers
subsequently resold the Old Notes to
qualified institutional buyers pursuant to
Rule 144A and to a limited number of
institutional accredited investors that
agreed to comply with certain transfer
restrictions and other conditions. See "The
Exchange Offer-- Purpose and Effect of the
Exchange Offer."
REGISTRATION RIGHTS AGREEMENT................ Pursuant to the Purchase Agreement, IMED,
IMED International Trading Corp. and the
Initial Purchasers entered into a
registration rights agreement dated as of
November 26, 1996 (the "Registration Rights
Agreement"), which grants the holders of the
Old Notes certain exchange and registration
rights. The Exchange Offer is intended to
satisfy such exchange rights which terminate
upon the consummation of the Exchange Offer.
See "The Exchange Offer--Purpose and Effect
of the Exchange Offer."
THE EXCHANGE OFFER
SECURITIES OFFERED........................... $200.0 million in aggregate principal amount
of 9 3/4% Senior Subordinated Notes due 2006,
which have been registered under the
Securities Act.
THE EXCHANGE OFFER........................... $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
Old Notes that are validly tendered and not
withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. As of the date
hereof, $200.0 million aggregate principal
amount of the Old Notes are outstanding. The
Company will issue the New Notes to holders
as promptly as practicable following the
Expiration Date.
RESALE....................................... Based on no-action letters issued by the
staff of the Commission to third parties, the
Company believes the New Notes issued
pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred
by any holder thereof (other
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
than any such holder that is an "affiliate"
of the Company or either of the Guaranteeing
Subsidiaries within the meaning of Rule 405
under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, PROVIDED
that such New Notes are acquired in the
ordinary course of such holder's business and
such holder has no arrangement or
understanding with any person to, and does
not intend to, participate in the
distribution of such New Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter.
Each Participating Broker-Dealer that
receives New Notes for its own account
pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time,
may be used by a Participating Broker-Dealer
in connection with resales of New Notes
received in exchange for Old Notes where such
Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities.
The Company and the Guaranteeing Subsidiaries
have agreed that, for a period of 180 days
after the Expiration Date, they will make
this Prospectus, as it may be amended or
supplemented from time to time, available to
any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution
of the New Notes can not rely on the position
of the staff of the Commission enunciated in
no-action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction.
Failure to comply with such requirements in
such instance may result in such holder
incurring liability under the Securities Act
for which the holder is not
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
indemnified by the Company and the
Guaranteeing Subsidiaries.
EXPIRATION DATE.............................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997,
unless extended, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended.
ACCRUED INTEREST ON THE NEW NOTES AND
THE OLD NOTES.............................. Each New Note will bear interest from
November 26, 1996, the date of the original
issuance of the Old Notes. No interest will
be paid on the Old Notes accepted for
exchange.
CONDITIONS TO THE EXCHANGE OFFER............. The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange
Offer--Conditions." The Exchange Offer is not
conditioned upon any minimum principal amount
of Old Notes being tendered.
PROCEDURES FOR TENDERING OLD NOTES........... Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, or an Agent's Message (as
defined) in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or facsimile thereof, together with such Old
Notes and any other required documentation to
the Exchange Agent (as defined), at one of
the addresses set forth herein and therein.
By executing the Letter of Transmittal or
delivering an Agent's Message, each holder of
Old Notes will represent to the Company and
the Guaranteeing Subsidiaries that, among
other things (i) the New Notes being acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business
of the person receiving such New Notes,
whether or not such person is the holder; and
(ii) neither the holder nor any such other
person (A) (other than a Participating
Broker-Dealer referred to in the next
sentence) has any arrangement or
understanding with any person to participate
in the distribution of such New Notes or is
engaging or intends to engage in the
distribution of such New Notes; or (B) is an
"affiliate" of the Company or either of the
Guaranteeing Subsidiaries within the meaning
of Rule 405 under the Securities Act. Each
Participating Broker-Dealer that receives New
Notes for its own account in exchange for Old
Notes must acknowledge that it (i) acquired
the Old Notes for its own account as a result
of market-
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
making activities or other trading
activities; (ii) has not entered into any
arrangement or understanding with the Company
or any "affiliate" of the Company or either
of the Guaranteeing Subsidiaries within the
meaning of Rule 405 under the Securities Act
to distribute the New Notes to be received in
the Exchange Offer; and (iii) will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale
of such New Notes. See "Plan of
Distribution," "The Exchange Offer--Purpose
and Effect of the Exchange Offer" and
"--Procedures for Tendering."
SHELF REGISTRATION STATEMENT................. If (i) any holder of Old Notes (A) is
prohibited by law or Commission policy from
participating in the Exchange Offer; (B) may
not resell the New Notes acquired by it in
the Exchange Offer to the public without
delivering a prospectus and this Prospectus,
as it may be amended or supplemented from
time to time, is not appropriate or available
for such resales; or (C) is a Participating
Broker-Dealer and owns Old Notes acquired
directly from the Company or an affiliate of
the Company or either of the Guaranteeing
Subsidiaries and (ii) such holder has
satisfied certain conditions relating to the
provision of information to the Company for
use therein, the Company and the Guaranteeing
Subsidiaries have agreed to register such Old
Notes on a shelf registration statement (the
"Shelf Registration Statement") and use their
respective best efforts to cause it to be
declared effective by the Commission on or
prior to 120 days after the date on which the
Company and the Guaranteeing Subsidiaries
became obligated to file the Shelf
Registration Statement. The Company and the
Guaranteeing Subsidiaries have agreed to
maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of three years, to
cover resales of Old Notes held by any such
holders. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS..... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Notes in the Exchange Offer should contact
such registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such beneficial
owner wishes to tender on his own behalf,
such beneficial owner must, prior to
completing and
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
executing the Letter of Transmittal or
delivering an Agent's Message and delivering
his Old Notes, either make appropriate
arrangements to register ownership of the Old
Notes in such beneficial owner's name or
obtain a properly completed bond power from
the registered holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See
"The Exchange Offer--Procedures for
Tendering."
GUARANTEED DELIVERY PROCEDURES............... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
an Agent's Message or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures
for book-entry transfer) prior to the
Expiration Date, must tender their Old Notes
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
ACCEPTANCE OF OLD NOTES AND DELIVERY
OF NEW NOTES............................... Subject to certain conditions (as described
more fully in "The Exchange
Offer--Conditions"), the Company will accept
for exchange any and all Old Notes which are
properly tendered in the Exchange Offer and
not withdrawn, prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered as promptly as practicable
following the Expiration Date.
WITHDRAWAL RIGHTS............................ Except as otherwise provided herein, tenders
of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
EXCHANGE AGENT............................... United States Trust Company of New York.
UNTENDERED OLD NOTES......................... Holders of Old Notes eligible to participate
in the Exchange Offer but who do not tender
their Old Notes will not have any further
exchange rights and such Old Notes will
continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes
could be adversely affected.
CONSEQUENCES OF FAILURE TO EXCHANGE
OLD NOTES.................................. Holders of Old Notes who do not exchange
their Old Notes for New Notes pursuant to the
Exchange
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Offer will continue to be subject to the
restrictions on transfer of such Old Notes as
set forth in the legend thereon as a
consequence of the issuance of the Old Notes
pursuant to exemptions from, or in
transactions not subject to, the registration
requirements of the Securities Act and
applicable state securities laws. In general,
the Old Notes may not be offered or sold,
unless registered under the Securities Act,
except pursuant to an exemption from, or in a
transaction not subject to, the Securities
Act and applicable state securities laws. The
Company does not currently anticipate that it
will register Old Notes under the Securities
Act. See "The Exchange Offer--Consequences of
Failure to Exchange."
USE OF PROCEEDS.............................. There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer. The net proceeds from the Offering
were used, together with borrowings under the
New Credit Facility, the proceeds from the
Capital Contribution and existing cash
balances, to pay the cash portion of the
Merger Consideration, consummate the
Refinancing, the Debt Tender Offer and
Consent Solicitation and the Junior Notes
Repayment, and pay transaction fees and
expenses. See "Use of Proceeds."
THE NEW NOTES
GENERAL...................................... The Exchange Offer applies to $200.0 million
aggregate principal amount of Old Notes. The
form and terms of the New Notes will be
identical in all material respects to the
form and terms of the Old Notes, except that
the New Notes (i) have been registered under
the Securities Act and, therefore, will not
bear legends restricting their transfer and
(ii) do not contain certain provisions
providing for the payment of Liquidated
Damages under certain circumstances relating
to the Registration Rights Agreement. The New
Notes will evidence the same debt as the Old
Notes and, except as set forth in the
immediately preceding sentence, will be
entitled to the benefits of the Indenture,
under which both the Old Notes were, and the
New Notes will be, issued. See "Description
of Notes."
SECURITIES OFFERED........................... $200.0 million in aggregate principal amount
of 9 3/4% Senior Subordinated Notes due 2006,
which have been registered under the
Securities Act.
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
MATURITY DATE................................ December 1, 2006.
INTEREST PAYMENT DATES....................... June 1 and December 1, commencing June 1,
1997.
MANDATORY REDEMPTION......................... The Company will not be required to make
mandatory redemption or sinking fund payments
with respect to the New Notes.
OPTIONAL REDEMPTION.......................... The New Notes will be redeemable at the
option of the Company, in whole or in part,
at any time on or after December 1, 2001 at
the redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption. In addition, at any time
prior to December 1, 1999, the Company may,
on one or more occasions, redeem up to $70.0
million in aggregate principal amount of the
Notes with any of the net proceeds of one or
more public or private offerings of common
stock of (i) Advanced Medical or any other
corporate parent of the Company to the extent
the net proceeds thereof are contributed to
the Company as a capital contribution to
common equity or (ii) the Company, in each
case, at a redemption price of 109.75% of the
principal amount thereof, plus accrued and
unpaid interest, if any, to the date of
redemption; PROVIDED that at least $130.0
million in aggregate principal amount of the
Notes remain outstanding immediately after
the occurrence of each such redemption;
PROVIDED, FURTHER, that, with respect to a
private offering of the common stock of the
Company, such common stock shall be issued at
a price no lower than the fair market value
thereof, as evidenced by an appraisal from an
independent investment banking firm of
national standing delivered to the Trustee.
CHANGE OF CONTROL............................ In the event of a Change of Control, each
holder of the New Notes will have the right
to require the Company to purchase such
holder's New Notes at 101% of the principal
amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase.
RANKING...................................... The New Notes will be general unsecured
obligations of the Company, subordinated in
right of payment to all existing and future
Senior Debt of the Company, including
indebtedness pursuant to the New Credit
Facility. At November 30, 1996, the Company
had approximately $218.6 million of Senior
Debt outstanding.
SUBSIDIARY GUARANTEES........................ The New Notes will be guaranteed, jointly and
severally, on a senior subordinated basis by
each of the Guaranteeing Subsidiaries. The
Subsidiary
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Guarantees will be subordinated in right of
payment to all existing and future Senior
Debt of the Guaranteeing Subsidiaries,
including the guarantees of the Guaranteeing
Subsidiaries of the Company's obligations
under the New Credit Facility. At November
30, 1996, the Guaranteeing Subsidiaries had
no Senior Debt outstanding (excluding
guarantees by the Guaranteeing Subsidiaries
of the Company's obligations under the New
Credit Facility).
CERTAIN COVENANTS............................ The Indenture pusuant to which the Old Notes
were, and the New Notes will, be issued
contains covenants that, among other things:
(i) limit the incurrence by the Company and
its Restricted Subsidiaries (as defined) of
additional indebtedness; (ii) limit the
issuance by the Company and the Guaranteeing
Subsidiaries of Disqualified Stock (as
defined) and the issuance by Restricted
Subsidiaries that are not Guaranteeing
Subsidiaries of preferred stock; (iii)
restrict the ability of the Company and its
Restricted Subsidiaries to make dividends and
other restricted payments or investments;
(iv) limit the ability of the Company and its
Restricted Subsidiaries to enter into
sale-leaseback transactions; (v) limit
transactions by the Company and its
Restricted Subsidiaries with affiliates; (vi)
limit the ability of the Company and its
Restricted Subsidiaries to make asset sales;
(vii) limit the ability of the Company and
its Restricted Subsidiaries to incur certain
liens; and (viii) limit the ability of the
Company to consolidate or merge with or into,
or to transfer all or substantially all of
its assets to, another person.
</TABLE>
RISK FACTORS
Holders of Old Notes should carefully consider the matters set forth under
the caption "Risk Factors" and all other information set forth in this
Prospectus before making a decision to tender their Old Notes in the Exchange
Offer.
15
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The summary pro forma statement of operations and other data for the year
ended December 31, 1995 and the nine month periods ended September 30, 1995 and
1996 and balance sheet data at September 30, 1996 set forth below (the "Summary
Pro Forma Financial Data") have been prepared on the basis set forth in, is
qualified in its entirety by reference to, and should be read in conjunction
with, the Pro Forma Condensed Consolidated Financial Statements included
elsewhere in this Prospectus. The Summary Pro Forma Financial Data does not
purport to represent what the Company's results of operations would have been if
any of the Transactions had actually occurred at such dates nor does such data
purport to represent the Company's results of operations for any future period.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED 30,
DECEMBER 31, ----------------------------
1995 1995 1996
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................... $ 352,728 $ 257,120 $ 251,552
Gross profit........................................................ 143,546 100,586 115,696
Restructuring and special item(1)................................... 15,969 14,485 --
Income from operations.............................................. 11,914 1,950 34,327
Lease/contract interest income(2)................................... 5,374 3,896 3,733
Interest expense(3)................................................. 44,633 32,945 30,074
Net income (loss)................................................... (30,831) (29,745) 6,071
Ratio of earnings to fixed charges(4)............................... -- -- 1.3x
OTHER DATA:
Adjusted EBITDA(5).................................................. $ 82,760 $ 60,548 $ 64,151
Cash interest expense(6)............................................ 41,676 31,241 28,695
Depreciation and amortization....................................... 33,629 24,618 25,541
Capital expenditures(7)............................................. 16,321 10,242 16,649
Ratio of Adjusted EBITDA to cash interest expense................... 2.0x 1.9x 2.2x
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: AT SEPTEMBER 30, 1996
<S> <C>
Cash and cash equivalents.............................................................. $ 101
Working capital....................................................................... 69,717
Total assets.......................................................................... 608,465
Long-term debt (including current portion)............................................ 410,645
Stockholder's equity.................................................................. 103,496
</TABLE>
- ------------------------
(1) Restructuring and special items includes one-time restructuring charges and
a non-cash purchased research and development write-off.
(2) Lease/contract interest income consists of interest income associated with
contracts or agreements pursuant to which a third party acquires infusion
pumps either (i) under sales type and direct financing leases or (ii) at no
or reduced initial cost, by paying a premium (a portion of which is recorded
by the Company in accordance with generally accepted accounting principles
as interest income) for subsequent purchases of disposable administration
sets.
(3) Includes interest expense of approximately $3,159 and $1,923 for the year
ended December 31, 1995 and the nine months ended September 30, 1995,
respectively, related to approximately $25,000 of debt repaid with the
proceeds from the sale of IVAC's San Diego manufacturing and office
facilities in November 1995. Excluding this item, total pro forma interest
expense would have been $41,474 and $31,022 for the year ended December 31,
1995 and nine months ended September 30, 1995, respectively.
(4) For purposes of determining the ratio of earnings to fixed charges, earnings
includes pre-tax income adjusted for fixed charges. Fixed charges consist of
interest on all indebtedness, estimated interest component of rental expense
and amortization of deferred financing costs. As a result of losses,
earnings would have been inadequate to cover fixed charges by $27,231 and
$27,045 for the year ended December 31, 1995 and the nine months ended
September 30, 1995, respectively.
(5) Adjusted EBITDA represents income (loss) from operations before
restructuring charges, non-recurring, non-cash purchase accounting charges
recorded by IVAC in 1995 and depreciation and amortization, plus
lease/contract interest income. Adjusted EBITDA does not represent net
income or cash flows from operations, as these terms are defined under
generally accepted accounting principles, and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. The Company has
included information concerning Adjusted EBITDA herein because it
understands that such information is used by certain investors as one
measure of an issuer's historical ability to service debt.
(6) Cash interest expense excludes $2,957, $1,704 and $1,379 of debt issuance
cost amortization for the year ended December 31, 1995 and for the nine
months ended September 30, 1995 and 1996, respectively. Includes $1,939 and
$1,744 for the year ended December 31, 1995 and nine months ended September
30, 1995, respectively, related to approximately $25,000 of debt repaid with
the proceeds from the sale of IVAC's San Diego manufacturing and office
facilities in November 1995. Excluding this item, pro forma cash interest
expense would have been $39,737 and $29,497 for the year ended December 31,
1995 and nine months ended September 30, 1995, respectively.
(7) Represents the combined historical capital expenditures of IMED and IVAC
(exclusive of River) for the periods presented. Includes $3,511 and $4,437
for the year ended December 31, 1995 and nine months ended September 30,
1996, respectively, related to leasehold improvements and equipment at
IVAC's new manufacturing and corporate office facilities.
16
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN
ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE TENDERING
THEIR OLD NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH BELOW (OTHER
THAN "FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT
HOLDERS" AND "CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER
OF NEW NOTES") ARE GENERALLY APPLICABLE TO THE OLD NOTES, AS WELL AS THE NEW
NOTES.
SIGNIFICANT LEVERAGE
As a result of the Transactions, the Company has substantial indebtedness
and significant debt service obligations. At September 30, 1996, on a pro forma
basis, the Company would have had approximately $410.6 million of indebtedness
outstanding, approximately $608.5 million of total assets, approximately $294.9
million of total tangible assets and approximately $103.5 million of
stockholder's equity. See "Pro Forma Capitalization" and "Pro Forma Condensed
Consolidated Financial Statements." The Company believes that it will generate
sufficient cash flow from operations to fund its operations, make planned
capital expenditures and make required payments of principal and interest under
the New Credit Facility and interest on the Notes; however, the Company may not
generate sufficient cash flow from operations to repay the Notes at maturity.
Accordingly, the Company may have to refinance the Notes at or prior to maturity
or sell assets or raise equity capital to repay the principal amount of the
Notes. No assurance can be given that any such debt or equity financing will be
available to the Company on acceptable terms, if at all. In addition, the
Company's ability to fund its operations, to make planned capital expenditures
and to make scheduled principal and interest payments will be dependent on the
Company's future operating performance, which is itself dependent on a number of
factors, many of which the Company cannot control, including prevailing economic
conditions, availability of other sources of liquidity, and financial, business,
regulatory and other factors affecting the Company's business and operations.
Futhermore, Advanced Medical has guaranteed the New Credit Facility and,
accordingly, any failure by Advanced Medical to pay interest on its outstanding
indebtedness or to repay such indebtedness at or prior to maturity would cause a
default under the New Credit Facility which, in turn, could cause a default
under the Notes. Advanced Medical currently has outstanding $16.2 million of
indebtedness pursuant to the 7 1/4% Convertible Subordinated Debentures due 2002
of Advanced Medical (the "Convertible Debentures") and has no significant
operations other than operations conducted through the Company. As a result,
Advanced Medical will be dependent on dividends or advances from the Company or
proceeds from additional equity offerings to fund its debt service obligations.
The Indenture and the New Credit Facility do not restrict distributions to
Advanced Medical to pay interest on the Convertible Debentures; PROVIDED THAT,
with respect to the New Credit Facility, there exists no default or event of
default under the New Credit Facility. The Indenture and the New Credit Facility
do, however, limit the ability of the Company to pay dividends and make other
distributions to Advanced Medical to repay the Convertible Debentures at
maturity. If the Company is prohibited from funding the repayment of the
Convertible Debentures at maturity, Advanced Medical could seek to refinance the
Convertible Debentures or to repay the Convertible Debentures with proceeds from
the sale of additional equity; no assurance can be given, however, that any such
refinancing or equity offering could be consummated on acceptable terms, if at
all.
The Company's high degree of leverage may have important consequences to the
holders of the Notes including, without limitation, the following: (i) a
substantial portion of the Company's net cash provided by operations is
committed to the payment of the Company's interest expense and principal
repayment obligations and is not available to the Company for its operations,
capital expenditures, acquisitions or other purposes; (ii) the Company's ability
to obtain additional financing in the future for working capital, capital
expenditures or acquisitions may be limited; (iii) the Company is more highly
leveraged than certain of its competitors, which may place it at a disadvantage
and limit the Company's flexibility in reacting to changes in its business; and
(iv) certain of the Company's borrowings under the New Credit Facility bear
interest at variable rates, which could result in higher interest expense if
interest rates rise. See "Description of Notes" and "Description of New Credit
Facility."
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LIMITATIONS IMPOSED BY CERTAIN INDEBTEDNESS
The documents governing the outstanding indebtedness of the Company
(including the Indenture and the New Credit Facility) contain significant
covenants that limit the Company's and its subsidiaries' ability to engage in
various transactions and, in the case of the New Credit Facility, require
satisfaction of specified financial performance criteria. In addition, under
each of the foregoing documents, the occurrence of certain events (including,
without limitation, failure to comply with the foregoing covenants, material
inaccuracies of representations and warranties, certain defaults under or
acceleration of other indebtedness and events of bankruptcy or insolvency)
would, in certain cases after notice and grace periods, constitute an event of
default permitting acceleration of the indebtedness covered by such documents.
The limitations imposed by the documents governing the outstanding indebtedness
of the Company and its subsidiaries are substantial, and failure to comply with
them could have a material adverse effect on the Company and its subsidiaries.
See "Description of Notes" and "Description of New Credit Facility."
SUBORDINATION
The payment of principal, premium, if any, and interest on the Notes is
subordinated to the prior payment in full of all existing and future Senior Debt
of the Company, including indebtedness under the New Credit Facility, and,
therefore, in the event of the bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will not be available to pay obligations
under the Notes until all such Senior Debt has been paid in full. Furthermore,
any payment with respect to a Subsidiary Guarantee also is subordinated to the
payment of Senior Debt of that Guaranteeing Subsidiary, including the
Guaranteeing Subsidiary's guarantee of the Company's obligations under the New
Credit Facility. As a result, there may not be sufficient assets remaining after
such bankruptcy, liquidation or reorganization to pay amounts due on the Notes.
At November 30, 1996, the Company had approximately $218.6 million of Senior
Debt outstanding and the Guaranteeing Subsidiaries had no Senior Debt
outstanding (excluding guarantees by the Guaranteeing Subsidiaries of the
Company's obligations under the New Credit Facility).
The subordination provisions of the Indenture provide that no payment may be
made by the Company with respect to the Notes upon the occurrence of a default
in the payment of principal, premium, if any, or interest on certain Designated
Senior Debt (as defined) beyond any applicable grace period. In addition, upon
the occurrence of any other event entitling the holders of such Designated
Senior Debt to accelerate the maturity thereof and receipt by the Trustee of
written notice of such occurrence, the holders of such Designated Senior Debt
will be able to block payment on the Notes for specified periods of time. If the
Company fails to make any payment on the Notes when due or within any applicable
grace period, whether or not on account of the payment blockage provisions
referred to above, such failure would constitute an event of default under the
Indenture and would entitle the holders of the Notes to accelerate the maturity
thereof. See "Description of Notes--Subordination."
The Notes are also effectively subordinated to all existing and future
liabilities of the Company's subsidiaries that are not Guaranteeing
Subsidiaries. On the date of the Indenture, the Notes were, and continue to be,
guaranteed by certain of the Company's domestic subsidiaries and were not, and
continue not to be, guaranteed by any of the Company's foreign subsidiaries. See
"Description of Notes--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
POSSIBLE INABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL
The New Credit Facility prohibits the Company from purchasing any of the
Notes and also provides that certain change of control events with respect to
the Company and Advanced Medical constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Debt to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing the Notes, the Company could seek the consent of its lenders to the
purchase of the Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings,
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the Company will remain prohibited from purchasing the Notes by the relevant
Senior Debt. In such case, the Company's failure to purchase the tendered Notes
would constitute an event of default under the Indenture which would, in turn,
constitute a default under the New Credit Facility and/or other Senior Debt. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of the Notes. Furthermore, no assurance can be
given that the Company will have sufficient resources to satisfy its repurchase
obligation with respect to the Notes following a Change of Control. See
"Description of Notes."
ABILITY TO SUCCESSFULLY INTEGRATE IMED AND IVAC
The integration and consolidation of IMED and IVAC following the Merger
requires substantial management, financial and other resources and may pose
risks with respect to production, other operations, customer service and market
share. While the Company believes it has sufficient financial and management
resources to accomplish this integration, there can be no assurance in this
regard or that the Company will not experience difficulties with customers,
personnel or others. In addition, although the Company believes that the Merger
will enhance its competitive position and business prospects, there can be no
assurance that such benefits will be realized or that the combination of IMED
and IVAC will be successful.
As the Company adapts to the current health care environment and integrates
IMED and IVAC subsequent to the Merger, it has made and will make further
operational changes, including consolidating certain operations, in order to
improve the future profitability of the Company. However, there can be no
assurance that the Company will recognize improved profitability as a result of
such operational changes. In addition, these actions may result in significant
disruption to the Company's operations, which could have a material adverse
effect on the Company's business.
DEPENDENCE ON NEW PRODUCTS AND MARKETS; TECHNOLOGICAL CHANGE
The primary markets for the Company's products are relatively mature and
highly competitive. The Company's success is therefore dependent on the
development of new infusion technologies and the development of other markets
for its products. The Company's older infusion therapy and thermometry product
lines have experienced declining sales and market share recently, primarily due
to competitors who offer volume discounts based on "bundled" purchases of a
broader range of medical equipment and supplies, as well as to the aging of the
Company's core products. See "--Competition" and "Business-- Competition." The
Company's introduction of new products may offset future declines in sales and
market share. There can be no assurance, however, that new products will be
successfully completed or marketed for sale, will not necessitate upgrades or
technical adjustments after market introduction, can be manufactured in
sufficient volumes to satisfy demand, or will offset declines in sales and
market share experienced with respect to existing products. See
"Business--Products and Services." Moreover, there can be no assurance that the
Company's efforts to take advantage of opportunities it perceives in the
alternate site and international markets will be successful. In addition,
although the pace of technological change in the Company's industry historically
has been relatively slow, the Company is unable to predict the pace of such
change in the future. There can be no assurance that technological change will
not place one or more of the Company's existing or proposed products at a
significant competitive disadvantage. Additionally, to the extent the Company
does not successfully reposition existing products for sale to different
markets, the introduction of new products by the Company will reduce sales of
such existing products.
COMPETITION
The Company faces substantial competition in all of its markets. Many of the
Company's competitors have greater financial, research and development, and
marketing resources than the Company. Some of the Company's principal
competitors are able to offer volume discounts based on "bundled" purchases of a
broader range of their medical equipment and supplies than the Company,
including infusion systems and intravenous solutions used with such systems, a
strategy that the Company is currently unable to and may
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continue to be unable to pursue. There can be no assurance that such competition
will not adversely affect the Company's results of operations or ability to
maintain or increase sales and market share. See
"--Dependence on New Products and Markets; Technological Change,"
"--Concentration of Buying Power" and "Business--Competition."
CONCENTRATION OF BUYING POWER
Many existing and potential customers for the Company's products have
combined into group purchasing organizations ("GPOs") which are quite large and
which effectively police compliance with exclusive purchase commitments. GPOs
often enter into exclusive purchase commitments with as few as one or two
providers of infusion systems and/or vital signs measurement products for a
period of several years. If the Company is not one of the selected providers, it
may be precluded from making sales to members of a GPO for several years and, in
certain situations, the GPO may require removal of the Company's existing
installed infusion pumps, which would result in a loss of the related disposable
administration set sales. Even if the Company is one of the selected providers,
the Company may be required to commit to pricing which has a material adverse
effect on net sales and profit margins. One such GPO issued a request in July
1996 for proposals for a supply agreement for infusion systems. The Company
believes that this GPO will represent approximately 35% of the United States
hospital market if all of its members elect to participate in the accepted
proposal. Each of IMED and IVAC has submitted a proposal in response to such
request; however, no assurance can be given that the Company will be named as a
supplier to the aforesaid GPO. In addition, many of the Company's competitors
may have advantages over the Company in competing for GPOs' business. See
"--Competition" and "Business--Competition."
RELIANCE ON PATENTS AND PROPRIETARY RIGHTS; EXPIRATION AND PROTECTION OF
SIGNIFICANT PATENTS
The Company relies heavily on patented and other proprietary technology.
There can be no assurance that patent applications submitted by the Company or
its licensors will result in patents being issued or that, if issued, such
patents and patents already issued will afford protection against competitors
with similar technology. There can also be no assurance that any patents issued
to or licensed by the Company will not be infringed upon or designed around by
others, that others will not obtain patents that the Company will need to
license or design around, that the Company's products will not inadvertently
infringe upon the patents of others, or that others will not manufacture and
distribute the Company's patented products upon expiration of such patents.
There can also be no assurance that key patents of the Company will not be
invalidated or that the Company or its licensors will have adequate funds to
finance the high cost of prosecuting or defending patent validity or
infringement issues. See "Business--Patents, Trademarks and Proprietary Rights"
and "Business--Legal Proceedings."
GOVERNMENT REGULATION
Government regulation is a significant factor in the research, development,
testing, production and marketing of the Company's products. Non-compliance with
applicable requirements may result in recall or seizure of products, total or
partial suspension of production, refusal of the government to allow clinical
testing or commercial distribution of products, refusal of the government to
allow new products to be marketed, civil penalties or fines and criminal
prosecution. There can be no assurance that the Company's existing products will
be found to comply with such regulations or that new products will be approved
in a timely manner or at all. See "Business--Government Regulation."
The United States Food and Drug Administration (the "FDA"), pursuant to the
Federal Food, Drug, and Cosmetic Act (the "FDC Act"), regulates the introduction
of medical devices, as well as manufacturing procedures, labelling, adverse
event reporting and record-keeping with respect to such products. The process of
obtaining market clearances from the FDA for new products can be time-consuming
and expensive and there can be no assurance that such clearances will be granted
or that FDA review will not involve delays adversely affecting the marketing and
sale of products. Current regulations depend heavily on administrative
interpretation and there can be no assurance that interpretations made by the
FDA or
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other regulatory bodies will not adversely affect the Company. The FDA and state
agencies routinely inspect the Company to determine whether the Company is in
compliance with various regulations relating to manufacturing practices,
testing, quality control and product labelling. Such audits/inspections can
result in the agencies requiring the Company to take certain corrective actions
for non-complying conditions observed during the audits/inspections. A
determination that the Company is in violation of such regulations could lead to
the imposition of civil sanctions, including fines, recall orders or product
seizures and criminal sanctions. Since 1992, the Company has on thirteen
occasions removed products from the market that were found not to meet
acceptable standards. None of such recalls materially interfered with the
Company's operations and all such product lines were subsequently returned to
the market. One such product recall, a voluntary recall related to the Company's
Signature Edition infusion pumps, has not been closed with the FDA. In addition,
the Company has initiated a voluntary safety alert of its P1000, P2000, P3000
and P4000 syringe pumps, which are marketed internationally. There can be no
assurance that the Company will not remove additional products from the market
in the future. See "Business--Government Regulation."
The Company has received ISO 9000 certification for certain of its
facilities regarding the quality of its manufacturing systems, a requirement for
doing business in European Community ("EC") countries, and is in the process of
applying for ISO 9000 certification for the balance of its manufacturing
facilities. The Company has been granted approval to affix the EC mark, pursuant
to the EC Medical Device Directives on certain of its products. This does not
necessarily preclude, however, additional restrictions on marketing in any
individual country in the EC.
Certain countries will require the Company to obtain clearances for its
products prior to marketing the products in those countries. In addition,
certain countries impose product specifications, standards or other requirements
which differ from or are in addition to those mandated in the United States. The
EC and certain other countries are in the process of developing new modes of
regulating medical products which may result in lengthening the time required to
obtain permission to market new products. These changes could have a material
adverse effect on the Company's ability to market its devices in such countries
and could hinder or delay the successful implementation of the Company's planned
international expansion. In addition, since MS III and the 591 Series infusion
pumps do not meet European standards for resistance to electromagnetic and radio
frequency interference, they are currently not cleared for marketing in Europe.
See "Business--Government Regulation."
HEALTH CARE REFORM
Because the cost of health care delivery has been steadily rising and
because the cost of a significant portion of medical care in the United States
and other countries is typically funded by governmental insurance programs,
there have been a number of government initiatives to reduce health care costs.
Congress and various state legislatures currently are proposing changes in law
and regulation that could effect major restructuring of the health care
industry. Although many of these proposals may seek to maintain or expand access
to health care services, the common objective of proposed legislation is to
achieve cost containment in the health care sector. Changes in governmental
support of health care services, the methods by which such services are
delivered, the prices for such services, or the regulations governing such
services or mandated benefits, as well as the growth of managed care
organizations, may all have a material adverse effect on the Company's net sales
and expenses. Even if the ultimate impact of any such changes on net sales is
positive, no assurance can be given that the costs of complying with possible
new requirements would not have a negative impact on the Company's future
earnings. No assurance can be given that any such legislation will not have a
material adverse effect on the Company's business and results of operations. In
addition, the Company believes that the trend toward cost containment in the
health care industry resulted in a change of protocol at certain hospitals
whereby the maximum time between changes of disposable administration sets
increased from every 24 hours to as much as every 72 hours. Unless sales of
disposable administration sets increase because of an increased installed base
of infusion pumps, this change in protocol, which the Company expects other
hospitals will adopt, will have
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an adverse effect on the Company's business and results of operations. Moreover,
this change in protocol and other changes in the United States health care
market which may occur in the future could force the Company to alter its
approach in selling, marketing, distributing and servicing its customer base.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations of IMED," "Management's Discussion and Analysis of Financial
Condition and Results of Operations of IVAC" and "Business--Government
Regulation."
PRODUCT LIABILITY
The Company faces an inherent business risk of exposure to product liability
claims in the event that the use of its products is alleged to have resulted in
injury or other adverse effects. The Company currently maintains product
liability insurance coverage but there can be no assurance that the Company will
be able to obtain such insurance on acceptable terms in the future, if at all,
or that any such insurance will provide adequate coverage against potential
claims. Current product liability insurance for products which constituted the
IMED product line provides for a deductible of $100,000 per occurrence, a
deductible cap of $500,000 per year, and a coverage limitation of $25 million
per occurrence and in the aggregate. Current product liability insurance for
products which constituted the IVAC product line provides for a deductible of
$100,000 per occurrence, a deductible cap of $500,000 per year, and a coverage
limitation of $5 million per occurrence and, together with other policies taken
out by IVAC, maximum aggregate coverage of $30 million per year. Each of IMED's
and IVAC's insurance excludes coverage for punitive damages. The Company's
financial condition and its ability to market and sell its products could be
adversely affected by a successful product liability claim.
CONTROL OF THE COMPANY
The Company is a wholly owned subsidiary of Advanced Medical which is
indirectly controlled through Decisions and JA Special Partnership Limited ("JA
Special") by Jeffry M. Picower. Mr. Picower is the sole stockholder and sole
Director of Decisions, the sole general partner of JA Special and a Director and
executive officer of each of Advanced Medical and the Company. Mr. Picower
beneficially owns indirectly through Decisions and JA Special approximately 79%
of Advanced Medical's common stock. Accordingly, Mr. Picower has the power to
elect all of the Company's Directors, appoint new management, determine the
outcome of any action requiring the approval of the holders of the Company's
common stock, including adopting amendments to the Company's certificate of
incorporation, and approve mergers or sales of all of the Company's assets. See
"Management."
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by a small number of key executive
officers, the loss of certain of whom could have a material adverse effect on
the Company. The Company believes that its future success will depend in large
part on its continued ability to attract and retain highly skilled and qualified
personnel. Upon consummation of the Merger, the Company's Chief Executive
Officer entered into an employment contract with Advanced Medical and the
Company for an initial term of five years and the Company's Chief Financial
Officer entered into an employment contract with Advanced Medical and the
Company for an initial term of three years. The Company does not presently
maintain "key man" life insurance with respect to any executive officers or
other employees of the Company. See "Management."
FOREIGN OPERATIONS
A substantial portion of the Company's sales and earnings are attributable
to operations conducted abroad. In addition, the Company's current operating
strategy contemplates expansion of the Company's international operations.
Foreign operations are subject to special risks that can materially affect the
sales, profits and cash flows of the Company, including currency exchange rate
fluctuations, the impact of inflation, exchange controls and other risks.
Changes in certain exchange rates could have an adverse effect
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on the Company's ability to meet interest and principal obligations with respect
to its United States dollar-denominated debt and could also have a material
adverse effect on the Company.
CERTAIN LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit filed in June 1996 by Sherwood (as
defined) against IVAC. The lawsuit, which is pending in the United States
District Court for the Southern District of California, alleges infringement of
two Sherwood patents by reason of certain activities including the sale by IVAC
of disposable probe covers for use with infrared tympanic thermometers. The
Company believes it has sufficient defenses to all claims by Sherwood. However,
there can be no assurance that the Company will successfully defend all claims
made by Sherwood and the failure of the Company to successfully prevail in this
lawsuit could have a material adverse effect on the Company's operations,
business and financial condition.
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence by the Company of indebtedness such as the Old Notes to
finance the Merger may be subject to review under relevant state and federal
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on
behalf of unpaid creditors of the Company. The Company believes that the
indebtedness represented by the Old Notes was incurred for proper purposes and
in good faith. Notwithstanding the Company's belief, however, if a court of
competent jurisdiction in a suit by an unpaid creditor or representative of
creditors (such as a trustee in bankruptcy or debtor-in-possession) were to find
that, at the time of the issuance of the Old Notes, the Company was insolvent,
was rendered insolvent by reason of such incurrence, was engaged in a business
or transaction for which its remaining assets constituted unreasonably small
capital, intended to incur, or believed that it would incur debts beyond its
ability to pay such debts as they matured, or intended to hinder, delay or
defraud its creditors, and that the indebtedness was incurred for less than
reasonably equivalent value, then such court could, among other things: (i) void
all or a portion of the Company's obligations to the holders of the Notes, the
effect of which would be that the holders of the Notes may not be repaid in full
or at all and/or (ii) subordinate the Company's obligations to the holders of
the Notes to other existing and future indebtedness of the Company, the effect
of which would be to entitle such other creditors to be paid in full before any
payment could be made on the Notes.
ENFORCEABILITY OF SUBSIDIARY GUARANTEES
The Company's obligations under the Notes will be guaranteed, jointly and
severally, on a senior subordinated basis by each of the Guaranteeing
Subsidiaries. The Company believes that the Subsidiary Guarantees were incurred
for proper purposes and in good faith. Notwithstanding the Company's belief
however, if a court of competent jurisdiction in a suit by an unpaid creditor or
representative of creditors (such as a trustee in bankruptcy or
debtor-in-possession) were to find that, at the time of the incurrence of a
Subsidiary Guarantee, a Guaranteeing Subsidiary was insolvent, was rendered
insolvent by reason of such issuance, was engaged in a business or transaction
for which its remaining assets constituted unreasonably small capital, intended
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, or intended to hinder, delay or defraud its creditors,
and that the indebtedness was incurred for less than reasonably equivalent
value, then such court could, among other things: (i) void all or a portion of
such Guaranteeing Subsidiary's obligations to the holders of the Notes, the
effect of which would be that the holders of the Notes may not be repaid in full
or at all and/or (ii) subordinate such Guaranteeing Subsidiary's obligations to
the holders of the Notes to other existing and future indebtedness of such
Guaranteeing Subsidiary, the effect of which would be to entitle such other
creditors to be paid in full before any payment could be made on the Notes.
Among other things, a legal challenge of a Subsidiary Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the
Guaranteeing Subsidiary as a result of the issuance by the Company of the Old
Notes.
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FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
To participate in the Exchange Offer, holders of Old Notes must transmit a
properly completed Letter of Transmittal or an Agent's Message, and all other
documents required by such Letter of Transmittal to the Exchange Agent at one of
the addresses set forth below under "The Exchange Offer--Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date. In addition (i)
certificates for Old Notes tendered must be received by the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date; (ii) a Book-Entry
Confirmation (as defined) of such Old Notes, if such procedure is available,
into the Exchange Agent's account at the Book-Entry Transfer Facility (as
defined) must be received by the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date; or (iii) the holder of such Old Notes must
comply with the guaranteed delivery procedures described herein. See "The
Exchange Offer--Procedures for Tendering."
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENT FOR TRANSFERS OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
See "The Exchange Offer--Consequences of Failure to Exchange."
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by any holder
thereof (other than any such holder that is an "affiliate" of the Company or
either of the Guaranteeing Subsidiaries within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, PROVIDED that such New Notes are acquired in
the ordinary course of such holder's business and such holder has no arrangement
or understanding with any person to, and does not intend to, participate in the
distribution of such New Notes.
Any Participating Broker-Dealer that acquired Old Notes for its own account
as a result of market-making activities or other trading activities may be a
statutory underwriter. Each Participating Broker-Dealer that receives New Notes
for its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities.
The Company and the Guaranteeing Subsidiaries have agreed that, for a period
of 180 days after the Expiration Date, they will make this Prospectus, as it may
be amended or supplemented from time to time, available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
If (i) any holder of Old Notes (A) is prohibited by law or Commission policy
from participating in the Exchange Offer; (B) may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and this Prospectus, as it may be amended or supplemented from time
to time, is not appropriate or available for such resales; or (C) is a
Participating Broker-Dealer and owns Old
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Notes acquired directly from the Company or an affiliate of the Company or
either of the Guaranteeing Subsidiaries and (ii) such holder has satisfied
certain conditions relating to the provision of information to the Company for
use therein, the Company and the Guaranteeing Subsidiaries have agreed to
register such Old Notes pursuant to the Shelf Registration Statement and to use
their respective best efforts to cause it to be declared effective by the
Commission on or prior to 120 days after the date on which the Company and the
Guaranteeing Subsidiaries became obligated to file the Shelf Registration
Statement. The Company and the Guaranteeing Subsidiaries have agreed to maintain
the effectiveness of the Shelf Registration Statement for, under certain
circumstances, a maximum of three years, to cover resales of Old Notes held by
such holders. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer."
LACK OF PUBLIC MARKET FOR NEW NOTES
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued in November 1996 to a small number of qualified institutional
buyers and institutional accredited investors, and are eligible for trading in
the PORTAL market. There is no existing market for the New Notes, and there can
be no assurance regarding the future development of such a market, the liquidity
of any market that may develop for the New Notes, the ability of holders of the
New Notes to sell their New Notes, or the price at which holders would be able
to sell their New Notes. Future trading prices of the New Notes will depend on
many factors, including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. The Company
does not intend to apply for listing of the New Notes on any securities exchange
or the Nasdaq National Market.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both domestic and foreign;
industry capacity; demographic changes; existing government regulations and
changes in, or the failure to comply with, government regulations; legislative
proposals for health care reform; liability and other claims asserted against
the Company; competition; the loss of any significant customers; changes in
operating strategy or development plans; the ability to attract and retain
qualified personnel; the significant indebtedness of the Company after the
Merger; the successful integration of IMED's and IVAC's operations following the
Merger; the availability and terms of capital to fund the expansion of the
Company's business; and other factors referenced in this Prospectus. Certain of
these factors are discussed in more detail elsewhere in this Prospectus,
including, without limitation, under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations of IMED," "Management's Discussion and Analysis of
Financial Condition and Results of Operations of IVAC" and "Business." GIVEN
THESE UNCERTAINTIES, PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
25
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by IMED on November 26, 1996 to the Initial
Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes only to "qualified institutional buyers" (as
defined in Rule 144A) in compliance with Rule 144A and to a limited number of
other institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) that, prior to their purchase of Old Notes,
delivered to the Initial Purchasers a letter containing certain representations
and agreements. As a condition to the Purchase Agreement, IMED, IMED
International Trading Corp. and the Initial Purchaser entered into the
Registration Rights Agreement.
Immediately subsequent to the Merger, the Company entered into a series of
assumption agreements under which it assumed all of the obligations of IMED (i)
under the Registration Rights Agreement; (ii) under the Old Notes and the
Indenture; and (iii) under the Purchase Agreement. In addition, immediately
subsequent to the Merger, IVAC Overseas Holdings, Inc. executed and delivered
(i) a supplemental indenture under which it agreed to guarantee the Notes on a
senior subordinated basis; (ii) a registration rights assumption agreement under
which IVAC Overseas Holdings, Inc. became a party to the Registration Rights
Agreement; and (iii) a purchase agreement assumption under which IVAC Overseas
Holdings, Inc. became a party to the Purchase Agreement.
Under existing interpretations of the staff of the Commission contained in
several no-action letters issued to third parties, the New Notes would in
general be freely tradeable after the Exchange Offer without further
registration under the Securities Act. However, any holder of Old Notes who is
an "affiliate" of the Company or either of the Guaranteeing Subsidiaries within
the meaning of Rule 405 under the Securitities Act, or who intends to
participate in the Exchange Offer for the purpose of distributing New Notes (i)
will not be able to rely on the aforesaid interpretations of the staff of the
Commission; (ii) will not be able to tender its Old Notes in the Exchange Offer;
and (iii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the its Old
Notes, unless such sale or transfer is made pursuant to an exemption from such
requirements.
As contemplated by the aforesaid no-action letters and the Registration
Rights Agreement, each holder accepting the Exchange Offer is required to
represent to the Company and the Guaranteeing Subsidiaries in the Letter of
Transmittal that, among other things (i) the New Notes being acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of business of
the person receiving such New Notes, whether or not such person is the holder;
and (ii) neither the holder nor any such other person (A) (other than a
Participating Broker-Dealer referred to in the next sentence) has any
arrangement or understanding with any person to participate in the distribution
of such New Notes or is engaging or intends to engage in the distribution of
such New Notes; or (B) is an "affiliate" of the Company or either of the
Guaranteeing Subsidiaries within the meaning of Rule 405 under the Securities
Act. Each Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes must acknowledge that it (i) acquired the Old
Notes for its own account as a result of market-making activities or other
trading activities; (ii) has not entered into any arrangement or understanding
with the Company or any "affiliate" of the Company or either of the Guaranteeing
Subsidiaries within the meaning of Rule 405 under the Securities Act to
distribute the New Notes to be received in the Exchange Offer; and (iii) will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
Pursuant to the Registration Rights Agreement, the Company and the
Guaranteeing Subsidiaries agreed to file with the Commission the Registration
Statement, of which this Prospectus is a part, covering the Exchange Offer. If
(i) the Company is not permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy or (ii)
any holder of Transfer
26
<PAGE>
Restricted Securities (as defined) notifies the Company, within the 20 business
day time period specified in the Registration Rights Agreement, that (A) it is
prohibited by law or Commission policy from participating in the Exchange Offer;
(B) that it may not resell the New Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and this Prospectus, as it may be
amended or supplemented from time to time, is not appropriate or available for
such resales; or (C) that it is a Participating Broker-Dealer and owns Old Notes
acquired directly from the Company or an affiliate of the Company or either of
the Guaranteeing Subsidiaries, the Company and the Guaranteeing Subsidiaries
will file with the Commission a Shelf Registration Statement to cover resales of
the Old Notes by the holders thereof who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration
Statement. The Company will, in the event of the filing of the Shelf
Registration Statement, provide to each applicable holder of Old Notes copies of
the prospectus which is a part of the Shelf Registration Statement; notify each
such holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the Old
Notes covered thereby. A holder of Old Notes that sells such Old Notes pursuant
to the Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
purchasers; will be subject to certain civil liability provisions under the
Securities Act in connection with such sales and will be bound by the provisions
of the Registraion Rights Agreement which are applicable to such a holder
(including certain indemnification obligations). In addition, each holder of Old
Notes will be required to deliver information to be used in connection with the
Shelf Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have its Old Notes included in the Shelf Registration Statement and
to benefit from the provisions contained in the Registration Rights Agreement
regarding Liquidated Damages.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Old Note until the earlier of (i) the date on which such Old Note has been
exchanged by a person other than a Participating Broker-Dealer for a New Note in
the Exchange Offer; (ii) following the exchange by a Participating Broker-Dealer
in the Exchange Offer of an Old Note for a New Note, the date on which such New
Note is sold to a purchaser who receives from such Participating Broker-Dealer
on or prior to the date of such sale a copy of this Prospectus, as it may be
amended or supplemented from time to time; (iii) the date on which such Old Note
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement; or (iv) the date on which such
Old Note is distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement requires that (i) the Company and the
Guaranteeing Subsidiaries file the Registration Statement, of which this
Prospectus is a part, with the Commission on or prior to 45 days after November
26, 1996; (ii) the Company and the Guaranting Subsidiaries use their respective
best efforts to have the Registration Statement declared effective by the
Commission on or prior to 120 days after November 26, 1996; (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 days after the date on which the Registration Statement was
declared effective by the Commission, New Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer; (iv) if obligated to file the
Shelf Registration Statement, the Company and the Guaranteeing Subsidiaries will
file the Shelf Registration Statement with the Commission on or prior to 45 days
after such filing obligation arises and use their respective best efforts to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 120 days after such obligation arises; and (v)(A) in certain
circumstances, cause the Registration Statement to remain effective and usable
for a period of 180 days following the initial effectiveness thereof and (B)
cause the Shelf Registration Statement to remain effective and usable for a
period of three years following the initial effectiveness thereof or such
shorter period ending when all the Old Notes available for sale thereunder have
been sold. If (a) the Company and the Guaranteeing Subsidiaries fail to file any
of the registration statements required by the Registration Rights Agreement on
or before the date specified for such filing; (b) any of such registration
statements is not declared
27
<PAGE>
effective by the Commission on or prior to the date specified for such
effectiveness; or (c) the Company fails to consummate the Exchange Offer within
30 business days after the date on which the Registration Statement is declared
effective; or (d) the Shelf Registration Statement or the Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company will
pay liquidated damages ("Liquidated Damages") to each holder of Old Notes, with
respect to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Old Notes held by such holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 principal amount of Old
Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50
per week per $1,000 principal amount of Old Notes. All accrued Liquidated
Damages will be paid by the Company on each interest payment date to the Global
Note Holder (as defined) by wire transfer of immediately available funds or by
federal funds check and to holders of Certificated Securities (as defined) by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all of the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to participate. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes who were eligible to participate in the Exchange
Offer but did not tender their Old Notes will not be entitled to certain rights
under the Registration Rights Agreement and such Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
GENERAL. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company hereby offers to
exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue $1,000
principal amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in amounts that are integral multiples of $1,000 principal amount.
The date of the exchange of New Notes for Old Notes will be the next business
day following the Expiration Date.
The form and terms of the New Notes are identical in all material respects
to the form and terms of the Old Notes except that the New Notes (i) have been
registered under the Securities Act and, therefore, do not bear legends
restricting their transfer and (ii) do not contain certain provisions providing
for the
28
<PAGE>
payment of Liquidated Damages under certain circumstances relating to the
Registration Rights Agreement. The New Notes will evidence the same debt as the
Old Notes and will be entitled to the benefits of the Indenture. The Exchange
Offer is not conditioned upon any minimum aggregate principal amount of Old
Notes being tendered for exchange.
As of the date of this Prospectus, $200,000,000 aggregate principal amount
of the Old Notes is outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for the purpose of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and interest thereon will continue to
accrue.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving the New Notes from
the Company. If any tendered Old Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on , 1997, unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is extended.
Although the Company has no current intention to extend the Exchange Offer, the
Company reserves the right to extend the Exchange Offer at any time and from
time to time. During any extension of the Exchange Offer, all Old Notes
previously tendered pursuant to the Exchange Offer and not withdrawn will remain
subject to the Exchange Offer. In order to extend the Exchange Offer, the
Company will notify the Exchange Act of any extension by oral notice (confirmed
in writing) or written notice and will make a public announcement thereof prior
to 9:00 a.m., New York City time, on the next business day after each previously
scheduled expiration date.
The Company reserves the right, in its sole discretion (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral notice (confirmed in writing) or
written notice of such delay, extension or termination to the Exchange Agent or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by public announcement thereof. If the Exchange Offer is amended in
any manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the holders of Old Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure to
such holders, if the Exchange Offer otherwise would expire during such period.
29
<PAGE>
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES. The New Notes will bear interest from November
26, 1996, the date of original issuance of the Old Notes. No interest will be
paid on the Old Notes accepted for exchange.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof (or an Agent's Message), have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile (or an Agent's
Message), together with any other required documents, to the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. In addition (i)
certificates for Old Notes tendered must be received by the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date; (ii) a confirmation of
a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such
procedure is available, into the Exchange Agent's account at the Book-Entry
Transfer Facility (as defined) pursuant to the procedure for book-entry transfer
described below must be received by the Exchange Agent prior to 5:00 p.m., New
York City time, on the Expiration Date; or (iii) the holder of such Old Notes
must comply with the guaranteed delivery procedures described below. To be
tendered effectively, the Old Notes, Letter of Transmittal (or an Agent's
Message) and other required documents must be completed and received by the
Exchange Agent at one of the addresses set forth below under "--Exchange Agent"
prior to 5:00 p.m., New York City time, on the Expiration Date.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are subject to Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against the participant.
By executing the Letter of Transmittal, each holder will make to the Company
and the Guaranteeing Subsidiaries the representations set forth above in the
fourth paragraph under the heading "--Purpose and Effect of the Exchange Offer."
The tender of Old Notes by a holder and the acceptance thereof by the
Company will constitute agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. This Prospectus, together with the Letter of
Transmittal, will first be sent on or about , 1997 to all holders of
Old Notes known to the Company and the Exchange Agent.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder
30
<PAGE>
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. See "Instructions to Registered Holder and/or Book-Entry
Transfer Facility Participant from Beneficial Owner" included with the Letter of
Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of the Medallion System (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Notes at the Depositary (the "Book-Entry Transfer Facility") for the purpose
of facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the Book- Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing such
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal or facsimile thereof properly completed and duly executed with any
required signature guarantee or an Agent's Message and all other required
documents must, in each case, be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
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<PAGE>
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or an Agent's Message or any other required documents to the
Exchange Agent or (iii) who cannot complete the procedures for book-entry
transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five New
York Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) or an Agent's Message together with the
certificate(s) representing the Old Notes or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer or a
Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
upon five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
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<PAGE>
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, SUBJECT, HOWEVER, to the rights of holders to withdraw such Old
Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
BY MAIL: OVERNIGHT COURIER:
United States Trust Company of New York United States Trust Company of New York
Attention: Attention:
(registered or certified mail recommended)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
BY HAND: FACSIMILE TRANSMISSION:
United States Trust Company of New York
(For Eligible Institutions Only)
Attention:
Attention:
</TABLE>
CONFIRM BY TELEPHONE:
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise); (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A, in accordance with Rule 144 under the Securities Act,
or pursuant to another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel reasonably acceptable to
the Company); (iii) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act; or
(iv) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by any holder
thereof (other than any such holder that is an "affiliate" of the Company or
either of the Guaranteeing Subsidiaries within the meaning of Rule 405 under the
Securities
34
<PAGE>
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, PROVIDED that such New Notes are acquired in
the ordinary course of such holder's business and such holder has no arrangement
or understanding with any person to, and does not intend to, participate in the
distribution of such New Notes. Any holder who tenders Old Notes in the Exchange
Offer with the intention to participate, or for the purpose of participating, in
a distribution of the New Notes may not rely upon the position of the staff of
the Commission enunciated in such no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company and the Guaranteeing Subsidiaries in the Letter of
Transmittal that such conditions have been met. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer" and "Plan of Distribution."
35
<PAGE>
THE MERGER
THE MERGER
On November 26, 1996 immediately following the closing of the Offering (the
"Merger Closing"), IMED Merger Sub, Inc., a Delaware corporation and subsidiary
of IMED ("IMED Merger Sub"), merged with and into IVAC Holdings (the "Initial
Merger") and, in connection therewith: (i) each share of the common stock of
IVAC Holdings was converted into the right to receive the per share Merger
Consideration (as defined); (ii) each outstanding option to acquire common stock
of IVAC Holdings was cancelled; and (iii) each share of the common stock of IMED
Merger Sub was converted into one share of the corporation (the "Surviving
Corporation") surviving the Initial Merger. As a result of the Initial Merger,
IVAC Medical Systems became an indirect wholly owned subsidiary of IMED.
Immediately following the Initial Merger, IMED and IVAC Medical Systems were
merged with and into the Surviving Corporation.
MERGER CONSIDERATION
The unadjusted aggregate consideration (the "Merger Consideration") paid to
the holders of IVAC Holdings common stock on the Merger Closing in connection
with the Initial Merger (including in connection with the cancellation of
outstanding options to acquire common stock of IVAC) was determined by
subtracting the following from the sum of $390.0 million plus the cash of IVAC
Medical Systems immediately prior to the Initial Merger: (i) the aggregate
amount of all indebtedness of IVAC Holdings and IVAC Medical Systems for
borrowed money and certain other outstanding obligations; (ii) the aggregate
amount of the cost needed to complete the Debt Tender Offer and Consent
Solicitation (including any premium, prepayment penalty and cost of defeasance
paid in connection therewith, to the extent such items are, in the aggregate,
exceeded $1.0 million); and (iii) the aggregate amount of certain miscellaneous
items and adjustments. On the first business day following the Initial Merger,
all of the then outstanding options to acquire common stock of IVAC Holdings
were cancelled and the holders thereof received a cash payment equal to the
difference between: (i) the per share Merger Consideration paid to holders of
IVAC Holdings common stock in connection with the Initial Merger and (ii) the
exercise price of such options (as adjusted). Purchase price adjustments to the
Merger Consideration will be determined through customary post-closing
adjustment mechanisms. Only limited representations and warranties made by the
parties to the Merger survive the Merger Closing. In connection with the Merger,
certain former stockholders of IVAC Holdings have agreed to indemnify IMED and
others for certain liabilities and obligations relating to River.
THE DEBT TENDER OFFER AND CONSENT SOLICITATION
In connection with the Merger, IVAC Medical Systems commenced and completed
a tender offer to purchase for cash all of its outstanding 9 1/4% Senior Notes
due 2002 (the "Existing Senior Notes") and a related consent solicitation to
modify certain terms of the indenture governing the Existing Senior Notes
(collectively, the "Debt Tender Offer and Consent Solicitation") for an
aggregate purchase price of 105.25% of their principal amount plus accrued
interest up to, but not including, the date of purchase. On November 13, 1996,
IVAC Medical Systems executed a supplemental indenture relating to the Existing
Senior Notes and, as of such date, all Existing Senior Notes had been tendered
for purchase. The amendments to the Existing Senior Notes set forth in the
supplemental indenture became effective and all Existing Senior Notes were
accepted for purchase immediately following the Initial Merger. Approximately
$109.75 million of the net proceeds from the Offering, the borrowings under the
New Credit Facility, the Capital Contribution and existing cash balances were
paid to holders of the Existing Senior Notes in connection with the Debt Tender
Offer and Consent Solicitation.
36
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes contemplated in
this Prospectus, the Company will receive Old Notes in like prinicipal amount,
the form and terms of which are the same as the form and terms of the New Notes
which replace the Old Notes), except as otherwise described herein. The Old
Notes surrendered in exchange for New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase or decrease in the indebtedness of the Company. As such, no effect
has been given to the Exchange Offer in the Pro Forma Condensed Financial
Statements or the Pro Forma Capitalization Table.
The proceeds of the Offering of $194.0 million, net of selling commissions,
actual borrowings of $204.2 million under the New Credit Facility, the proceeds
from the Capital Contribution ($19.6 million) and existing cash balances were
used to pay the Merger Consideration, consummate the Refinancing, the Debt
Tender Offer and Consent Solicitation and the Junior Notes Repayment, and pay
fees and expenses. Actual sources and uses of funds at the Merger Closing differ
from pro forma September 30, 1996 amounts due to operating activity and changes
in balances between September 30, 1996 and the Merger Closing.
The following table illustrates the estimated sources and uses of funds for
the Transactions assuming the Transactions had occurred on September 30, 1996.
Actual sources and uses for consummation of the Transactions varied as described
in the footnotes below.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Notes.................................................................................... $ 200,000
New Credit Facility (1):
Revolving credit facility (2)........................................................ 2,000
Term loan facilities................................................................. 200,000
Capital Contribution(3).................................................................. 20,000
Combined cash............................................................................ 11,197
--------
Total sources........................................................................ $ 433,197
--------
--------
USES OF FUNDS(4):
Merger Consideration..................................................................... $ 224,500
Refinancing including accrued interest................................................... 34,875
Debt Tender Offer and Consent Solicitation (including accrued interest
and tender and consent fees)(5)........................................................ 108,498
Junior Notes Repayment................................................................... 37,324
Estimated fees and expenses(6)........................................................... 20,000
Lilly payment(7)......................................................................... 8,000
--------
Total uses........................................................................... $ 433,197
--------
--------
</TABLE>
- ------------------------
(1) The New Credit Facility consists of $200.0 million of term loan facilities
and a $50.0 million revolving credit facility. See "Description of New
Credit Facility."
(2) The actual amount borrowed under the revolving credit facility at the Merger
Closing was $4.2 million.
(3) The actual capital contribution was approximately $19.6 million. The Capital
Contribution was funded from a portion of the Decisions Contribution. The
balance of the Capital Contribution was funded with existing cash balances
of Advanced Medical. The portion of the net proceeds of the Decisions
Contribution not applied to make the Capital Contribution was used by
Advanced Medical to redeem approximately $22.0 million principal amount of
its 15% Subordinated Debentures due 1999 and fund the redemption of Advanced
Medical's outstanding preferred stock. In connection with the Decisions
Contribution, Decisions exchanged an aggregate of $37.5 million in principal
amount of convertible promissory notes issued by Advanced Medical for
29,416,086 shares of Advanced Medical common stock.
(4) As described under "The Merger -- Merger Consideration," the aggregate
Merger Consideration paid to holders of IVAC Holdings common stock is
calculated by subtracting certain amounts, including indebtedness of IVAC
(including accrued interest) at the Merger Closing and, subject to certain
limitations, costs of IVAC in connection with the Transactions, from $390.0
million plus IVAC's cash on the date of the Merger Closing. Accordingly, any
increase in interest accrued on indebtedness of IVAC prior to the Merger
Closing and any increase in estimated transaction costs at the Merger
Closing will reduce the Merger Consideration and increase one or more of the
amounts applied to the Refinancing, the Debt Tender Offer and Consent
Solicitation and/or the Junior Notes Repayment. Any such increase will not,
however, increase the aggregate uses of funds in the Transactions.
(5) The total use of funds related to the Debt Tender Offer and Consent
Solicitation was approximately $109.75 million at the Merger Closing,
including $5.25 million of redemption premium and consent fees and $4.5
million of accrued interest.
(6) The estimated fees and expenses consist of debt issuance costs, financial
advisory fees and legal, accounting and other professional fees.
(7) See Note (F) to Notes to the Pro Forma Condensed Consolidated Balance Sheet.
See "Pro Forma Condensed Consolidated Financial Statements."
37
<PAGE>
PRO FORMA CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the cash and cash equivalents and
capitalization of the Company on a pro forma basis after giving effect to the
Transactions as if they had occurred at September 30, 1996. This table should be
read in conjunction with "Selected Historical Consolidated Financial Data of
IMED," "Selected Historical Consolidated Financial Data of IVAC" and "Pro Forma
Condensed Consolidated Financial Statements" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1996
<S> <C>
Cash and cash equivalents................................................................... $ 101
--------
--------
Long-term debt:
New Credit Facility:
Revolving credit facility............................................................... $ 2,000
Term loan facilities.................................................................... 200,000
9 3/4% Senior Subordinated Notes due 2006 offered hereby.................................. 200,000
Other(1).................................................................................. 8,645
--------
Total long-term debt (including current portion)...................................... 410,645
--------
Stockholder's equity:
Common stock and capital in excess of par................................................. 97,058
Retained earnings(2)...................................................................... 6,229
Cumulative translation adjustment and other............................................... 209
--------
Total stockholder's equity............................................................ 103,496
--------
Total capitalization...................................................................... $ 514,141
--------
--------
</TABLE>
- ------------------------
(1) Primarily reflects the present value of the Company's minimum royalty
payment to Siemens Infusion Systems, Ltd. in conjunction with the sale of
the MiniMed product line (the predecessor of MS III) to IVAC in September
1993. See Note 5 to Notes to Consolidated Financial Statements of IVAC
Holdings and Note 7 to Notes to Consolidated Financial Statements of the
Predecessor Company (as defined) included elsewhere in this Prospectus.
(2) Includes IMED restructuring costs of $6,000 and $697 write-off of
unamortized debt issue costs related to IMED's Existing Credit Facility net
of tax benefit at an estimated statutory rate of 40%.
38
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following Pro Forma Condensed Consolidated Balance Sheet at September
30, 1996 reflects the historical consolidated balance sheets of IMED and IVAC
Holdings, adjusted to give effect to the Transactions (including the purchase of
all Existing Senior Notes pursuant to the Debt Tender Offer and Consent
Solicitation), as if the Transactions had occurred at September 30, 1996. The
IVAC Holdings historical balance sheet at September 30, 1996 includes
adjustments required to record the River Divestiture, including the write-down
of River's assets to their estimated fair value and the accrual of
discontinuation costs of $6.2 million.
On the Merger Closing, the Company will account for the Merger as a purchase
and all required purchase accounting adjustments to record assets and
liabilities at their estimated fair values will be made based on the actual
purchase price and actual levels of the IVAC Holdings assets acquired and
liabilities assumed. The Merger Consideration is subject to adjustment based on
certain factors such as the total IVAC Holdings cash and debt balances at the
Merger Closing. Any adjustment to the purchase price will affect the amount
allocated to intangible assets and will affect the amortization of intangibles
in subsequent periods.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA
The following Pro Forma Condensed Consolidated Statements of Operations and
Other Data for the year ended December 31, 1995 and nine months ended September
30, 1995 are based on the respective historical consolidated statements of
operations of IMED and IVAC Holdings, adjusted to give effect to the
Transactions and the River Divestiture, as if such transactions had occurred on
January 1, 1995.
The following Pro Forma Condensed Consolidated Statement of Operations and
Other Data for the nine months ended September 30, 1996 is based on the
historical unaudited results of operations of IMED and IVAC Holdings, adjusted
to give effect to the Transactions and the River Divestiture, as if such
transactions had occurred on January 1, 1996.
The Pro Forma Condensed Consolidated Statements of Operations and Other Data
reflect certain cost savings that management has identified related to
elimination of duplicative costs for functional areas and facilities. However,
the Pro Forma Condensed Consolidated Statements of Operations and Other Data do
not reflect certain additional cost savings and synergies that management has
identified related to areas such as vendor consolidation and research and
development costs (other than in connection with facilities consolidations).
The unaudited pro forma financial statements are based on assumptions the
Company believes are reasonable, including those related to cost savings arising
from the Company's integration plans, and which the Company believes are both
factually supportable and directly attributable to the Merger. Such unaudited
pro forma financial data should be read in conjunction with the Consolidated
Financial Statements of IMED and IVAC Holdings and the respective accompanying
notes thereto included elsewhere in this Prospectus.
The following pro forma financial data are not necessarily indicative of the
Company's results of operations that might have occurred had such transactions
been completed at the beginning of the periods specified, and do not purport to
represent what the Company's consolidated results of operations might be for any
future period.
39
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IVAC TRANSACTIONS COMPANY
IMED HOLDINGS COMBINED ADJUSTMENTS PRO FORMA
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 851 $ 10,447 $11,298 $ 195,750(A) $ 101
192,000(B)
(230,250)(C)
(180,697)(D)
20,000(E)
(8,000)(F)
Receivables, net.................................................... 24,714 52,469 77,183 77,183
Inventory........................................................... 20,339 39,646 59,985 10,000(C) 69,985
Prepaid expenses and other current assets........................... 3,246 2,490 5,736 8,000(C) 16,436
2,700(G)
-------- -------- -------- ---------
Total current assets.............................................. 49,150 105,052 154,202 163,705
Net investment in sales type and direct financing leases and long-term
contract receivables................................................ 13,559 18,232 31,791 31,791
Property, plant and equipment, net.................................... 14,212 44,966 59,178 59,178
Other non-current assets.............................................. 5,072 1,626 6,698 6,250(A) 40,251
8,000(B)
20,000(C)
(697)(D)
Intangible assets..................................................... 48,344 21,105 69,449 244,091(C) 313,540
-------- -------- -------- ---------
Total assets...................................................... $130,337 $190,981 $321,318 $608,465
-------- -------- -------- ---------
-------- -------- -------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable.................................................... $ 8,255 $ 13,703 $21,958 $ 21,958
Accrued expenses and other liabilities.............................. 13,043 49,643 62,686 $ (11,000)(C) 68,097
3,589(D)
8,000(F)
(6,000)(H)
Short-term debt and current portion of long-term debt............... 149 17,534 17,683 (1,250)(A) 3,933
15,000(D)
-------- -------- -------- ---------
Total current liabilities......................................... 21,447 80,880 102,327 93,988
Long-term debt........................................................ 19,865 142,955 162,820 (200,750)(A) 406,712
(200,000)(B)
(5,250)(C)
162,108(D)
Other non-current liabilities......................................... 1,532 2,737 4,269 4,269
-------- -------- -------- ---------
Total liabilities................................................. 42,844 226,572 269,416 504,969
Common stock and capital in excess of par............................. 77,058 33,855 110,913 33,855(C) 97,058
(20,000)(E)
Retained earnings/(accumulated deficit)............................... 10,226 (70,166) (59,940 ) (70,166)(C) 6,229
697(D)
(2,700)(G)
6,000(H)
Cumulative translation adjustment and other........................... 209 720 929 720(C) 209
-------- -------- -------- ---------
Total stockholder's equity (deficit).............................. 87,493 (35,591) 51,902 103,496
-------- -------- -------- ---------
Total liabilities and stockholder's equity........................ $130,337 $190,981 $321,318 $608,465
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Balance Sheet.
40
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) Reflects receipt of gross proceeds of $202,000 from the initial borrowing
under the New Credit Facility, net of issuance costs of $6,250 which have
been included in other non-current assets.
New Credit Facility consists of the following:
<TABLE>
<S> <C>
Term loan facilities.............................................. $ 200,000
Revolving credit facility(1)...................................... 2,000
---------
Total New Credit Facility..................................... 202,000
Current portion................................................... 1,250
---------
Long-term......................................................... $ 200,750
---------
---------
</TABLE>
- ------------------------
(1) The actual amount borrowed under the revolving credit facility at the Merger
Closing related to the Transactions was $4,200.
(B) Reflects receipt of gross proceeds of $200,000 from the issuance of the
Notes, net of $6,000 of selling commissions and $2,000 of offering expenses
which have been reflected as debt issuance costs and included in other
non-current assets.
(C) Reflects the allocation of the total Merger cost:
<TABLE>
<S> <C>
Cash Merger Consideration......................................... $ 224,500
Estimated transaction fees in addition to debt issuance costs..... 5,750
---------
Total cash payments in connection with Merger................... 230,250
---------
Elimination of book value of net assets acquired:
Common stock and capital in excess of par......................... (33,855)
Accumulated deficit............................................... 70,166
Cumulative translation adjustment and other....................... (720)
---------
Net stockholders' deficit....................................... 35,591
---------
Excess of cost over book value................................ $ 265,841
---------
---------
Allocation of excess cost over book value:
Amount assigned to inventory...................................... $ 10,000
Deferred tax assets--current...................................... 8,000
Deferred tax assets--non-current.................................. 20,000
Severance, bonus and restructuring related to IVAC personnel and
facilities (see Note (H) below for IMED restructuring
charges)........................................................ (11,000)
Premium payable in connection with the Debt Tender Offer
and Consent Solicitation........................................ (5,250)
Amount assigned to intangible assets.............................. 244,091
---------
Total......................................................... $ 265,841
---------
---------
</TABLE>
41
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(D) Reflects the retirement of the following long-term and current debt
obligations and related accrued interest:
<TABLE>
<CAPTION>
ACCRUED
DEBT INTEREST TOTAL
<S> <C> <C> <C>
Current debt:
IVAC existing credit facility............................... $ 15,000 $ 165 $ 15,165
---------- --------- ----------
Long term debt:
Existing Senior Notes (including redemption premium and
consent fees of $5,250)................................... 105,250 3,248 108,498
Junior Subordinated Notes of IVAC Holdings.................. 37,324 -- 37,324
IMED Existing Credit Facility (1)........................... 19,534 176 19,710
---------- --------- ----------
Total long-term debt.................................... 162,108 3,424 165,532
---------- --------- ----------
Total current and long-term debt........................ $ 177,108 $ 3,589 $ 180,697
---------- --------- ----------
---------- --------- ----------
</TABLE>
- ------------------------
(1) The Pro Forma Condensed Consolidated Balance Sheet also includes the
write-off of related unamortized debt issuance costs of $697.
(E) Reflects the Capital Contribution from Advanced Medical.
(F) Reflects $8,000 payment to Eli Lilly and Company ("Lilly") which is
anticipated to be made by IVAC Holdings prior to the consummation of the
Merger and will be paid from existing cash balances and/or with borrowings
under IVAC's existing credit facility.
(G) Reflects tax benefit at an estimated statutory rate of 40% related to IMED
restructuring costs of $6,000 and $697 write-off of unamortized debt
issuance costs related to IMED's Existing Credit Facility.
(H) Reflects $6,000 non-recurring restructuring charge related to the closure of
certain IMED facilities and severance payments.
42
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RIVER
IVAC DIVESTITURE TRANSACTIONS COMPANY
IMED HOLDINGS COMBINED ADJUSTMENTS (A) ADJUSTMENTS PRO FORMA
Net sales.................................... $112,551 $240,971 $353,522 $ (794) $352,728
Cost of sales................................ 63,270 157,869 221,139 (5,357) $(6,600)(B) 209,182
-------- --------- --------- ---------
Gross margin................................. 49,281 83,102 132,383 143,546
-------- --------- --------- ---------
Selling and marketing........................ 16,567 43,994 60,561 (3,006) (2,850)(B) 54,705
General and administrative................... 8,893 28,381 37,274 (3,478) 8,136(C) 41,032
(900)(B)
Research and development..................... 7,386 12,083 19,469 (790) (250)(B) 18,429
Purchased research and development........... -- 22,883 22,883 (12,755) 10,128
Restructuring................................ -- 5,944 5,944 (103) 5,841
Other operating expense, net................. -- 1,497 1,497 1,497
-------- --------- --------- ---------
Total operating expenses................... 32,846 114,782 147,628 131,632
-------- --------- --------- ---------
Income (loss) from operations.............. 16,435 (31,680) (15,245) 11,914
-------- --------- --------- ---------
Other income (expense):
Interest income (D)........................ 2,361 3,506 5,867 5,867
Interest expense........................... (2,052) (27,969) (30,021) 163 (37,784)(E) (44,633)
23,009(F)
Other, net................................. (379) -- (379) (379)
-------- --------- --------- ---------
(70) (24,463) (24,533) (39,145)
-------- --------- --------- ---------
Income (loss) before income taxes............ 16,365 (56,143) (39,778) (27,231)
Provision for (benefit from) income taxes.... 8,099 (378) 7,721 3,831 (7,952)(G) 3,600
-------- --------- --------- --------------- ------------ ---------
Net income (loss)............................ $ 8,266 $ (55,765) $ (47,499) $ 21,027 $(4,359) $(30,831)
-------- --------- --------- --------------- ------------ ---------
-------- --------- --------- --------------- ------------ ---------
OTHER DATA:
Income (loss) from operations.............. $ 16,435 $ (31,680) $ (15,245) $ 24,695 $ 2,464 $ 11,914
Depreciation and amortization.............. 6,542 20,950 27,492 (1,199) 7,336 33,629
Technology license fee to Advanced Medical
(H)...................................... -- -- -- 1,100 1,100
Inventory purchase accounting adjustment... -- 14,774 14,774 14,774
Restructuring.............................. -- 5,944 5,944 (103) 5,841
Purchased research and development......... -- 22,883 22,883 (12,755) 10,128
Lease/contract interest income............. 2,361 3,013 5,374 5,374
-------- --------- --------- --------------- ------------ ---------
Adjusted EBITDA............................ $ 25,338 $ 35,884 $ 61,222 $ 10,638 $10,900 $ 82,760
-------- --------- --------- --------------- ------------ ---------
-------- --------- --------- --------------- ------------ ---------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
43
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RIVER
IVAC DIVESTITURE TRANSACTIONS COMPANY
IMED HOLDINGS COMBINED ADJUSTMENTS(A) ADJUSTMENTS PRO FORMA
Net sales................................ $ 83,012 $ 174,663 $ 257,675 $ (555) $ 257,120
Cost of sales............................ 46,633 118,255 164,888 (3,404) $ (4,950)(B) 156,534
--------- --------- --------- -------------
Gross margin............................. 36,379 56,408 92,787 100,586
--------- --------- --------- -------------
Selling and marketing.................... 12,965 32,470 45,435 (2,235) (2,137)(B) 41,063
General and administrative............... 6,502 18,529 25,031 (2,254) 6,102(C) 28,204
(675)(B)
Research and development................. 5,603 10,111 15,714 (642) (188)(B) 14,884
Purchased research and development....... -- 19,883 19,883 (9,755) 10,128
Restructuring............................ -- 4,460 4,460 (103) 4,357
--------- --------- --------- -------------
Total operating expenses............... 25,070 85,453 110,523 98,636
--------- --------- --------- -------------
Income (loss) from operations.......... 11,309 (29,045) (17,736) 1,950
--------- --------- --------- -------------
Other income (expense):
Interest income (D).................... 1,766 2,491 4,257 4,257
Interest expense....................... (1,647) (20,047) (21,694) 98 (28,338)(E) (32,945)
16,989(F)
Other, net............................. (307) -- (307) (307)
--------- --------- --------- -------------
(188) (17,556) (17,744) (28,995)
--------- --------- --------- -------------
Income (loss) before income taxes........ 11,121 (46,601) (35,480) (27,045)
Provision for (benefit from) income 5,076 (3,270) 1,806 3,831 (2,937)(G) 2,700
taxes..................................
--------- --------- --------- --------------- ------------- -------------
Net income (loss)........................ $ 6,045 $ (43,331) $ (37,286) $ 14,105 $ (6,564) $ (29,745)
--------- --------- --------- --------------- ------------- -------------
--------- --------- --------- --------------- ------------- -------------
OTHER DATA:
Income (loss) from operations.......... $ 11,309 $ (29,045) $ (17,736) $ 17,838 $ 1,848 $ 1,950
Depreciation and amortization.......... 4,889 15,094 19,983 (867) 5,502 24,618
Technology license fee to Advanced -- -- -- 825 825
Medical(H)...........................
Inventory purchase accounting -- 14,774 14,774 14,774
adjustment...........................
Purchased research and development..... -- 19,883 19,883 (9,755) 10,128
Restructuring.......................... -- 4,460 4,460 (103) 4,357
Lease/contract interest income......... 1,766 2,130 3,896 3,896
--------- --------- --------- --------------- ------------- -------------
Adjusted EBITDA........................ $ 17,964 $ 27,296 $ 45,260 $ 7,113 $ 8,175 $ 60,548
--------- --------- --------- --------------- ------------- -------------
--------- --------- --------- --------------- ------------- -------------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
44
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RIVER
IVAC DIVESTITURE TRANSACTIONS COMPANY
IMED HOLDINGS COMBINED ADJUSTMENTS(A) ADJUSTMENTS PRO FORMA
Net sales................................ $ 81,770 $ 170,155 $ 251,925 $ (373) $ 251,552
Cost of sales............................ 44,757 98,836 143,593 (2,787) $ (4,950)(B) 135,856
--------- --------- --------- --------------
Gross margin............................. 37,013 71,319 108,332 115,696
--------- --------- --------- --------------
Selling and marketing.................... 13,167 28,872 42,039 (819) (2,137)(B) 39,083
General and administrative............... 7,050 17,479 24,529 (719) 6,102(C) 29,237
(675)(B)
Research and development................. 5,773 7,663 13,436 (199) (188)(B) 13,049
Restructuring............................ -- 17,396 17,396 (17,396) --
--------- --------- --------- --------------
Total operating expenses............. 25,990 71,410 97,400 81,369
--------- --------- --------- --------------
Income (loss) from operations........ 11,023 (91) 10,932 34,327
--------- --------- --------- --------------
Other income (expense):
Interest income(D)..................... 1,921 2,146 4,067 4,067
Interest expense....................... (1,119) (13,730) (14,849) 121 (28,417)(E) (30,074)
13,071(F)
Other, net............................. (49) -- (49) (49)
--------- --------- --------- --------------
753 (11,584) (10,831) (26,056)
--------- --------- --------- --------------
Income (loss) before income taxes........ 11,776 (11,675) 101 8,271
Provision for (benefit from) income
taxes.................................. 5,573 2,434 8,007 2,782 (8,589)(G) 2,200
--------- --------- --------- ------- ------------- --------------
Net income (loss)........................ $ 6,203 $ (14,109) $ (7,906) $ 18,886 $(4,909) $ 6,071
--------- --------- --------- ------- ------------- --------------
--------- --------- --------- ------- ------------- --------------
OTHER DATA:
Income (loss) from operations.......... $ 11,023 $ (91) $ 10,932 $ 21,547 $ 1,848 $ 34,327
Depreciation and amortization.......... 5,508 15,279 20,787 (748 ) 5,502 25,541
Technology license fee to Advanced
Medical(H)........................... -- -- -- 550 550
Restructuring.......................... -- 17,396 17,396 (17,396 ) --
Lease/contract interest income......... 1,921 1,812 3,733 3,733
--------- --------- --------- ------- ------------- --------------
Adjusted EBITDA........................ $ 18,452 $ 34,396 $ 52,848 $ 3,403 $7,900 $ 64,151
--------- --------- --------- ------- ------------- --------------
--------- --------- --------- ------- ------------- --------------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
45
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) In June 1996, IVAC decided to discontinue River's operations and to divest
River's assets. River's primary assets include patents, technologies, trade
secrets, inventories and manufacturing equipment. As a result of the River
Divestiture, pro forma adjustments have been made to eliminate the
historical operating results of River and the related income tax impact to
IVAC Holdings.
(B) In connection with the Merger, management has performed a review of
operating activities of IVAC and IMED and identified duplicative costs that
will be eliminated in connection with the Merger. The most significant of
these eliminations will be achieved through head count reductions and
closure of redundant manufacturing and headquarters facilities.
Total cost savings resulting from head count reductions, assuming such
reductions had occurred at the beginning of each pro forma period, would
have been $3,000 for the year ended December 31, 1995 and $2,250 for the
nine months ended September 30, 1995 and 1996, and have been allocated to
operating expenses as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DEC. 31, 1995 SEPTEMBER 30, 1995 AND 1996
<S> <C> <C>
Selling and marketing.......................................... $ 2,600 $ 1,950
General and administrative..................................... 400 300
------ ------
$ 3,000 $ 2,250
------ ------
------ ------
</TABLE>
Due to excess capacity at the manufacturing facilities of both IMED and
IVAC, management has decided to consolidate IMED's existing San Diego
manufacturing operations at IVAC's San Diego facility. Total cost savings
resulting from this facility consolidation, assuming such consolidation had
occurred at the beginning of each pro forma period, would have been $6,600
for the year ended December 31, 1995 and $4,950 for the nine months ended
September 30, 1995 and 1996.
In addition, as a result of the head count reductions described above,
management has decided to consolidate the headquarters of IMED with IVAC's
existing San Diego headquarters. Total cost savings resulting from this
consolidation, assuming such consolidation had occurred at the beginning of
each pro forma period, would have been $1,000 for the year ended December
31, 1995 and $750 for the nine months ended September 30, 1995 and 1996 and
have been allocated to operating expenses as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DEC. 31, 1995 SEPTEMBER 30, 1995 AND 1996
<S> <C> <C>
Selling and marketing.......................................... $ 250 $ 187
General and administrative..................................... 500 375
Research and development....................................... 250 188
------ ------
$ 1,000 $ 750
------ ------
------ ------
</TABLE>
Management has identified additional costs savings related to volume
discounts expected to be received in connection with the consolidation of
suppliers and vendors, as well as planned cost savings related to the
consolidation of research and development programs. Estimated cost savings
related to these items are not deemed to qualify for pro forma adjustments
under Regulation S-X and, accordingly, have been excluded from such
adjustments.
46
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER DATA (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(C) Reflects amortization of increased intangible assets (primarily goodwill)
using an estimated useful life of 30 years. No adjustment to cost of sales
has been made in the Pro Forma Condensed Consolidated Statements of
Operations and Other Data related to the purchase accounting adjustment made
to inventory as it will result in a non-recurring increase to cost of sales
when such inventory is sold.
(D) Interest income consists of lease/contract interest income and interest
income on actual cash balances.
(E) Reflects interest expense related to the borrowings under the New Credit
Facility and the Notes:
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, NINE MONTHS ENDED NINE MONTHS ENDED
1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
<S> <C> <C> <C>
New Credit Facility (at an assumed weighted average
interest rate of 8.7%)(1)........................ $ 16,547 $ 12,410 $ 12,489
Amortization of issuance costs..................... 937 703 703
Notes (at an interest rate of 9.75%)............... 19,500 14,625 14,625
Amortization of issuance costs..................... 800 600 600
------------ ------- -------
$ 37,784 $ 28,338 $ 28,417
------------ ------- -------
------------ ------- -------
</TABLE>
----------------------------
(1) For the year ended December 31, 1995, the nine months ended September
30, 1995 and eight months of the nine months ended September 30, 1996,
excludes interest expense related to $11,000 of borrowings under the New
Credit Facility used to repay borrowings under the Existing Credit
Facility incurred in connection with the repurchase of certain European
distribution rights on August 30, 1996.
(F) Reflects elimination of interest expense, including amortization of debt
issuance costs in connection with the Refinancing, the Debt Tender Offer and
Consent Solicitation, and the Junior Notes Repayment:
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, NINE MONTHS ENDED NINE MONTHS ENDED
1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
<S> <C> <C> <C>
IMED Existing Credit Facility......................... $ 1,166 $ 884 $ 1,055
IVAC existing credit facility (1)..................... 3,286 2,231 1,188
Existing Senior Notes................................. 1,465 -- 7,465
Junior subordinated notes of IVAC Holdings............ 3,961 2,971 3,363
Bridge notes of IVAC Medical Systems (2).............. 13,131 10,903 --
------------ ------- -------
$ 23,009 $ 16,989 $ 13,071
------------ ------- -------
------------ ------- -------
</TABLE>
----------------------------
(1) In addition to interest on the $15,000 of indebtedness outstanding at
September 30, 1996 under IVAC's existing credit facility that will be
repaid in the Refinancing, the elimination of interest expense related to
IVAC includes interest on $14,000 of bank debt which was repaid with the
proceeds received from the issuance of the Existing Senior Notes by IVAC
Medical Systems during November 1995.
(2) Bridge notes of IVAC Medical Systems were repaid in full with the
proceeds from the issuance of the Existing Senior Notes in November 1995.
Accordingly, all interest expense and write-off and amortization of debt
issuance costs related to the bridge notes have been eliminated in the
Pro Forma Condensed Consolidated Statements of Operations and Other Data
for the year ended December 31, 1995 and the nine months ended September
30, 1995.
Pro forma interest expense does not reflect interest savings attributable to
the repayment of approximately $25,000 principal amount of IVAC debt in
November 1995 with the proceeds of the sale of IVAC's San Diego
manufacturing and office facility. Assuming the sale had occured at January
1, 1995, interest expense would have been reduced by $3,159 and $1,923 for
the year ended December 31, 1995 and nine months ended September 30, 1995,
respectively.
47
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER DATA (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(G) Reflects adjustment to income tax expense related to the Transactions. The
pro forma income tax expense represents the expected taxes on the pro forma
pretax income (loss) which is primarily foreign taxes.
(H) Prior to June 30, 1996, Advanced Medical licensed to IMED certain technology
rights for $1,100 per year. Because this license fee could not be paid to
Advanced Medical as a result of restrictions in the Existing Credit
Facility, IMED accrued a liability in respect of such license fee. Effective
June 30, 1996 Advanced Medical contributed the underlying technology to
IMED. This non-cash charge has been added to income from operations in
computing Adjusted EBITDA.
48
<PAGE>
PRO FORMA LIQUIDITY
The Company expects to meet its liquidity needs and capital expenditures
requirements with cash flow from operations and borrowings under the New Credit
Facility. The Company's primary use of funds will be to fund capital
expenditures and strategic acquisitions, and to pay debt service on outstanding
indebtedness.
At September 30, 1996, on a pro forma basis, the Company's outstanding
indebtedness would have been approximately $410.6 million, including
approximately $202.0 million outstanding pursuant to the New Credit Facility and
$200.0 million outstanding pursuant to the Notes. Borrowings under the New
Credit Facility bear interest at floating rates based, at the Company's option,
on the Eurodollar Rate (as defined in the New Credit Facility) or the Base Rate
(as defined). See "Description of New Credit Facility."
In addition to the indebtedness incurred pursuant to the New Credit Facility
and the Notes, in connection with the Transactions, the Company assumed IVAC's
obligations to Siemens Infusion Systems Ltd. These obligations relate to the
payment of additional purchase consideration related to the acquisition of the
MiniMed product line (the predecessor product line to MS III) and provide for
the payment of the greater of $3.0 million per year or 8% of the prior year's MS
III sales in 1997 through 1999.
Annual amortizations of the Company's indebtedness are expected to be
approximately $4.3 million, $14.7 million and $15.8 million for 1997, 1998 and
1999, respectively.
The Company expects that during the first quarter of 1997, it will incur
approximately $12.0 million of additional indebtedness under the New Credit
Facility to pay restructuring costs related to the Transactions. On a pro forma
basis, after payment of the restructuring charges, the Company would have
approximately $36.0 million of available borrowing capacity under the $50.0
million revolving credit facility.
Although the Company is not a guarantor of Advanced Medical's Convertible
Debentures, Advanced Medical has no significant operations, other than the
operations of the Company, and will be dependent upon the Company to fund its
debt service requirements and other operating expenses. As of September 30,
1996, the outstanding principal amount of the Convertible Debentures was $16.2
million. The Convertible Debentures provide for semi-annual interest payments of
approximately $0.6 million and mature on January 15, 2002. The Indenture and the
New Credit Facility will permit the Company to fund interest payments on the
Convertible Debentures and to make limited distributions to Advanced Medical to
fund operating expenses and to pay income taxes; PROVIDED THAT, with respect to
the New Credit Facility, there exists no default or event of default under the
New Credit Facility. The Indenture and the New Credit Facility, however, will
restrict distributions to Advanced Medical to fund the repayment of the
Convertible Notes at maturity.
In addition to routine capital expenditures that are expected to be
consistent with the combined historical capital expenditures of IMED and IVAC,
the Company expects to make a total of approximately $10.0 million of capital
and operating expenditures during 1997 and 1998 for the acquisition and
implementation of a new enterprise-wide information system. In addition, the
Company may incur additional capital expenditures with respect to leasehold
improvements in connection with the consolidation of the operations of IMED and
IVAC.
The Company believes that it will generate sufficient cash flow from
operations to fund its operations, make planned capital expenditures and make
required payments of principal and interest under the New Credit Facility and
interest on the Notes; however, the Company may not generate sufficient cash
flow from operations to repay the Notes at maturity. Accordingly, the Company
may have to refinance the Notes at or prior to maturity or sell assets or raise
equity capital to repay the principal amount of the Notes. In addition, the
Company's ability to fund its operations, to make planned capital expenditures
and
49
<PAGE>
to make scheduled principal and interest payments will be dependent on the
Company's future operating performance, which is itself dependent on a number of
factors, many of which the Company cannot control, including prevailing economic
conditions, availability of other sources of liquidity, and financial, business,
regulatory and other factors affecting the Company's business and operations.
See "Risk Factors."
50
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF IMED
(DOLLARS IN THOUSANDS)
The following selected historical consolidated financial data of IMED as of
and for the years ended December 31, 1991, 1992, 1993, 1994 and 1995 have been
derived from the audited consolidated financial statements of IMED. The selected
historical consolidated financial data of IMED at September 30, 1996 and for the
nine month periods ended September 30, 1995 and 1996 have been derived from the
unaudited interim condensed consolidated financial statements of IMED. The
unaudited interim condensed consolidated financial statements include all
adjustments, consisting of normal recurring adjustments, which management
considers necessary for a fair statement of the financial position and results
of operations for these periods. Operating results for the nine months ended
September 30, 1996 are not indicative of results for future periods, including
the year ending December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales(1)............................ $ 127,077 $ 128,642 $ 119,858 $ 112,122 $ 112,551 $ 83,012 $ 81,770
Cost of sales........................... 71,671 72,940 72,197 65,641 63,270 46,633 44,757
---------- ---------- ---------- ---------- ---------- --------- ---------
Gross profit............................ 55,406 55,702 47,661 46,481 49,281 36,379 37,013
Selling and marketing................... 25,046 19,715 18,882 16,850 16,567 12,965 13,167
General and administrative.............. 11,842 10,358 10,409 8,726 8,893 6,502 7,050
Research and development................ 8,149 8,931 8,630 6,345 7,386 5,603 5,773
Restructuring(2)........................ -- -- 4,503 -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- ---------
Income from operations.................. 10,369 16,698 5,237 14,560 16,435 11,309 11,023
Lease interest income(3)................ 1,912 1,968 2,660 2,461 2,361 1,766 1,921
Interest expense........................ (7,682) (5,046) (4,159) (2,805) (2,052) (1,647) (1,119)
Other income (expense).................. 924 319 (4,115) (261) (379) (307) (49)
---------- ---------- ---------- ---------- ---------- --------- ---------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of change in accounting
principle............................. 5,523 13,939 (377) 13,955 16,365 11,121 11,776
Provision for income taxes.............. 2,526 4,696 1,863 8,310 8,099 5,076 5,573
---------- ---------- ---------- ---------- ---------- --------- ---------
Income (loss) before extraordinary item
and cumulative effect of change in
accounting principle.................. 2,997 9,243 (2,240) 5,645 8,266 6,045 6,203
Extraordinary gain (loss)............... (1,236) 1,193 -- -- -- -- --
Cumulative effect of change in
accounting principle(4)............... -- -- 768 -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- ---------
Net income (loss)....................... $ 1,761 $ 10,436 $ (1,472) $ 5,645 $ 8,266 $ 6,045 $ 6,203
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Ratio of earnings to fixed charges(5)... 1.6x 3.2x -- 4.5x 6.3x 5.6x 7.2x
Other Data:
Adjusted EBITDA(6)...................... $ 21,816 $ 28,462 $ 20,753 $ 23,727 $ 25,338 $ 17,964 $ 18,452
Depreciation and
amortization(7)....................... 9,535 9,796 8,353 6,706 6,542 4,889 5,508
Capital expenditures.................... 5,851 3,984 1,616 4,549 4,803 4,629 4,013
Net cash provided by operating
activities............................ 16,110 6,993 12,441 19,933 24,024 20,284 15,575
Net cash provided by (used in) investing
activities............................ 3,707 (1,492) (1,512) (530) (8,188) (7,991) (16,468)
Net cash provided by (used in) financing
activities............................ (18,256) (7,669) (10,860) (19,572) (15,868) (12,913) 1,280
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash................................................... $ 2,630 $ 715 $ 981 $ 1,124 $ 436
Working capital........................................ (9,049) (5,320) (310) 30,189 25,753
Total assets........................................... 143,343 144,818 130,602 122,983 122,597
Short-term debt (excludes current portion of long-term
debt)................................................ 19,147 19,513 16,690 -- --
Long-term debt (including current portion)............. 33,266 25,538 19,017 19,647 11,353
Stockholder's equity................................... 23,811 27,288 28,514 32,929 32,477
<CAPTION>
AT SEPTEMBER 30,
1996
<S> <C>
Balance Sheet Data:
Cash................................................... $ 851
Working capital........................................ 27,703
Total assets........................................... 130,337
Short-term debt (excludes current portion of long-term
debt)................................................ --
Long-term debt (including current portion)............. 20,014
Stockholder's equity................................... 87,493(8)
</TABLE>
- --------------------------
(1) Net sales for the years ended December 31, 1993 and 1994 include $1,500 and
$2,600, respectively, associated with products manufactured in IMED's Irish
manufacturing facility for Pharmacia & Upjohn, Inc. Net sales relating to
these products were terminated in August 1994 in connection with the sale of
IMED's Irish manufacturing facility.
(2) See Note 10 to Notes to the Consolidated Financial Statements of IMED
included elsewhere in this Prospectus.
(3) Lease interest income consists of interest income associated with contracts
or agreements pursuant to which a third party acquires infusion pumps under
sales type and direct financing leases.
(4) Reflects the adoption on January 1, 1993 of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
(5) For purposes of determining the ratio of earnings to fixed charges, earnings
includes pre-tax income adjusted for fixed charges. Fixed charges consist of
interest on all indebtedness, estimated interest component of rental expense
and amortization of deferred financing costs. As a result of the loss
incurred for the year ended December 31, 1993, earnings were inadequate to
cover fixed charges by $377.
(6) Adjusted EBITDA represents income from operations before restructuring
charges and depreciation and amortization, plus lease interest income.
Adjusted EBITDA does not represent net income or cash flows from operations,
as these terms are defined under generally accepted accounting principles,
and should not be considered as an alternative to net income as an indicator
of IMED's operating performance or to cash flows as a measure of liquidity.
IMED has included information concerning Adjusted EBITDA herein because it
understands that such information is used by certain investors as one
measure of an issuer's historical ability to service debt.
(7) Depreciation and amortization excludes debt issuance costs included in
interest expense of $411, $352, $314, $263, $248, $189 and $180 for the
years ended December 31, 1991, 1992, 1993, 1994 and 1995 and the nine month
periods ended September 30, 1995 and 1996, respectively.
(8) See Note 8 to Notes to the Condensed Consolidated Financial Statements of
IMED included elsewhere in this Prospectus.
52
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF IMED
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS OF IMED AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROPECTUS.
GENERAL
IMED sells and services infusion systems primarily in the United States,
Western Europe, Canada, Australia, Latin America and the Middle East. IMED
generates revenues from the sale and/or lease of infusion pumps and sales of
associated proprietary disposable administration sets. Prior to 1993, disposable
administration sets used with IMED's piston cassette infusion pumps had
generated a majority of IMED's overall sales of disposable administration sets
and total revenues. During 1995 and the nine months ended September 30, 1996,
however, approximately 98% and 99%, respectively, of IMED's revenues from the
sale or lease of infusion pumps were attributable to IMED's Gemini series of
large volume peristaltic infusion pumps reflecting the trend in the health care
industry away from older piston cassette technology toward the peristaltic
technology incorporated in the Gemini series. IMED expects that the shift away
from piston cassette technology toward peristaltic technology will continue.
IMED discontinued manufacturing piston cassette infusion pumps in the first
quarter of 1995. IMED's infusion systems are priced at the high end of the
industry price range and compete on the basis of technological sophistication,
quality, safety and flexibility in application.
Approximately 68.5% and 71.9% of IMED's net sales during 1995 and the nine
months ended September 30, 1996, respectively, were attributable to sales of
proprietary disposable administration sets. Prior to the third quarter of 1992,
a majority of IMED's net sales attributable to disposable administration sets
were generated by sales of disposable administration sets used with IMED's
piston cassette infusion pumps. During 1995 and the nine months ended September
30, 1996, however, approximately 78.5% and 82.5% of IMED's disposable
administration set net sales were attributable to sales of disposable
administration sets used with IMED's Gemini series infusion pumps reflecting the
industry shift away from piston cassette technology toward peristaltic
technology and IMED's growing installed base of peristaltic infusion pumps.
In recent years, IMED's results of operations have been affected by the cost
containment pressures applicable to health care providers. In particular, in
order to reduce costs, certain hospitals adopted a new protocol increasing the
maximum time between disposable administration set changes from every 24 hours
to as much as every 72 hours. Notwithstanding this change in protocol, unit
sales volume of IMED's disposable administration sets have increased in every
period since January 1, 1993, primarily as a result of IMED's growing installed
base of infusion pumps. IMED's profitability is also affected by the increasing
use of GPOs which are better able to negotiate favorable pricing from providers
of infusion systems, such as IMED, and which police compliance with exclusive
buying arrangements for their members. These buying arrangements, in certain
situations, also may result in the GPO requiring removal of IMED's existing
infusion pumps. IMED expects that such GPOs will become increasingly common and
may have an adverse effect on IMED's profitability in the future. Finally, the
enactment of national health care reform or other legislation affecting payment
mechanisms and health care delivery would affect IMED's future results of
operations. Although the final form of any such legislation is not known, it is
likely that any such legislation may impose limits on the number and type of
medical procedures which may be performed and may restrict a provider's ability
to select specific devices or products for use in administering care which, in
turn, could adversely impact demand and/or pricing for IMED's infusion systems.
It is impossible to predict the extent to which IMED may be affected by any such
change in legislation.
Commencing in 1993, IMED undertook a number of measures designed to reduce
manufacturing costs and increase Adjusted EBITDA. These measures included (i)
selling IMED's Irish molding manufacturing operations in August 1994; (ii)
decreasing IMED's domestic work force by approximately 10%; and
53
<PAGE>
(iii) modifying certain employee benefit plans. Since that time, IMED has also
undertaken to outsource certain component parts and negotiate price reductions
from key suppliers in order to further improve its gross margin. As a result
primarily of the foregoing, IMED's Adjusted EBITDA margin improved from 17.3% in
1993 to 22.6% for the nine months ended September 30, 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
financial information expressed as a percentage of net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
Net sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................. 60.2 58.5 56.2 56.2 54.7
--------- --------- --------- --------- ---------
Gross margin.............................................. 39.8 41.5 43.8 43.8 45.3
Selling and marketing..................................... 15.7 15.0 14.7 15.6 16.1
General and administrative................................ 8.7 7.8 7.9 7.8 8.6
Research and development.................................. 7.2 5.7 6.6 6.8 7.1
Restructuring............................................. 3.8 -- -- -- --
--------- --------- --------- --------- ---------
Income from operations.................................... 4.4 13.0 14.6 13.6 13.5
Interest expense.......................................... (3.5) (2.5) (1.8) (2.0) (1.4)
Lease interest income..................................... 2.2 2.2 2.1 2.1 2.3
Other expense, net........................................ (3.4) (0.2) (0.3) (0.3) --
Provision for income taxes................................ 1.5 7.4 7.2 6.1 6.8
Cumulative effect of change in accounting principle....... 0.6 -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss)......................................... (1.2)% 5.1% 7.4% 7.3% 7.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
Adjusted EBITDA......................................... 17.3% 21.2% 22.5% 21.6% 22.6%
</TABLE>
The following table sets forth IMED sales by major product groups for the
periods presented:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Piston cassette disposables................................. $ 30.8 $ 22.1 $ 16.6 $ 13.0 $ 10.3
Peristaltic disposables..................................... 48.0 53.8 60.5 44.2 48.5
Piston cassette infusion pumps.............................. 1.7...... 0.7...... 0.5 0.5 0.1
Peristaltic infusion pumps.................................. 26.4 22.5 25.3 18.0 15.8
ReadyMED.................................................... 3.8 3.5 2.5 2.0 1.8
Products manufactured in Ireland............................ 1.5 2.6 -- -- --
Other(1).................................................... 7.7 6.9 7.2 5.3 5.3
--------- --------- --------- --------- ---------
Total................................................. $ 119.9 $ 112.1 $ 112.6 $ 83.0 $ 81.8
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Consists primarily of operating lease income relating to infusion pumps,
service fees, license fee revenue and accessory sales.
54
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
NET SALES. Net sales decreased $1.2 million, or 1.5%, from $83.0 million
for the nine months ended September 30, 1995 to $81.8 million for the nine
months ended September 30, 1996. United States sales, which were 79.0% of net
sales for the nine months ended September 30, 1996, decreased $3.0 million, or
4.4%, from $67.6 million for the nine months ended September 30, 1995 to $64.6
million for the nine months ended September 30, 1996. Within the United States
infusion therapy business, sales decreased for the nine months ended September
30, 1996, as compared to the nine months ended September 30, 1995, primarily due
to a (i) decrease in the volume of infusion pump shipments primarily
attributable to several large transactions during the nine months ended
September 30, 1995 and (ii) decline in the average selling price of IMED's
infusion pumps and disposable administration sets, offset in part by an increase
in unit volume of disposable administration set sales. Sales to customers
located outside of the United States increased $1.8 million, or 11.7%, from
$15.4 million for the nine months ended September 30, 1995 to $17.2 million for
the nine months ended September 30, 1996 primarily as a result of increased unit
volume of disposable administration sets resulting from IMED's growing installed
base in Canada, Australia, Latin America and the Far East.
GROSS MARGIN. Gross margin increased $0.6 million from $36.4 million for
the nine months ended September 30, 1995 to $37.0 million for the nine months
ended September 30, 1996 due primarily to the decrease in cost of sales
discussed below. Despite the decline in average selling prices of infusion pumps
and disposable administration sets discussed above, gross margin, as a
percentage of net sales, increased from 43.8% for the nine months ended
September 30, 1995 to 45.3% for the nine months ended September 30, 1996
primarily as a result of reductions in the manufacturing cost of disposable
administration sets caused by (i) increased outsourcing of molded parts and
components; (ii) negotiated price reductions from suppliers; and (iii) the
favorable effects of increased manufacturing volume. Gross margin also increased
for the nine months ended September 30, 1996, compared to the nine months ended
September 30, 1995, as a result of lower unit cost for inventory at December 31,
1995 that were sold during the nine months ended September 30, 1996 compared to
the unit cost for inventory at December 31, 1994 that were sold during the nine
months ended September 30, 1995.
SELLING AND MARKETING. As a percentage of net sales, selling and marketing
expense increased from 15.6% for the nine months ended September 30, 1995 to
16.1% for the nine months ended September 30, 1996 primarily as a result of the
decrease in net sales discussed above. Selling and marketing expense increased
from $13.0 million for the nine months ended September 30, 1995 to $13.2 million
for the nine months ended September 30, 1996 primarily due to the recognition of
selling and marketing expense by IMED Ltd. in September 1996 as a result of
IMED's acquisition of the European distribution rights for IMED products from
Pharmacia & Upjohn, Inc.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
from $6.5 million for the nine months ended September 30, 1995 to $7.1 million
for the nine months ended September 30, 1996 primarily as a result of
recruitment and relocation expenses of development personnel and expenses
related to investments in information technology. General and administrative
expense also increased for the nine months ended September 30, 1996, compared to
the nine months ended September 30, 1995, due to the recognition of general and
administrative expenses by IMED Ltd. in September 1996. As a percentage of net
sales, general and administrative expense increased from 7.8% for the nine
months ended September 30, 1995 to 8.6% for the nine months ended September 30,
1996 primarily as a result of the increase in general and administrative
expenses and the decrease in net sales discussed above.
RESEARCH AND DEVELOPMENT. Research and development expense increased from
$5.6 million for the nine months ended September 30, 1995 to $5.8 million for
the nine months ended September 30, 1996 primarily as a result of the timing of
certain expenses associated with the development of a new modular infusion
system. Research and development expense for the year ending December 31, 1996
is expected to be comparable to research and development expense for the year
ended December 31, 1995. As a
55
<PAGE>
percentage of net sales, research and development expense increased from 6.8%
for the nine months ended September 30, 1995 to 7.1% for the nine months ended
September 30, 1996 primarily as a result of the decrease in net sales discussed
above.
ADJUSTED EBITDA. For the reasons discussed above and increased lease
interest income, as a percentage of net sales, Adjusted EBITDA increased from
21.6%, or $18.0 million, for the nine months ended September 30, 1995 to 22.6%,
or $18.5 million, for the nine months ended September 30, 1996.
INCOME FROM OPERATIONS. For the reasons discussed above, as a percentage of
net sales, income from operations decreased from 13.6%, or $11.3 million, for
the nine months ended September 30, 1995 to 13.5%, or $11.0 million, for the
nine months ended September 30, 1996.
INTEREST EXPENSE. Interest expense decreased from $1.6 million for the nine
months ended September 30, 1995 to $1.1 million for the nine months ended
September 30, 1996 primarily as a result of lower average borrowings.
LEASE INTEREST INCOME. Lease interest income during both periods consisted
of interest income associated with contracts or agreements pursuant to which a
third party acquired infusion pumps under sales type and direct financing
leases.
NET INCOME. For the reasons discussed above, net income increased $0.2
million from $6.0 million for the nine months ended September 30, 1995 to $6.2
million for the nine months ended September 30, 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased $0.4 million, or 0.4%, from $112.1 million
for 1994 to $112.6 million for 1995. United States sales, which were 81.8% of
net sales for 1995, increased $0.9 million or 1.0%, from $91.2 million for 1994
to $92.1 million for 1995. Within the United States infusion therapy business,
sales increased for 1995 as compared to 1994 primarily due to an increase in the
volume of infusion pump and disposable administration set shipments, offset in
part by a decline in average selling price of infusion pumps and disposable
administration sets and a reduction in ReadyMED sales volume due to lower demand
for the product. Sales to customers outside of the United States increased $2.1
million, or 11.5%, from $18.3 million for 1994 to $20.4 million for 1995
primarily as a result of increased (i) unit volume of disposable administration
sets in Australia, the Middle East and the Far East and (ii) sales of infusion
pumps in the Middle East, the Far East and Western Europe, partially offset by
decreased volume of disposable administration sets in Western Europe reflecting
a decline in installed instrument base. The increased volume of infusion pumps
and disposable administration sets in the Middle East and the Far East reflect
the additional investment in direct sales personnel in these territories, which
were previously covered exclusively by dealer networks.
GROSS MARGIN. Gross margin increased $2.8 million from $46.5 million for
1994 to $49.3 million for 1995 primarily due to reductions in cost of sales.
Gross margin as a percentage of net sales increased from 41.5% for 1994 to 43.8%
for 1995, primarily due to (i) increased outsourcing of molded parts and
components; (ii) the discontinuance of lower margin sales generated from the
production by IMED of a customer's products; and (iii) the favorable effects of
the peso devaluation on the labor cost on the assembly of disposable
administration sets at IMED's Mexico facility in 1995, partially offset by the
decline in the average selling price of IMED's instruments and disposable
administration sets in the United States.
SELLING AND MARKETING. As a percentage of net sales, selling and marketing
expense decreased from 15.0%, or $16.9 million, for 1994 to 14.7%, or $16.6
million, for 1995, primarily due to cost containment programs which continue to
reduce expenses, partially offset by expenses associated with certain 1995 sales
meetings not held in 1994 and increases in personnel costs associated with
additional head count in international territories previously covered
exclusively by dealer networks.
56
<PAGE>
GENERAL AND ADMINISTRATIVE. As a percentage of net sales, general and
administrative expense increased from 7.8%, or $8.7 million, for 1994 to 7.9%,
or $8.9 million, for 1995.
RESEARCH AND DEVELOPMENT. Research and development expense increased from
$6.3 million, or 5.7% of net sales, for 1994 to $7.4 million, or 6.6% of net
sales, for 1995 primarily as a result of increases in personnel and related
costs associated with the development of a new modular infusion system.
ADJUSTED EBITDA. For the reasons discussed above, as a percentage of net
sales, Adjusted EBITDA increased from 21.2%, or $23.7 million, for 1994 to
22.5%, or $25.3 million, for 1995.
INCOME FROM OPERATIONS. For the reasons discussed above, as a percentage of
net sales, income from operations increased from 13.0%, or $14.6 million, for
1994 to 14.6%, or $16.4 million, for 1995.
INTEREST EXPENSE. Interest expense decreased from $2.8 million for 1994 to
$2.1 million for 1995 primarily as a result of lower average borrowings.
LEASE INTEREST INCOME. Lease interest income during both periods consisted
of interest income associated with contracts or agreements pursuant to which a
third party acquired infusion pumps under sales type and direct financing
leases.
PROVISION FOR INCOME TAXES. Provision for income taxes was $8.3 million for
1994 compared to $8.1 million for 1995. Provision for income taxes in 1994
includes taxes on foreign earnings relating to the sale of IMED's Irish
manufacturing facility in August 1994.
NET INCOME. For the reasons discussed above, net income increased $2.6
million from $5.6 million for 1994 to $8.3 million for 1995.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES. Net sales decreased $7.7 million, or 6.5%, from $119.9 million
for 1993 to $112.1 million for 1994. United States sales, which were 81.3% of
net sales for 1994, decreased $9.8 million, or 9.7%, from $101.0 million for
1993 to $91.2 million for 1994. Within the United States infusion therapy
business, sales decreased for 1994 as compared to 1993 primarily due to (i) a
decrease in the volume of infusion pump shipments and (ii) a decline in average
selling price of IMED's infusion pumps and disposable administration sets. Sales
to customers outside of the United States increased $1.0 million, or 5.8%, from
$17.3 million for 1993 to $18.3 million for 1994, primarily as a result of (i)
increased volume of infusion pump and disposable administration set shipments in
Australia and (ii) increased volume of disposable administration set shipments
in Western Europe. These increases were offset in part by decreased infusion
pump sales volume in Western Europe.
GROSS MARGIN. Gross margin decreased $1.2 million from $47.7 million for
1993 to $46.5 million for 1994 due primarily to the decline in sales discussed
above, offset by reductions in cost of sales. Gross margin, as a percentage of
net sales, increased from 39.8% for 1993 to 41.5% for 1994 primarily as a result
of (i) reductions in the manufacturing costs of disposable administration sets
due to cost containment programs implemented during the fourth quarter of 1993;
(ii) increased outsourcing of molded parts and components; and (iii) the
resolution of a disputed sales contract with a major customer in 1993.
SELLING AND MARKETING. As a percentage of net sales, selling and marketing
expense decreased from 15.7%, or $18.9 million, for 1993 to 15.0%, or $16.9
million, for 1994 primarily as a result of (i) cost containment programs for the
domestic field sales force which were implemented during the fourth quarter of
1993 and (ii) reductions in advertising and promotion expense.
GENERAL AND ADMINISTRATIVE. As a percentage of net sales, general and
administrative expense decreased from 8.7%, or $10.4 million, for 1993 to 7.8%,
or $8.7 million, for 1994 primarily due to (i) implementation costs incurred in
1993 and not in 1994 for certain management programs and
57
<PAGE>
(ii) reductions in personnel and related costs resulting from the restructuring
during the fourth quarter of 1993.
RESEARCH AND DEVELOPMENT. As a percentage of net sales, research and
development expense decreased from 7.2%, or $8.6 million, for 1993 to 5.7%, or
$6.3 million, for 1994 as in 1993, IMED incurred approximately $3.6 million of
research and development expense under an agreement with a third-party
contractor, which agreement and development effort was terminated in the third
quarter of 1993. The acceleration of IMED's in-house development of a modular
infusion system began in late 1993 and resulted in an increase in personnel and
related development costs.
ADJUSTED EBITDA. For the reasons discussed above, as a percentage of net
sales, Adjusted EBITDA increased from 17.3%, or $20.8 million, for 1993 to
21.2%, or $23.7 million, for 1994.
INCOME FROM OPERATIONS. For the reasons discussed above, as a percentage of
net sales, income from operations increased from 4.4%, or $5.2 million, for 1993
to 13.0%, or $14.6 million, for 1994.
INTEREST EXPENSE. Interest expense decreased from $4.2 million for 1993 to
$2.8 million for 1994 primarily as a result of the repayment of outstanding
indebtedness with the proceeds from the sale of IMED's Irish manufacturing
facility.
LEASE INTEREST INCOME. Lease interest income during both periods consisted
of interest income associated with contracts or agreements pursuant to which a
third party acquired infusion pumps under sales type and direct financing
leases.
PROVISION FOR INCOME TAXES. Provision for income taxes was $1.9 million for
1993 compared to $8.3 million for 1994 primarily as a result of the increase in
income before income taxes in 1994 for the reasons discussed above.
NET INCOME. For the reasons discussed above, net income increased $7.1
million from a loss of $1.5 million for 1993 to income of $5.6 million for 1994.
LIQUIDITY AND CAPITAL RESOURCES
IMED has met its liquidity needs and capital expenditures requirements with
internally generated funds and external borrowings. IMED's primary use of funds
has been to fund capital expenditures, pay interest on outstanding indebtedness,
repay outstanding indebtedness and pay dividends to and redeem preferred stock
held by Advanced Medical.
As of September 30, 1996, IMED's outstanding indebtedness was approximately
$20.0 million, $19.5 million of which was outstanding pursuant to a revolving
credit facility with General Electric Capital Corporation (the "Existing Credit
Facility"). The Existing Credit Facility provides for revolving borrowings of up
to $35.0 million and matures in March 1999. Actual availability under the
Existing Credit Facility is limited based on a borrowing base consisting of 85%
of eligible accounts receivable, 65% of eligible inventory and 85% of the future
value of eligible infusion pump lease receivables. At September 30, 1996, giving
effect to such borrowing base limitations and outstanding borrowings, IMED's
maximum available additional borrowings under the Existing Credit Facility were
$13.8 million. The Existing Credit Facility contains affirmative and negative
covenants, including, among others, the maintenance of certain financial ratios,
balances and earnings levels, limitations on capital expenditures and transfer
of funds to Advanced Medical and restrictions on the incurrence of additional
debt. The Existing Credit Facility is secured by a first priority security
interest in all of IMED's assets, the IMED capital stock and certain patents
used in IMED's business. Maturities of long-term debt subsequent to December 31,
1996 are $0.1 million, $0.2 million and $19.7 million for 1997, 1998 and 1999,
respectively.
During the nine months ended September 30, 1996, cash and cash equivalents
increased to $0.9 million from $0.4 million at December 31, 1995 due primarily
to (i) $4.0 million of capital expenditures;
58
<PAGE>
(ii) license fee payments of $1.5 million under a distribution agreement with
Debiotech SA for attaining certain milestones related to the development of new
products; (iii) advances of $7.4 million to Advanced Medical as permitted under
the Existing Credit Facility; and (iv) the repurchase of European distribution
rights from Pharmacia & Upjohn, Inc. for $11.1 million, all of the above offset
by $15.6 million of net cash provided by operating activities and $8.8 million
of net borrowings under the Existing Credit Facility.
At September 30, 1996, IMED had working capital of $27.7 million, an
increase of $1.9 million from the level at December 31, 1995 of $25.8 million.
The increase in working capital was due primarily to an increase in inventory
levels of $4.5 million, offset in part by a $2.3 million reduction in accounts
receivable due to the collection of year-end receivables.
IMED's capital expenditures were approximately $4.0 million in the first
nine months of 1996 compared to $4.6 million for the first nine months of 1995.
Management estimates that full year 1996 capital expenditures will amount to
approximately $7.1 million, compared to $4.8 million, $4.5 million and $1.6
million for the years ended December 31, 1995, 1994, 1993, respectively.
SEASONALITY
Infusion pump sales are typically higher in the fourth quarter due to sales
compensation plans which reward the achievement of annual quotas and the
seasonal nature of the health care industry, including hospital purchasing
patterns. First quarter sales are traditionally not as strong as the fourth
quarter.
RECENT ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of
accounting for employee stock option or similar equity plans. SFAS 123 allows an
entity to continue to measure compensation costs for those plans using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
IMED has elected to continue to measure its stock-based compensation in
accordance with APB 25. Certain pro forma disclosures required by SFAS 123 will
be made in 1996 in accordance with SFAS 123. Management intends to elect the pro
forma disclosures allowed by SFAS 123, accordingly, the adoption of SFAS 123
will not have a significant effect on its financial position or results of
operations.
59
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF IVAC
(DOLLARS IN THOUSANDS)
The following selected historical consolidated financial data as of and for
the years ended December 31, 1991, 1992 and 1993 have been derived from the
Consolidated Financial Statements of the Predecessor Company and subsidiaries
and certain related entities audited by Ernst & Young LLP, independent auditors.
The following selected historical consolidated financial data as of and for the
years ended December 31, 1994 and 1995 have been derived from the Consolidated
Financial Statements of the Predecessor Company and IVAC Holdings, respectively,
audited by Price Waterhouse LLP, independent accountants. The selected
historical consolidated financial data as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 have been derived from unaudited
financial statements of IVAC Holdings. The summary historical consolidated
financial data for all periods prior to and including December 31, 1994 are
derived from the Consolidated Financial Statements of the Predecessor Company
prior to the consummation of the December 1994 acquisition (the "Prior
Acquisition") of IVAC Medical Systems by DLJ Merchant Banking, L.P. and related
entities ("DLJMB") and River and related entities (the "River Group") (the
"Predecessor Company"). For accounting purposes, the Prior Acquisition was
treated as a purchase transaction and accordingly, the summary historical
consolidated financial data of the Predecessor Company are not comparable in all
respects to the summary historical consolidated financial data of IVAC Holdings
for periods subsequent to the Prior Acquisition. The unaudited financial
statements include all adjustments which IVAC Holdings considers necessary for a
fair presentation of its financial position and results of operations for these
periods. Operating results for the nine months ended September 30, 1996 are not
indicative of results for future periods, including the year ending December 31,
1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY IVAC HOLDINGS
-------------------------------------- --------------------------------
<CAPTION>
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $203,301 $213,430 $214,244 $223,227 $240,971 $174,663 $170,155
Cost of sales................................ 111,431 123,497 125,542 146,659 157,869(1) 118,255(1) 98,836
-------- -------- -------- -------- -------- -------- --------
Gross profit................................. 91,870 89,933 88,702 76,568 83,102 56,408 71,319
Selling and marketing........................ 40,428 41,395 40,190 45,055 43,994 32,470 28,872
General and administrative................... 13,808 16,348 16,032 21,586 28,381 18,529 17,479
Research and development..................... 17,171 15,938 18,742 18,504 12,083 10,111 7,663
Purchased research and development........... -- -- -- -- 22,883 19,883 --
Restructuring and special items(2)........... 5,000 1,307 3,967 13,143 5,944 4,460 17,396
Parent company allocations(3)................ 8,024 7,411 6,416 7,480 -- -- --
Other expense (income)....................... 724 2,013 269 3,560 1,497 -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations................ 6,715 5,521 3,086 (32,760) (31,680) (29,045) (91)
Contract interest income (4)................. 1,952 2,766 2,724 2,927 3,013 2,130 1,812
Interest income (expense), net(5)............ 3,241 1,963 1,316 (2,227) (27,476) (19,686) (13,396)
Provision for (benefit from) income taxes.... 3,595 4,755 1,710 3,793 (378) (3,270) 2,434
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................ $ 8,313 $ 5,495 $ 5,416 $(35,853) $(55,765) $(43,331) $(14,109)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges(6)........ 22.4x 15.9x 7.2x -- -- -- --
OTHER DATA:
Adjusted EBITDA(7)........................... $ 31,586 $ 27,267 $ 26,442 $ 7,601 $ 35,884 $ 27,296 $ 34,396
Depreciation and amortization................ 9,895 10,262 10,249 15,119 20,950(8) 15,094(8) 15,279
Capital expenditures, net.................... 11,293 8,324 9,920 9,000 13,752(9) 7,738 12,957
Net cash provided by operating activities.... 7,640 18,618 8,115 6,502 38,143 28,544 15,485
Net cash used in investing activities........ (11,291) (8,482) (36,721) (9,000) (179,287) (193,693) (12,957)
Net cash provided by (used in) financing
activities................................. -- (1,551) 30,217 -- 157,605 181,674 (9,332)
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------
PREDECESSOR COMPANY
AT SEPTEMBER 30,
----------------
IVAC HOLDINGS
------------------------------------------ ------------------------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 2,112 $ 5,400 $ 4,683 $ 3,226 $ 18,308 $ 10,447
Working capital............................ 46,924 52,734 119,457 74,124 41,850 24,172
Total assets............................... 222,333 230,012 248,909 174,144 215,995 190,981
Long-term debt (including current portion
and related party debt).................. -- -- 12,000(10) 11,621(10) 165,785 160,489
Shareholders' equity (deficit)............. 181,689 185,173 192,511 129,981 (20,515) (35,591)
</TABLE>
- ------------------------
(1) Includes $14,774 one-time purchase price allocation to inventories in
excess of historical costs.
(2) See Notes 4 and 5 to Notes to Consolidated Financial Statements of the
Predecessor Company, Note 12 to Notes to Consolidated Financial Statements
of IVAC Holdings and Note 5 to Notes to Condensed Consolidated Financial
Statements of IVAC Holdings included elsewhere in this Prospectus.
(3) Prior to December 31, 1994, IVAC was a wholly owned subsidiary of Lilly.
Parent company allocations represent the Predecessor Company's non-cash pro
rata share of Lilly's corporate overhead.
(4) Contract interest income consists of interest income associated with
contracts or agreements pursuant to which a third party acquires instruments
at no or reduced initial cost by paying a premium (a portion of which is
recorded by IVAC in accordance with generally accepted accounting principles
as contract interest income) for subsequent purchases of disposable
administration sets. See Note 2 to Notes to Consolidated Financial
Statements of the Predecessor Company and IVAC Holdings included elsewhere
in this Prospectus.
(5) Prior to the Prior Acquisition, interest income (expense), net, consists of
interest expense net of intercompany interest income, if any, and,
subsequent to the Prior Acquisition, interest income (expense), net,
consists of interest expense net of interest earned on cash balances. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of IVAC." Includes interest income of $3,280, $2,060, $1,674,
$716 and $493 for the years ended December 31, 1991, 1992, 1993, 1994 and
1995, respectively, and $361 and $334 for the nine months ended September
30, 1995 and 1996, respectively.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings includes pre-tax income adjusted for fixed charges. Fixed charges
consist of interest on all indebtedness, estimated interest component of
rental expense and amortization of deferred financing costs. As a result of
losses, earnings were inadequate to cover fixed charges by $32,060, $56,143,
$46,601 and $11,675 for the years ended December 31, 1994 and 1995, and the
nine months ended September 30, 1995 and 1996, respectively.
(7) Adjusted EBITDA represents income (loss) from operations before parent
company allocations, restructuring and special items, certain non-recurring,
non-cash purchase accounting charges and depreciation and amortization, plus
contract interest income. Adjusted EBITDA does not represent net income or
cash flows from operations, as these terms are defined under generally
accepted accounting principles, and should not be considered as an
alternative to net income as an indicator of IVAC's operating performance or
to cash flows as a measure of liquidity. IVAC has included information
concerning Adjusted EBITDA herein because it understands that such
information is used by certain investors as one measure of an issuer's
historical ability to service debt.
(8) Excludes service support agreement amortization for the year ended December
31, 1995 and nine months ended September 30, 1995 of $2,786. The amount
capitalized as service support agreement in 1995 consisted of certain
administrative services provided by Lilly on behalf of IVAC for a period of
six months.
(9) Excludes proceeds from the sale of IVAC's 380,000 square foot San Diego
facility.
(10) Includes IVAC's minimum royalty payment to Siemens Infusion Systems, Ltd.
in conjunction with the sale of the MiniMed product line (the predecessor of
MS III) to the Predecessor Company in September 1993. See Note 3 to Notes to
Consolidated Financial Statements of the Predecessor Company included
elsewhere in this Prospectus.
61
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF IVAC
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS OF IVAC HOLDINGS AND THE PREDECESSOR COMPANY AND THE RESPECTIVE
RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
GENERAL
IVAC sells and services products primarily in the United States, Canada and
Europe to both hospital and alternate site markets. IVAC's two principal lines
of business are infusion therapy and vital signs measurement products. In 1995,
net sales from infusion therapy and vital signs measurement products (including,
in each category, associated disposable sets) accounted for approximately 80%
and 14%, respectively, of IVAC's net sales.
In order to provide continued support for its products, IVAC offers repair
and other services in connection with its installed base of instruments. Net
sales from such services were less than 10% of total net sales in all of the
periods discussed below.
Pursuant to the Prior Acquisition, IVAC Holdings was formed and, after the
close of business on December 31, 1994, IVAC Medical Systems was acquired from
Lilly by DLJMB and the River Group. Prior to the Prior Acquisition, IVAC Medical
Systems was a wholly owned subsidiary of Lilly. In connection with the Prior
Acquisition, all of the outstanding capital stock of River was contributed to
IVAC Holdings (which, in turn, contributed such stock to IVAC Medical Systems)
and, as a result, River became a wholly owned subsidiary of IVAC Medical
Systems. River's primary product was SmartDose, a pre-filled, disposable
infusion pump used primarily in the alternate site market. As a result of the
Prior Acquisition, financial data for IVAC for periods subsequent to December
31, 1994, which give effect to purchase accounting adjustments related to the
Prior Acquisition and include financial results for River, are not necessarily
comparable to financial data for the Predecessor Company for periods prior to
December 31, 1994. In addition, results of operations for periods prior to the
Prior Acquisition include parent company allocations of corporate expenses which
are not included in subsequent periods.
In June 1996, IVAC decided to discontinue operations at River and to seek to
divest the subsidiary's assets. River's primary assets include patents,
technologies, trade secrets, inventories and manufacturing equipment. IVAC
recorded a restructuring charge of $17.4 million during the second quarter of
1996 and anticipates that it will make cash payments related to the River
Divestiture of approximately $7.8 million.
Subsequent to the Prior Acquisition, IVAC significantly reduced production
and operating costs and eliminated excess expenses incurred by Lilly, its former
parent, in connection with Lilly's operation of IVAC Medical Systems as a
division. IVAC's efforts focused on improving the overall quality of its product
offerings and providing better customer service while achieving a lower-cost
manufacturing platform for existing and future products. During 1995, IVAC
implemented the following programs: (i) reduced overall head count by
approximately 403, or 28% of total employees as of December 31, 1994, through
termination and attrition; (ii) consolidated supply sources; (iii) eliminated
research and development projects which were judged to be high risk/low market
potential; (iv) rationalized underutilized assets, including consolidating
certain warehouse operations and reconfiguring materials handling and product
lines; and (v) integrated the vital signs manufacturing, engineering and
marketing functions with those of the infusion therapy business. In addition, as
part of its overall cost reduction strategy, IVAC sold its 380,000 square foot
San Diego facility in November 1995 and IVAC relocated its primary instrument
manufacturing and corporate headquarters operations to smaller leased facilities
in San Diego. IVAC intends to continue implementing cost reduction initiatives
in the future, including the possible expansion of its Mexican maquiladora
manufacturing facility to realize labor savings. In connection with the Prior
Acquisition, IVAC was obligated to pay a defined severance package to employees
transferred from the Predecessor Company if such employees were terminated prior
to July 1, 1996.
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In recent years, IVAC's results of operations have been affected by the cost
containment pressures applicable to health care providers. In particular, in
order to reduce costs, certain hospitals adopted a new protocol increasing the
maximum time between disposable administration set changes from every 24 hours
to as much as every 72 hours. Notwithstanding this change in protocol, unit
sales volume of IVAC's disposable administration sets have increased in every
period since January 1, 1993, primarily as a result of IVAC's growing installed
base of infusion pumps. IVAC's profitability is also affected by the increasing
use of GPOs which are better able to negotiate favorable pricing from providers
of infusion systems, such as IVAC, and which police compliance with exclusive
buying arrangements for their members. These buying arrangements, in certain
situations, also may result in the GPO requiring removal of IVAC's existing
infusion pumps. IVAC expects that such GPOs will become increasingly common and
may have an adverse effect on IVAC's profitability in the future. Finally, the
enactment of national health care reform or other legislation affecting payment
mechanisms and health care delivery would affect IVAC's future results of
operations. Although the final form of any such legislation is not known, it is
likely that any such legislation may impose limits on the number and type of
medical procedures which may be performed and may restrict a provider's ability
to select specific devices or products for use in administering care which, in
turn, in each case could adversely impact demand and/or pricing for IVAC's
products. It is impossible to predict the extent to which IVAC may be affected
by any such change in legislation.
RESULTS OF OPERATIONS OF IVAC
The following table sets forth, for the periods indicated, selected
financial information of IVAC, expressed as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
NINE MONTHS ENDED
PREDECESSOR COMPANY
SEPTEMBER 30,
--------------------
IVAC HOLDINGS
-------------------- -------------------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................... 58.6 65.7 65.5 67.7 58.1
--------- --------- --------- --------- ---------
Gross profit..................................... 41.4 34.3 34.5 32.3 41.9
Selling and marketing............................ 18.8 20.2 18.3 18.6 17.0
General and administrative....................... 7.5 9.7 11.8 10.6 10.3
Research and development......................... 8.7 8.3 5.0 5.8 4.5
Purchased research and development............... -- -- 9.5 11.4 --
Restructuring and special items.................. 1.9 5.9 2.5 2.5 10.2
Parent company allocations....................... 3.0 3.3 -- -- --
Other expense.................................... 0.1 1.6 0.6 -- --
--------- --------- --------- --------- ---------
Income (loss) from operations.................... 1.4 (14.7) (13.2) (16.6) (0.1)
Contract interest income......................... 1.3 1.3 1.3 1.2 1.1
Interest income (expense), net................... 0.6 (1.0) (11.4) (11.3) (7.9)
Provision for (benefit from) income taxes........ 0.8 1.7 (0.2) (1.9) 1.4
--------- --------- --------- --------- ---------
Net income (loss)................................ 2.5% (16.1)% (23.1)% (24.8)% (8.3)%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
Adjusted EBITDA................................ 12.3% 3.4% 14.9% 15.6% 20.2%
</TABLE>
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<PAGE>
The following table sets forth for the periods indicated selected financial
information of IVAC Holdings expressed as a percentage of net sales, on a pro
forma basis, as if the River Divestiture had occurred at the beginning of each
of the periods indicated:
<TABLE>
<CAPTION>
IVAC HOLDINGS, EXCLUDING RIVER
-----------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
YEAR ENDED ----------------------------------
DECEMBER 31, 1995 1995 1996
<S> <C> <C> <C>
Net sales....................................... 100.0% 100.0% 100.0%
Cost of sales................................... 63.5 66.0 56.6
------- ------- -------
Gross profit.................................... 36.5 34.0 43.4
Selling and marketing........................... 17.1 17.4 16.5
General and administrative...................... 10.4 9.3 9.9
Research and development........................ 4.7 5.4 4.4
Purchased research and development.............. 4.2 5.8 --
Restructuring and special items................. 2.4 2.5 --
Other expense................................... 0.6 -- --
------- ------- -------
Income (loss) from operations................... (2.9) (6.4) 12.6
Contract interest income........................ 1.3 1.2 1.1
Interest income (expense), net.................. (11.4) (11.3) (7.8)
Provision for (benefit from) income taxes....... 1.4 0.3 3.1
------- ------- -------
Net income (loss)............................... (14.4)% (16.8)% 2.8%
------- ------- -------
------- ------- -------
OTHER DATA:
Adjusted EBITDA............................... 19.4% 19.8% 22.3%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
NET SALES. Net sales decreased $4.5 million, or 2.6%, from $174.7 million
for the nine months ended September 30, 1995 to $170.2 million for the nine
months ended September 30, 1996. U.S. net sales, which were 66.8% of net sales
for the nine months ended September 30, 1996, decreased $4.7 million, or 4.0%,
from $118.4 million for the nine months ended September 30, 1995 to $113.7
million for the nine months ended September 30, 1996. Within the United States
infusion therapy business, sales decreased for the nine months ended September
30, 1996 as compared to the nine months ended September 30, 1995 as a result of
(i) shipment in 1995 of the MS III product backlog which had resulted from the
discontinuation of production due to product design and manufacturing process
problems during the fourth quarter 1994 and (ii) attrition in the installed base
of older technology products. In addition, IVAC has been impacted by the market
trend of increasing concentration of buying power among healthcare providers.
The sales decrease was partially offset by an increase in the number of
Signature Edition instruments shipped in 1996 as compared to 1995. Separately,
in June 1996, IVAC temporarily ceased manufacturing and distribution of its
Signature Edition infusion pumps in order to evaluate field complaints. IVAC
subsequently implemented a voluntary recall of the Signature Edition pumps.
Production and distribution of the Signature Edition product line, incorporating
product improvements, resumed during the third quarter of 1996. U.S. vital signs
product sales declined as a result of lower instrument placements and decreased
sales of thermometer disposable probe covers. International sales increased $0.2
million, or 0.4%, from $56.3 million for the nine months ended September 30,
1995 to $56.5 million for the nine months ended September 30, 1996, primarily as
a result of the increased volume of drug infusion disposable administration sets
offset in part by the unfavorable impact of exchange rate fluctuations which
reduced net sales by $1.3 million. On a pro forma basis for the River
Divestiture, net sales would have been $169.8 million for the nine months ended
September 30, 1996 and $174.1 million for the nine months ended September 30,
1995.
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GROSS PROFIT. Gross profit increased $14.9 million, or 26.4%, from $56.4
million for the nine months ended September 30, 1995 to $71.3 million for the
nine months ended September 30, 1996 due to (i) a one time $14.8 million charge
in 1995 for the acquisition purchase price allocation to inventories in excess
of historical costs recorded in connection with the Prior Acquisition, (ii)
lower repair costs associated with the MS III product line, (iii) the ongoing
benefit of lower manufacturing costs associated with restructuring of
manufacturing workforce in 1995, and (iv) cost savings realized in connection
with the discontinuation of the operations of River in June 1996. These factors
were offset in part by decreased net sales, which reduced IVAC's economies of
scale, and costs associated with IVAC's voluntary recall of the Signature
Edition pumps. Excluding the 1995 effect of the one time purchase accounting
adjustment, gross profit as a percentage of net sales improved from 40.8% for
the nine months ended September 30, 1995 to 41.9% for the nine months ended
September 30, 1996. On a pro forma basis for the River Divestiture, gross profit
would have been $73.7 million for the nine months ended September 30, 1996 and
$59.3 million for the nine months ended September 30, 1995.
SELLING AND MARKETING. As a percentage of net sales, selling and marketing
expenses decreased from 18.6%, or $32.5 million, for the nine months ended
September 30, 1995 to 17.0%, or $28.9 million, for the nine months ended
September 30, 1996, primarily as a result of cost savings derived from
restructuring the Company's hospital field sales force during 1995, cost savings
realized in connection with the discontinuation of the operations of River in
June 1996 and lower international spending due to the termination of the
services agreement with Lilly (IVAC's former parent). IVAC is currently
performing these services. On a pro forma basis for the River Divestiture,
selling and marketing expense would have been $28.1 million for the nine months
ended September 30, 1996 and $30.2 million for the nine months ended September
30, 1995.
GENERAL AND ADMINISTRATIVE. As a percentage of net sales, general and
administrative expenses decreased from 10.6%, or $18.5 million for the nine
months ended September 30, 1995 to 10.3%, or $17.5 million for the nine months
ended September 30, 1996, primarily as a result of cost savings realized in
connection with the discontinuation of the operations of River in June 1996,
including lower legal costs associated with the SmartDose product line, offset
in part by legal costs and accounting fees associated with the Merger. On a pro
forma basis for the River Divestiture, general and administrative expense would
have been $16.8 million for the nine months ended September 30, 1996 and $16.3
million for the nine months ended September 30, 1995.
RESEARCH AND DEVELOPMENT. As a percentage of net sales, research and
development expenses decreased from 5.8%, or $10.1 million, for the nine months
ended September 30, 1995 to 4.5%, or $7.7 million, for the nine months ended
September 30, 1996, primarily as a result of reduced spending on the new
Signature Edition product as it reached the final phase of the development cycle
during the fourth quarter of 1995 and 1995 head count reductions. On a pro forma
basis for the River Divestiture, research and development expense would have
been $7.5 million for the nine months ended September 30, 1996 and $9.5 million
for the nine months ended September 30, 1995.
RESTRUCTURING AND SPECIAL ITEMS. The restructuring and special items for
1995, totaling $4.5 million, consisted of a non-recurring charge for severance
costs incurred in connection with head count reductions undertaken as part of a
restructuring in September 1995. The restructuring and special items for the
nine months ended September 30, 1996, totaling $17.4 million, consisted of a
non-recurring charge for the River Divestiture. River's primary assets include
patents, technologies, trade secrets, inventories and manufacturing equipment.
River has ceased operations and IVAC is continuing to seek the most advantageous
sale of River's assets. Management believes the River Divestiture will allow
IVAC to focus on its core products in infusion therapy and vital signs
monitoring markets.
PURCHASED RESEARCH AND DEVELOPMENT. During the nine months ended September
30, 1995, IVAC recorded a one time purchase accounting adjustment of $19.9
million for purchased research and development relating to the revaluation of
assets in conjunction with the acquisition of IVAC Medical Systems and River in
the Prior Acquisition. On a pro forma basis for the River Divestiture, the
purchased
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<PAGE>
research and development expense would have been $10.1 million for the nine
months ended September 30, 1995.
ADJUSTED EBITDA. For the reasons discussed above, Adjusted EBITDA increased
$7.1 million, or 26.0%, from $27.3 million for the nine months ended September
30, 1995 to $34.4 million for the nine months ended September 30, 1996. Adjusted
EBITDA margin increased from 15.6% for the nine months ended September 30, 1995
to 20.2% for the nine months ended September 30, 1996. On a pro forma basis for
the River Divestiture, Adjusted EBITDA would have been $37.8 million for the
nine months ended September 30, 1996 and $34.4 million for the nine months ended
September 30, 1995.
INCOME (LOSS) FROM OPERATIONS. Loss from operations decreased $29.0 million
from a loss of $29.0 million for the nine months ended September 30, 1995 to a
loss from operations of less than $0.1 million for the nine months ended
September 30, 1996. Excluding the one time acquisition purchase accounting
charges of $34.7 million during the nine months ended September 30, 1995, of
which $14.8 million was included in cost of sales and $19.9 million in purchased
research and development, the 1995 restructuring charge of $4.5 million and the
1996 one time restructuring charge of $17.4 million for the River Divestiture,
income from operations increased $7.2 million, or 70.6%, from $10.2 million for
the nine months ended September 30, 1995 to $17.4 million for the nine months
ended September 30, 1996. The $7.2 million increase reflects the reduction in
production and operating costs attributed to IVAC's restructuring and cost
savings actions initiated in 1995 and continuing in 1996, including the
discontinuance of the operations of River in June 1996. On a pro forma basis for
the River Divestiture, income from operations would have been $21.5 million for
the nine months ended September 30, 1996 and loss from operations would have
been $11.2 million for the nine months ended September 30, 1995.
INTEREST INCOME (EXPENSE), NET. Net interest expense for the nine months
ended September 30, 1995 was $19.7 million, compared to net interest expense for
the nine months ended September 30, 1996 of $13.4 million. Interest income
during both periods consisted of interest earned on actual cash balances.
Interest expense was lower for the nine months ended September 30, 1996 as a
result of refinancing and repayment of debt during the fourth quarter of 1995.
On a pro forma basis for the River Divestiture, net interest expense would have
been $13.3 million for the nine months ended September 30, 1996 and $19.6
million for the nine months ended September 30, 1995. See "--Liquidity and
Capital Resources."
CONTRACT INTEREST INCOME. Contract interest income consists of interest
income associated with contracts or agreements pursuant to which a third party
acquires instruments at no or reduced initial cost by paying a premium (a
portion of which is reported by IVAC in accordance with generally accepted
accounting principles as contract interest income) for subsequent purchase of
disposable administration sets.
INCOME (LOSS) BEFORE INCOME TAXES. Excluding the effect of (i) pre-tax 1995
acquisition purchase accounting adjustments of $34.7 million, (ii) 1995 pre-tax
restructuring charges of $4.5 million and (iii) 1996 pre-tax restructuring
charge of $17.4 million, income before income taxes increased $13.1 million,
from a loss before taxes of $7.4 million for the nine months ended September 30,
1995 to income before taxes of $5.7 million for the nine months ended September
30, 1996, reflecting the cost savings discussed above. On a pro forma basis for
the River Divestiture, income before income taxes would have been $10.0 million
for the nine months ended September 30, 1996 and loss before income taxes would
have been $28.7 million for the nine months ended September 30, 1995.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income taxes
was $3.3 million for the nine months ended September 30, 1995 compared to income
tax expense of $2.4 million for the nine months ended September 30, 1996. The
1995 benefit reflects the write-off of purchased research and development
partially offset by foreign taxes. IVAC has recorded a valuation allowance
against its deferred tax assets based on an assessment that it is more likely
than not that the deferred tax assets will not be realized. On a pro forma basis
for the River Divestiture, provision for income taxes would have been $5.2
million for the nine months ended September 30, 1996 and $0.6 million for the
nine months ended September 30, 1995.
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<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased $17.8 million, or 8.0%, from $223.2 million
for 1994 to $241.0 million for 1995. United States sales, which comprised 67.8%
of net sales for 1995, increased 6.5%, or $9.9 million, from $153.4 million for
1994 to $163.3 million for 1995 as a result of increases in drug infusion
product sales. Within the United States infusion therapy business, sales of
IVAC's more mature product lines, such as the 560/570 Series and 590/599 Series,
increased modestly and sales of MS III increased as compared to 1994 net sales
as a result of (i) a backlog resulting from discontinuance of production due to
product design and manufacturing process problems during 1994 and (ii) the
transfer of selling efforts from a small number of MS III specialists to IVAC's
larger sales force beginning in the second quarter of 1994. International sales
increased 11.2%, or $7.8 million, from $69.8 million for 1994 to $77.6 million
for 1995 primarily as a result of the increased volume of sales of infusion
therapy products, particularly the P-Series syringe pumps, the favorable impact
of exchange rate fluctuations and the increased volume of vital signs
measurement products sales. On a pro forma basis for the River Divestiture, net
sales would have been $240.2 million for the year ended December 31, 1995.
GROSS PROFIT. Excluding the effect of purchase accounting of $14.8 million,
gross profit increased $21.3 million, or 27.8%, from $76.6 million for 1994 to
$97.9 million for 1995. This increase resulted from increased sales, decreased
manufacturing costs achieved through cost savings and improved manufacturing
efficiencies, and improvements in product quality, offset in part by increased
spending associated with manufacturing of the SmartDose product line. On a pro
forma basis for the River Divestiture, gross profit would have been $87.7
million for the year ended December 31, 1995.
SELLING AND MARKETING. As a percentage of net sales, selling and marketing
expense decreased from 20.2%, or $45.1 million, for 1994 to 18.3%, or $44.0
million, for 1995 primarily as a result of cost savings derived from
restructuring the Company's hospital field sales force during the first quarter
of 1995 and on-going expense management of items such as travel and
entertainment, offset in part by increased expenses attributable to the
establishment of an alternate site sales force. On a pro forma basis for the
River Divestiture, selling and marketing expense would have been $41.0 million
for the year ended December 31, 1995.
GENERAL AND ADMINISTRATIVE. As a percentage of net sales, general and
administrative expense increased from 9.7%, or $21.6 million, for 1994 to 11.8%,
or $28.4 million, for 1995 primarily reflecting (i) increased expenses incurred
by River (without corresponding River sales volume increases); (ii) amortization
of excess purchase price over net assets acquired associated with the Prior
Acquisition; and (iii) expenses for studies conducted to identify improvement
opportunities for domestic and international operations. On a pro forma basis
for the River Divestiture, general and administrative expense would have been
$24.9 million for the year ended December 31, 1995.
RESEARCH AND DEVELOPMENT. As a percentage of net sales, research and
development expense decreased from 8.3%, or $18.5 million, for 1994 to 5.0%, or
$12.1 million, for 1995 primarily as a result of the elimination of certain
research projects and reduced spending on the new Signature Edition line as it
neared the final phase of the development cycle. Such reductions were offset in
part, however, by development expenses related to the SmartDose system. This
increase is partially offset by reduced costs resulting from 1995 head count
reductions. On a pro forma basis for the River Divestiture, research and
development expense would have been $11.3 million for the year ended December
31, 1995.
RESTRUCTURING AND SPECIAL ITEMS. The restructuring and special items for
1995, totaling $5.9 million, consisted of a non-recurring charge of $5.3 million
for severance costs incurred in connection with head count reductions undertaken
as part of the restructuring and $0.6 million in costs for relocating the
corporate headquarters and primary instrument manufacturing facilities. The
restructuring and special items for 1994, totaling $13.1 million, were solely
related to a write-down of excess purchase price over net assets acquired as a
result of the acquisition of the MS III product line. The write-down recognized
design and other defects of the acquired product line, together with a change in
market conditions which caused the sales and earnings of MS III products to be
significantly below those that had been projected at the
67
<PAGE>
time of the acquisition of the product line. On a pro forma basis for the River
Divestiture, restructuring and special items would have been $5.8 million for
the year ended December 31, 1995.
ADJUSTED EBITDA. For the reasons discussed above, Adjusted EBITDA increased
372.4%, or $28.3 million, from $7.6 million for 1994 to $35.9 million for 1995.
Adjusted EBITDA margin increased from 3.4% for 1994 to 14.9% for 1995. On a pro
forma basis for the River Divestiture, Adjusted EBITDA would have been $46.5
million for the year ended December 31, 1995.
INCOME (LOSS) FROM OPERATIONS. For the reasons discussed above, IVAC
recorded a loss from operations of $32.8 million for 1994 as compared to a loss
from operations of $31.7 million for 1995. Loss from operations in 1995 included
$37.7 million of one-time-purchase accounting adjustments of which $14.8 million
is included in cost of sales and $22.9 million in purchased research and
development, as well as a $5.9 million charge for restructuring and special
items. Loss from operations in 1994 included a $13.1 million write-down of
excess purchase price over net assets associated with the MS III product line,
as well as $7.5 million of corporate expense allocations from IVAC Medical
System's former parent company, Lilly. On a pro forma basis for the River
Divestiture, loss from operations would have been $7.0 million for the year
ended December 31, 1995.
INTEREST INCOME (EXPENSE), NET. Net interest expense for 1995 was $27.5
million compared to net interest expense for 1994 of $2.2 million. Interest
expense in 1995 was comprised primarily of interest expense attributable to
indebtedness incurred to fund the Prior Acquisition. On a pro forma basis for
the River Divestiture, net interest expense would have been $27.3 million for
the year ended December 31, 1995.
CONTRACT INTEREST INCOME. Contract interest income consists of interest
income associated with contracts or agreements pursuant to which a third party
acquires instruments at no or reduced initial cost by paying a premium (a
portion of which is reported by IVAC in accordance with generally accepted
accounting principles as contract interest income) for subsequent purchase of
disposable administration sets.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. Benefit from income taxes was
$0.4 million in 1995 compared to income tax expense of $3.8 million for 1994.
The 1995 benefit reflects the write-off of purchased research and development
partially offset by foreign taxes. As of December 31, 1995, IVAC recorded a
valuation allowance against its deferred tax assets based on an assessment that
it is more likely than not that the deferred tax assets will not be realized. On
a pro forma basis for the River Divestiture, provision for income taxes would
have been $3.5 million for the year ended December 31, 1995.
NET LOSS. For the reasons discussed above, net loss increased $19.9 million
from a net loss of $35.9 million for 1994 to a net loss of $55.8 million for
1995. The net loss in 1995 included $37.7 million of pre-tax one-time-purchase
accounting adjustments and $5.9 million of pre-tax non-recurring charges for
severance costs and facility relocation expenses. On a pro forma basis for the
River Divestiture, net loss would have been $34.7 million for the year ended
December 31, 1995.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES. Net sales increased $9.0 million, or 4.2%, from $214.2 million
for the year ended December 31, 1993 to $223.2 million for the year ended
December 31, 1994. United States sales, which comprised 68.7% of net sales for
1994, increased 1.1%, or $1.7 million, from $151.7 million to $153.4 million as
a result of growth in infusion therapy product sales offset in part by a
decrease in vital signs measurement products sales. United States infusion
therapy sales increased as a result of an increase in MS III sales, reflecting a
full-year effect of the September 1993 acquisition of MS III, offset in part by
a decline in sales of IVAC's more mature product lines. United States vital
signs measurement products sales declined as a result of lower instrument
placements, partially offset by increased thermometer disposable probe cover
sales. International sales of $69.8 million for 1994 increased 11.7% over the
prior year, primarily as a result of increased sales of the P-Series syringe
pumps and Model 591/597/598 Series disposable administration sets, and the
favorable impact of exchange rate fluctuations.
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<PAGE>
GROSS PROFIT. Gross profit decreased $12.1 million, or 13.7%, for the year
ended December 31, 1994 to $76.6 million from $88.7 million for the year ended
December 31, 1993. As a percentage of net sales, gross profit decreased from
41.4% for the year ended December 31, 1993 to 34.3% for the year ended December
31, 1994. This decrease resulted primarily from higher manufacturing and service
expenses associated with (i) manufacturing and reengineering of the MS III
product; (ii) the full-year effect in 1994 of costs associated with servicing
returned MS III products; and (iii) a shut-down of the MS III production line
during the fourth quarter of 1994. Excluding the MS III product line, gross
profit as a percentage of net sales decreased slightly due to competitive
pressures resulting in price reductions and lower sales of IVAC's more mature
infusion therapy product lines.
SELLING AND MARKETING. As a percentage of net sales, selling and marketing
expense increased from 18.8%, or $40.2 million, in the year ended December 31,
1993 to 20.2%, or $45.1 million, in the year ended December 31, 1994 primarily
as a result of increased personnel and marketing programs related to MS III.
GENERAL AND ADMINISTRATIVE. As a percentage of net sales, general and
administrative expense increased from 7.5%, or $16.0 million, in the year ended
December 31, 1993 to 9.7%, or $21.6 million, in the year ended December 31, 1994
primarily as a result of the full-year effect of amortization of excess purchase
price over net assets acquired associated with the acquisition of the MS III
product line, increased allowance for doubtful accounts and increased employee
health care benefits.
RESEARCH AND DEVELOPMENT. As a percentage of net sales, research and
development expense decreased to 8.3%, or $18.5 million, in the year ended
December 31, 1994 from 8.7%, or $18.7 million, in the year ended December 31,
1993 primarily as a result of increased development expenses associated with the
full-year impact of supporting the MS III product line offset by the
discontinuation of other development projects being pursued by Lilly.
ADJUSTED EBITDA. For the reasons discussed above, Adjusted EBITDA decreased
71.2%, or $18.8 million, from $26.4 million in the year ended December 31, 1993
to $7.6 million in the year ended December 31, 1994. Adjusted EBITDA margin
decreased from 12.3% for the year ended December 31, 1993 to 3.4% for the year
ended December 31, 1994.
RESTRUCTURING AND SPECIAL ITEMS. The restructuring and special items during
1994 ($13.1 million) were solely related to a write-down of excess purchase
price over net assets acquired associated with the acquisition of the MS III
product line. This write-down recognized design and other defects of the
acquired product line together with the change in market conditions which caused
the sales and earnings of the MS III products to be significantly below those
that were projected at the time of the acquisition. The restructuring and
special items in the year ended December 31, 1993 related to the reorganization
of operations outside the United States ($3.7 million) and the realignment of
the United States field sales force ($0.3 million).
OTHER EXPENSE (INCOME). Other expense increased from $0.3 million for the
year ended December 31, 1993 to $3.6 million for the year ended December 31,
1994 due primarily to (i) costs associated with the discontinuation of the Lilly
information systems data center located at IVAC; (ii) expenses allocated by
Lilly attributable to foreign currency hedging; and (iii) an accrual for a
non-recurring legal settlement.
INCOME (LOSS) FROM OPERATIONS. For the reasons discussed above, income from
operations decreased from $3.1 million for the year ended December 31, 1993 to a
loss of $32.8 million for the year ended December 31, 1994.
INTEREST INCOME (EXPENSE), NET. Net interest expense for the year ended
December 31, 1994 was $2.2 million compared to net interest income for the year
ended December 31, 1993 of $1.3 million. The change resulted from the full-year
impact of interest expense on the Lilly intercompany loan attributable to the
acquisition of the MS III product line and the reduction of intercompany
interest income earned on excess cash invested through Lilly's cash management
system as $48.7 million of excess cash was distributed to Lilly as a dividend in
May 1994.
Contract Interest Income. Contract interest income consists of interest
income associated with contracts or agreements pursuant to which a third party
acquires instruments at no or reduced initial cost by
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<PAGE>
paying a premium (a portion of which is reported by IVAC in accordance with
generally accepted accounting principles as contract interest income) for
subsequent purchase of disposable administration sets.
NET INCOME. For the reasons discussed above, net income decreased $41.3
million from $5.4 million for the year ended December 31, 1993 to a loss of
$35.9 million for the year ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1996, cash and cash equivalents
decreased to $10.4 million from $18.3 million at December 31, 1995 due primarily
to (i) $13.0 million of capital expenditures inclusive of leasehold improvements
associated with IVAC's relocation of its corporate and primary instrument
manufacturing facilities in San Diego; (ii) the March 1996 prepayment of $5.5
million of bank term loans (concurrent with the amendment and restatement of
IVAC's old bank credit facility (the "Old Facility")); and (iii) the payment of
$4.5 million related to the 1993 acquisition of the MS III product line; all of
the above being offset in part by $15.5 million of cash provided by operating
activities (resulting from operating profitability and reductions in certain
working capital components).
At September 30, 1996, IVAC had working capital of $24.2 million, a decrease
of $17.7 million, or 42.2%, from the level at December 31, 1995 of $41.9
million. The decrease in working capital was due primarily to the (i) impact of
the prepayment of $5.5 million of term loans under the Old Facility concurrent
with the conversion of the Old Facility to a new revolving credit facility (the
"New Facility"), which resulted in a reclassification of $9.7 million from
long-term debt to current debt; (ii) $7.4 million working capital impact of the
write-down for the River Divestiture; (iii) decreased accounts receivable due to
increased collection efforts and reduced net sales; and (iv) inventory build-up
in anticipation of fourth quarter sales of Signature Edition instruments.
The New Facility matures on March 29, 1999 and provides for borrowings of up
to $40.0 million, secured by substantially all of the Company's domestic assets.
Borrowings under the New Facility bear interest at a rate equal to the Alternate
Base Rate (as defined in the New Facility) plus 0.25% or Adjusted LIBOR (as
defined in the New Facility) plus 1.5%, at the option of IVAC. The interest rate
is also subject to change quarterly based upon certain debt and interest
coverage ratios. In connection with the Prior Acquisition, IVAC entered into and
became the borrower under the Old Facility with a syndicate of financial
institutions providing for facilities of $80.0 million, consisting of $60.0
million of term loans and a $20.0 million revolving credit facility. Initial
borrowings under the Old Facility were used to finance the Prior Acquisition.
See Notes 5 and 13 to Notes to Consolidated Financial Statements of IVAC
Holdings included elsewhere herein. At September 30, 1996, IVAC had $24.5
million of available revolving borrowings under the New Facility and cash and
cash equivalents of $10.4 million.
In the fourth quarter of 1995, IVAC Medical Systems issued $100.0 million of
the Existing Senior Notes through a public debt offering, the net proceeds of
which were used to prepay $80.0 million of bridge financing incurred to fund the
Prior Acquisition (plus accrued interest) and $14.0 million of term loans under
the Old Facility. This refinancing reduced interest expense as the result of the
lower interest rate applicable to the Existing Senior Notes.
Also, in the fourth quarter of 1995, IVAC sold its San Diego facility for
$26.0 million and relocated its corporate headquarters and the operations
previously conducted at the San Diego facility to smaller leased premises. The
net proceeds from the sale were used to prepay $25.0 million of term loans under
the Old Facility.
IVAC is obligated to pay additional purchase consideration related to two
previous acquisitions. In connection with the acquisition of MS III, IVAC paid
additional consideration to Siemens Infusion Systems, Ltd. of $4.5 million
during the three months ended March 31, 1996, based on 1994 and 1995 product
sales, and is obligated to pay the greater of $3.0 million per year or 8% of the
prior year's product sales in 1997 through 1999. IVAC is also contingently
liable for up to approximately $1.9 million for additional purchase
considerations through 1996 based upon the P-Series syringe pump product line
achieving certain sales and pre-tax performance in each year.
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BACKLOG
The backlog of orders, believed to be firm, at September 30, 1996 was $4.4
million. The comparable backlog at September 30, 1995 was $3.4 million.
INFLATION
In 1993, 1994, 1995 and the first six months of 1996, IVAC has experienced
moderate upward pressure on the cost of supplies and services. Greater upward
pressure has historically been exerted upon labor costs, a trend that IVAC
expects will continue. IVAC has generally been able to offset the impact of
inflation through increased economies related to higher sales and manufacturing
efficiencies.
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BUSINESS
OVERVIEW
The Company is the leading provider of infusion systems and related
technologies to the United States hospital market, with the largest installed
base of channels. In addition, the Company is a leader in the international
infusion systems market with a number one or two market position based on
installed base of infusion pumps in eight Western European countries, the
largest installed base of infusion pumps in Australia and Canada, and an
established position in Latin America and Asia. The Company's infusion systems,
which are used to deliver fluids, generally pharmaceuticals or nutritionals,
accurately and safely to patients, consist of single and multi-channel infusion
pumps and controllers, and proprietary and non-proprietary disposable
administration sets (plastic tubing and pump interfaces). In addition, the
Company is a leading provider of vital signs measurement products that measure
and monitor temperature, pulse and blood pressure, with the largest installed
base of hospital thermometry systems in the United States.
The Company sells a full range of products through a direct sales force
consisting of over 230 salespersons and through more than 150 distributors to
over 5,000 hospitals worldwide. On a pro forma basis, the Company's United
States sales and sales to customers located outside the United States would have
accounted for approximately 72% and 28%, respectively, of the Company's pro
forma net sales for 1995. For the twelve months ended September 30, 1996, on a
pro forma basis, the Company would have had net sales of $347.2 million and
Adjusted EBITDA of $86.4 million.
INFUSION SYSTEMS. On a pro forma basis at September 30, 1996, the Company
had approximately 205,000 single and multi-channel large volume infusion pumps
installed in the United States, with a market share of approximately 40% of all
installed channels in the United States. The Company offers a wide variety of
infusion pumps designed to meet the varying price and technological requirements
of its broad array of customers. These infusion pumps include the Gemini series,
consisting of single, dual and four channel infusion pumps designed for use in
all hospital settings by customers with sophisticated technological
requirements; Signature Edition, a versatile, user-friendly single and dual
channel infusion pump for use in general medical and surgical settings; MS III,
a compact, lightweight, programmable three channel infusion pump targeted for
the hospital critical care setting; and the 560/570 Series and the 590/599
Series, consisting of single channel infusion pumps designed for the
price-conscious customer. In addition, the Company offers the ReadyMED
ambulatory infusion pump, which is compact, lightweight and disposable, for use
in the alternate site market and a variety of syringe infusion pumps for use
primarily outside the United States.
The Company manufactures higher margin proprietary disposable administration
sets which can only be used with the Company's large volume infusion pumps.
Since the useful life of the Company's infusion pumps is typically seven to ten
years, the Company's industry-leading installed base allows it to generate
stable, predictable and recurring revenues from sales of disposable
administration sets. In 1995, the Company sold approximately 47.5 million
proprietary and 7.5 million non-proprietary disposable administration sets. The
Company's disposable administration sets offer protection features designed to
prevent free flow. In addition, the Company has recently introduced several
enhancements to its disposable administration sets, including needleless access
systems that are designed to reduce the risk to health care providers of
diseases, such as AIDS and hepatitis, that may be transmitted through accidental
needlesticks and, in the case of the SmartSite System, to eliminate patient
exposure to latex which can cause severe allergic or anaphylactic shock
reactions. These features continue to provide the Company's customers with the
latest cost-effective technology for the Company's installed base of infusion
pumps. For the twelve months ended September 30, 1996, on a pro forma basis, the
Company's infusion systems net sales would have been approximately $293.6
million, representing approximately 85% of the Company's pro forma net sales.
VITAL SIGNS MEASUREMENT PRODUCTS. The vital signs measurement products
market consists of discrete market niches, each of which has different
competitive dynamics. The Company primarily operates in the
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United States, Canada and Western Europe in two market niches of the vital signs
measurement products market: (i) hospital thermometry systems and (ii)
stand-alone, non-invasive, multi-parameter instruments used to measure and
monitor a combination of temperature, pulse and blood pressure. The Company's
large base of installed hospital thermometry instruments allows it to generate
stable, predictable and recurring revenues from sales of related disposable
probe covers. In 1995, the Company manufactured and sold over 630 million
proprietary disposable probe covers. For the twelve months ended September 30,
1996, on a pro forma basis, the Company's vital signs measurement products net
sales would have been approximately $33.2 million, representing approximately
9.6% of the Company's pro forma net sales.
At December 31, 1995, the Company's installed base of thermometry
instruments constituted approximately 43% of the United States hospital
electronic and infrared thermometry market, making the Company the largest
provider of hospital thermometry systems in the United States. The Company's
principal thermometry instruments are TEMP-PLUS II, an electronic thermometer,
and CORE-CHECK, an infrared thermometer, both of which are widely used in
hospitals and alternate site settings. The Company is also the second largest
participant in the United States infrared thermometry market, the fastest
growing segment of the hospital thermometry market, and, at December 31, 1995,
had approximately 31% of the United States hospital installed base. In addition,
the Company's hospital installed base of stand-alone, non-invasive,
multi-parameter instruments, which measure and monitor temperature, pulse and
blood pressure, is the second largest in this market niche in the United States.
OPERATING STRATEGY
The Company believes that the Merger will enable it to: (i) significantly
expand the breadth of its product lines; (ii) capitalize on its established
global distribution network; (iii) enhance existing products and introduce new
products through the use of complementary patents and other proprietary
technologies; (iv) benefit from the combined experience of IMED and IVAC senior
management teams; and (v) identify and realize cost savings through synergies
and economies of scale. The Company believes that these benefits will enable it
to achieve increased sales and Adjusted EBITDA in future periods.
The Company's goals are to: (i) enhance its worldwide position as a leading
provider of cost-effective, high-quality infusion systems in the hospital
setting; (ii) expand its presence in the alternate site market; (iii) expand its
product lines through strategic acquisitions and alliances; and (iv) increase
profitability and Adjusted EBITDA. In order to achieve these goals, management
will focus on implementing the following strategies:
EXPANDING INTERNAL GROWTH. The Company will seek to expand internal growth
by continuing to develop, manufacture and market new products while also making
innovations to its existing product lines in order to respond to evolving
customer preferences, changing market dynamics and technological advancements.
Moreover, the Company will introduce certain of its products to geographic and
user markets that have traditionally not used such products as part of their
therapeutic programs. The Company will strive to introduce and market products
with innovative features that are not presently available while manufacturing
these products at a reasonable cost. The Company is currently developing several
new products and product line extensions, including: (i) a modular infusion pump
that incorporates innovations in microprocessor and electromechanical technology
and will offer advanced programming features, compact size and a one to four
channel capability; (ii) an electromechanical ambulatory infusion pump, targeted
for the alternate site market, that is lightweight, compact and capable of
performing multiple therapeutic applications and other advanced functions; and
(iii) a single channel infusion pump designed for the price-conscious customer.
The Company believes that, in addition to increasing revenues from infusion pump
sales, to the extent the introduction of these new infusion pumps increases its
installed base of infusion pumps, the Company will benefit from increased cash
flows attributable to sales of higher margin proprietary disposable
administration sets used in connection with these new infusion pumps.
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INCREASING INTERNATIONAL OPERATIONS. The Company believes that sales of
products outside of the United States represents a significant potential source
of growth. For the nine months ended September 30, 1996, sales to customers of
IMED and IVAC located outside of the United States represented 21% and 33% of
their respective net sales. The Company intends to expand its global presence
and increase its penetration in markets where it does not currently enjoy
significant market shares by: (i) cross-selling the full range of IMED and IVAC
products to the Company's expanded customer base; (ii) establishing distribution
channels through strategic partnerships and direct sales forces in countries
where the Company has little or no existing distribution network; (iii)
establishing direct distribution systems in markets where the Company utilizes
local distributors; and (iv) developing products or modifying existing products
to satisfy local market preferences or requirements.
REDUCING PRODUCTION AND OPERATING COSTS. The Company will seek to
significantly reduce production and operating costs following the Merger by
eliminating redundant expenses and by monitoring and controlling fixed and
variable operating expenses. To achieve these cost reductions, the Company will
focus on implementing the following programs: (i) reducing overall head count
through termination and attrition; (ii) consolidating supply sources; and (iii)
rationalizing underutilized assets, including consolidating executive offices
and manufacturing facilities. IVAC's and IMED's executives have demonstrated an
ability to enhance productivity and reduce costs as indicated by their
respective improvements in Adjusted EBITDA. IVAC's Adjusted EBITDA margin
improved from 3.4% in 1994 to 20.2% for the nine months ended September 30,
1996. IMED's Adjusted EBITDA margin improved from 17.3% in 1993 to 22.6% for the
nine months ended September 30, 1996. The Company believes that a low-cost
manufacturer should be well positioned to succeed in the current cost-conscious
health care environment through aggressive pricing while maintaining
profitability.
CAPITALIZING ON STRATEGIC ACQUISITIONS. The Company intends to supplement
internal growth by engaging in strategic product, technology and business
acquisitions focused primarily on complementing the Company's existing product
lines. Acquisition candidates will be assessed primarily based on: (i)
opportunities for improving the Company's established United States and
international sales presence; (ii) market leadership potential; (iii) ability to
increase the Company's revenue per account; (iv) ability to access niche
markets; and (v) synergy with the Company's existing technological base and
manufacturing capabilities. The acquisition of products used in the alternate
site market will also be a priority.
INDUSTRY
GENERAL. Cost containment measures both imposed and proposed by federal and
state regulators and private payors, combined with increased utilization review
and case management, have led to greater financial pressure on hospitals. In
response to these cost-containment pressures, hospitals and other potential
customers for the Company's products are increasingly combining into GPOs which
may be large and which effectively police compliance with exclusive purchase
commitments. GPOs may enter into exclusive purchase commitments with as few as
one or two providers of infusion systems and/or vital signs measurement
products, for a period of several years. See "Risk Factors--Concentration of
Buying Power." These trends have, in turn, led to downward pricing pressure on
manufacturers of medical products, including the Company, and greater use of
alternate sites for treatment. Growth in the alternate site market is also
attributable to advances in technology that have facilitated the provision of
care outside of the hospital, an increased number of illnesses and diseases
considered to be treatable with home infusion therapy and increased acceptance
by the medical community of, and patient preference for, non-hospital treatment.
As both the complexity of infusion therapy treatments and the potency of drugs
administered have increased, the demand for technologically-advanced infusion
systems has risen significantly. In the vital signs measurement products
markets, similar trends of cost reduction of health care delivery and
technological innovation have resulted in the creation of a number of new
products and product areas, such as infrared thermometry products, pulse
oximetry and multi-parameter patient monitoring products.
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The Company believes that as the infusion system and vital signs measurement
products markets continue to mature, providers of goods and services in these
markets will need to increase the scale of their operations and broaden the
scope of their product lines in order to leverage worldwide sales, service and
research and development infrastructures. These trends are driving industry
consolidation which, in turn, provides opportunities for leading suppliers to
increase market share and participate in strategic alliances, joint ventures and
acquisitions. See "Business--Operating Strategy."
The United States hospital market consists of approximately 5,300 hospitals
with a total of approximately 900,000 licensed beds and can be divided into
three major areas: critical care (E.G., adult, pediatric and neonatal intensive
care units), specialty units (E.G., oncology, ob/gyn, coronary care and
emergency room/trauma) and general medical/surgical. The alternate site market
encompasses all health care provided outside a hospital and is comprised
primarily of home health care, freestanding clinics, skilled nursing facilities
and long-term care facilities.
INFUSION SYSTEMS. Intravenous infusion therapy generally involves the
delivery of one or more fluids, primarily pharmaceuticals or nutritionals, to a
patient through an infusion line inserted into the circulatory system. Over the
past 20 years, as both the reliance on intravenous drug therapy and the potency
of the drugs administered have increased, the need for extremely precise
administration and monitoring of intravenous fluids has risen significantly.
Infusion systems are differentiated on a number of characteristics including
size, weight, number of delivery channels, programmability, mechanism of
infusion, cost and service. One of the key differences among infusion systems is
the level of control that such systems afford to both medical staffs and
patients. Infusion systems are generally designed for either critical care or
general care use, with the latter group being used both in hospitals and at
alternate site facilities.
The United States infusion therapy market had sales of approximately $1.4
billion in 1995 and has grown at an estimated compound annual growth rate of
approximately 3.5% from 1992 to 1995. There are two principal markets for
infusion systems: the hospital market and the alternate site market. These
markets had sales in the United States of approximately $1.1 billion and $322
million, respectively, in 1995, and estimated annual compound growth rates of
approximately 1% and 14%, respectively, from 1992 to 1995.
Infusion systems include three major delivery technologies:
pumps/controllers, disposable pumps and gravity delivery products. In 1995,
these three segments had sales in the United States of approximately $779
million, $75 million and $330 million, respectively. While the Company competes
in the pumps/ controllers and disposable pumps segments, it has never competed
in gravity delivery products because of the commodity nature of this market.
Controllers typically are nonvolumetric devices that regulate flow by
electronically counting drops rather than by measuring a specific volume of
fluid. The Company does not currently market a traditional controller, but some
of its infusion pumps can be used in a controller mode. Infusion pumps use
positive pressure to overcome the resistance in the infusion tubing and the back
pressure generated by the patient's circulatory system. Infusion pumps
administer precise, volumetrically measured quantities of fluids more accurately
and over a wider range of infusion rates than controllers. For this reason,
infusion pumps are used more frequently than controllers to administer
expensive, critical or potent therapeutics. Syringe pumps operate by gradually
depressing the plunger on a standard disposable syringe, thereby delivering a
more concentrated dose of medication at a very precise rate of accuracy.
Disposable pumps are single-use products designed for use primarily in general
care settings.
Historically, controllers have held a major share of the installed base of
infusion instruments, principally because they were significantly less expensive
than infusion pumps. As infusion pump prices declined and their technological
capabilities increased, the purchasing trend has been toward infusion
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pumps. As of the end of 1995, infusion pumps represented approximately 97%, and
controllers represented approximately 3%, of the installed base of infusion
instruments in the United States hospital market and less than 1% of the
infusion instruments sold in 1995 were controllers.
The infusion systems sold in the markets in which the Company competes
consist of single and multi-channel infusion pumps and disposable administration
sets. As treatment regimens have become more complex and as the critically ill
constitute an increasing percentage of hospital patients, the average hospital
patient now requires a greater number of intravenous lines and more potent
therapeutics, thereby creating a greater need for technologically-advanced
infusion systems. As a result, United States sales of channels relating to
multi-channel infusion pumps have increased from approximately 28% of total
United States channels sold in 1991 to approximately 36% of total United States
channels sold in 1995.
All infusion pumps and controllers require the use of disposable
administration sets. A set consists of a plastic interface and tubing and may
have a variety of features such as volume control, pumping segments or cassette
pumping systems for more accurate delivery, clamps for flow regulation and
multiple ports for injecting medication and delivery of more than one solution.
Components such as burettes and filters may also be added for critical drugs or
special infusion. Almost all of these sets, including those manufactured by the
Company, are compatible only with their particular manufacturer's line of
infusion systems. Since these disposable administration sets tend to have
significantly higher margins than infusion pumps, the establishment of an
extensive installed base, such as the Company's, is important for generating
ongoing disposable administration set sales and enhancing overall margins.
VITAL SIGNS MEASUREMENT PRODUCTS. Vital signs measurement products are used
to measure and monitor temperature, pulse, blood pressure and respiration rate.
Products sold in this market have varying levels of technological sophistication
and are used in a variety of diagnostic and health care settings. The vital
signs measurement products market consists of discrete market niches each of
which has different competitive dynamics. The Company competes in two
niches--hospital thermometry systems, and stand-alone, non-invasive,
multi-parameter instruments which measure and monitor a combination of
temperature, pulse and blood pressure. In the United States, these two market
niches had sales of approximately $54.0 million and $25.0 million, respectively,
in 1995.
The three major instrument types in the hospital thermometry market are
glass, electronic and infrared devices, which in 1995 accounted for
approximately 5%, 65% and 30%, respectively, of the United States hospital
market installed base. The Company offers electronic and infrared instruments
but does not compete in the glass thermometry market. Over the last several
years, there has been a shift toward increased use of infrared instruments due
primarily to their ease of use. While infrared thermometers constituted only
approximately 30% of the installed base in the United States in 1995, sales of
these products accounted for approximately 58% of total market sales in 1995.
As with the infusion therapy market, the hospital thermometry market has
higher margin disposable products that are used in concert with instruments and,
consequently, the existence of an installed base is important for generating
ongoing disposable product sales and enhancing overall margins.
PRODUCTS AND SERVICES
The Company manufactures and markets both single and multi-channel infusion
pumps and disposable administration sets. As of December 31, 1995, on a pro
forma basis, the Company would have had approximately 205,000 single and
multi-channel large volume infusion pumps installed in the United States, with a
market share of approximately 40% of all installed channels in the United
States. The Company's infusion pumps include large volume infusion pumps such as
its Gemini series, Signature Edition, MS III and 560/570 Series pumps, syringe
infusion pumps such as P1000, P3000, PCAM and P7000, which are sold primarily in
Western Europe, and the ReadyMED ambulatory infusion pump. The Company's large
volume infusion pumps require the use of higher margin proprietary disposable
administration sets. The Company also sells non-proprietary disposable
administration sets for use with syringe
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infusion pumps manufactured by the Company and others. Furthermore, the Company
manufactures and markets hospital thermometry instruments and related disposable
probe covers, and stand-alone, non-invasive, multi-parameter instruments which
measure and monitor temperature, pulse and blood pressure. In the United States
hospital electronic and infrared thermometry market, the Company had an
installed base market share of approximately 43% in 1995 and was the second
largest supplier of hospital thermometry products in the infrared market. In its
niche of stand-alone, non-invasive, multi-parameter instruments, the Company had
an installed base market share of approximately 14% in the United States in
1995.
The table set forth below summarizes the key features and actual or
estimated market introduction dates of the Company's product line and products
in development.
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION STATUS
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
LARGE VOLUME INFUSION PUMPS
PISTON CASSETTE PUMPS Full line of single channel pumps Various models introduced between
1974 and 1981
PERISTALTIC PUMPS
GEMINI PC-1 Single channel instrument with pump Marketed since 1988
and controller capability; for use
in all hospital settings
GEMINI PC-2 Dual channel instrument with pump Marketed since 1987
and controller capability; for use
in all hospital settings
GEMINI PC-2TX Dual channel instrument with pump Marketed since May 1994
and controller capability;
programmable drug delivery/dose
calculations and pressure history;
for use in all hospital settings
GEMINI PC-4 Four channel instrument with pump Marketed since December 1992
and controller capability;
programmable drug delivery/dose
calculations and pressure history;
for use in all hospital settings
MODULAR INFUSION PUMP Compact, flexible, lightweight Market introduction planned for 1998
modular infusion pump with an
adjustable hardware and software
platform with advanced programming
capabilities; for use in all
hospital and certain alternate
site settings
</TABLE>
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<TABLE>
<CAPTION>
PRODUCT DESCRIPTION STATUS
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
560/570 SERIES Single channel pump with largest On market since 1983 and 1990,
installed base worldwide; for respectively
general care use
590/599 SERIES Single channel, multi-pump On market since mid-1980s and 1991,
597/598 SERIES configuration of reduced size and respectively
weight; used frequently for
delivery of nutritional products;
597/598 Series primarily sold in
Europe; for general care and
alternate site use
MS III Three channel pump; smallest and Originally introduced in late 1980s
lightest pump available on the by Siemens Infusion Systems, Ltd.
United States market; for critical as MiniMed; significantly
care use reengineered since its acquisition
in 1993
SIGNATURE EDITION Single and dual channel pump; Selectively marketed since September
incorporates intuitive user 1995; full commercial availability
interface; for critical and in the United States achieved in
general care use the first quarter of 1996;
introduction in Europe planned
during the first half of 1997
ENTRY LEVEL PUMP Single channel pump designed for the Market introduction planned in 1997
price-conscious consumer; intended
to be marketed in the United
States for general care use
SYRINGE INFUSION PUMPS
P1000, P2000, P3000, P4000 Preferred method of delivery in many Various models introduced between
markets outside the United States; late 1980s and early 1990s
for critical and non-critical care
use
P7000 Syringe pump with advanced features Introduced to European market during
for critical, non-critical and second quarter of 1996
neonatal care use
PCAM (PATIENT CONTROLLED ANALGESIA Syringe pump that allows patients to Introduced internationally in first
PUMP) control the delivery of pain quarter of 1995
medication
</TABLE>
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<TABLE>
<CAPTION>
PRODUCT DESCRIPTION STATUS
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
AMBULATORY PUMPS
READYMED Compact, disposable, lightweight 100 mL marketed since July 1992 and
ambulatory infusion pump designed 50 mL and 250 mL introduced in
for alternate site use 1993
MICROSTAR Compact, mobile, lightweight Market introduction planned for 1997
multiple therapy infusion pump
designed primarily for ambulatory
and alternate site infusions
requiring device-based flow
control
DISPOSABLE ADMINISTRATION SETS Proprietary and non-proprietary On market and in development
administration sets for use with
each of the Company's existing and
proposed infusion pumps
NEEDLELESS ACCESS PRODUCTS
IVAC NEEDLELESS SYSTEM Infusion system component designed On market since fourth quarter of
to eliminate use of hypodermic 1994
needle to access administration
set; may reduce risk of caregiver
needlestick injuries
VERSASAFE Infusion system component utilizing Marketed since 1994 through a
a blunt cannula device combined non-exclusive license
with a split-septum "Y" site
SAFSITE Valve which provides needle-free Introduced in 1995
access to the administration set
through the use of a standard male
luer
SMARTSITE SYSTEM Needleless, capless, latex-free Introduced in 1996
infusion system component intended
to increase safety of patients and
health care workers
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION STATUS
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
THERMOMETRY SYSTEMS
TEMP-PLUS II (MODEL 2080) Electronic thermometer; for general On market since mid-1980s
hospital and alternate site use
"FAST" 2080 Electronic thermometer; a In early phases of development
7-to-10-second version of the
Model 2080; intended for general
hospital use
CORE-CHECK (MODEL 2090) Infrared tympanic thermometer that On market since 1991
saves time, reduces patient
interruption and lowers risk of
infection; for general hospital
use
DISPOSABLE PROBE COVERS Proprietary covers for use with each On market and in development
of the Company's existing and
proposed thermometers
OTHER VITAL SIGNS MEASUREMENT
PRODUCTS
VITAL-CHECK Continuous monitoring model that On market since late 1980s
rapidly measures pulse, blood
pressure and temperature; for
general hospital use
</TABLE>
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LARGE VOLUME INFUSION PUMPS. The Company's large volume infusion pumps
consist of volumetric piston cassette pumps, which regulate the flow of fluid
through a syringe-like mechanism, and peristaltic pumps, which regulate fluid
flow by means of a multi-finger-like mechanism that alternately compresses
sections of the tubing contained in the pumping chamber. Peristaltic pumps
represent the largest portion of the Company's installed base of infusion pumps.
The Company discontinued manufacturing piston cassette pumps in the first
quarter of 1995 and all subsequently recognized revenue relating to piston
cassette pumps results primarily from the shipment of reconditioned pumps.
The Gemini peristaltic infusion pump series, which consists of single, dual
and four channel pumps, is based on the foundation of a flexible hardware and
software technology platform. This technology platform has enabled the Company
over time to offer incremental feature enhancements based on evolving customer
needs. The Gemini series currently offers the following features: free flow
protection (which the Company pioneered); independent channel operation; ability
to switch from pump to controller mode without changing the disposable
administration set; programmable to automatically taper-up and taper-down
infusion rates to facilitate delivery of complex drug-dosing regimens;
capability to operate in either micro mode (0.1 to 99.9 mL/hr) for use with
neonatal patients, among others, or macro mode (1 to 999 mL/hr) for use with
adult patients; drug dose calculation; pressure monitoring; pressure history and
volume/time dosing; and nuisance alarm (alarms with no clinical significance)
reduction.
The 560/570 Series and the 590/599 Series are single channel peristaltic
infusion pumps that offer cost-effective solutions for drug delivery in the
general care setting. The Company believes that the 560/570 Series has the
largest installed base of any individual infusion pump worldwide. The Company
has recently begun to promote its 599 Series infusion pump for use in the
alternate site market. In Europe, the Company has marketed the 597/598 Series
which offers features similar to the 590/599 Series.
MS III is a compact, lightweight, programmable, three channel, peristaltic
infusion pump used primarily in the critical care market. The MS III predecessor
product line was acquired from Siemens Infusion Systems, Ltd. in September 1993.
Since such time, significant resources have been invested to reengineer MS III.
The Company believes that as a result of this reengineering, MS III is one of
the smallest, most versatile and most technologically advanced multi-channel
pumps currently on the market.
The Signature Edition line of peristaltic infusion pumps includes a single
channel and dual channel pump. The Signature Edition line of infusion pumps is
designed for use primarily in hospitals. The Signature Edition line of infusion
pumps features reduced size and weight, improved ease of use and other advanced
features, including new safety features designed to minimize the chance of free
flow. The Signature Edition line of infusion pumps is currently subject to a
voluntary recall initiated by the Company. See "--Government Regulation."
During the fourth quarter of 1993, the Company commenced designing a modular
infusion pump, which can operate in a one to four channel mode, as the basis for
its next generation of infusion pumps. In addition to all of the features
available on the Gemini series, the modular infusion pump is being designed to
incorporate advanced programming capabilities in a smaller infusion pump that is
simpler to operate. A modular, building-block design is intended to allow the
user to configure the various features of the modular infusion pump to specific
situations resulting in lower cost operation and greater asset utilization.
SYRINGE PUMPS. The Company offers syringe pumps, which are small-volume
fluid delivery systems used in neonatal care, oncology, anesthesia, critical
care and labor and delivery. While these infusion pumps represent a relatively
small portion of the industry installed base in the United States, such pumps
are widely used in Europe, where they constitute approximately 60% of the
infusion pump market. Syringe pumps are more widely used in Europe because of
the general practice of European doctors to administer medications in smaller
volumes of fluid. The Company believes that it is one of the two largest
suppliers of syringe pumps in Western Europe, with a number one or number two
installed base market share in eight countries. The Company is currently
evaluating customer interest and regulatory requirements in the United States
for syringe pumps.
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In 1995, the Company introduced the PCAM patient controlled analgesia pump
that allows patients to control the delivery of pain medication. Designed for
general care settings, the PCAM pump is the most advanced patient controlled
analgesia pump on the European market today, with pre-programmed and user
programmable drug delivery protocols, comprehensive patient history logging and
an ergonomically designed handset with status indicator.
The Company continued to expand its syringe pump product line by introducing
the P7000 syringe pump to the international market during the second quarter of
1996. Designed for critical, non-critical and neonatal care settings, the P7000
offers several advanced features, including an automatic dose rate calculator; a
pre-programmable drug menu; a range of pre-programmed infusion administration
protocols; and an automatic pressure reduction capability in response to
administration set occlusions.
The Company has initiated a voluntary safety alert of its P1000, P2000,
P3000 and P4000 syringe pumps, which are marketed internationally. See
"--Government Regulation."
AMBULATORY PUMPS. ReadyMED is a disposable, compact, ambulatory pump for
the intravenous administration of antibiotics. ReadyMED is designed to offer a
number of advantages over systems currently in use for this purpose. Traditional
systems require the patient to attach a small bag and tubing set, through which
the antibiotics are administered, to a catheter placed in the patient's
circulatory system. The patient must eliminate all air from the system and set a
manual rate adjustment clamp, a process that generally must be repeated every
four to six hours. Since traditional systems are gravity driven, the bag must
remain on an intravenous solution pole during infusion, thereby restricting the
patient's movement. ReadyMED is pre-filled (in 50 mL, 100 mL and 250 mL sizes)
and pre-primed, allowing infusion to be initiated when the patient simply opens
a clamp. In addition, since ReadyMED is small and uses positive pressure, the
patient is able to carry the device in a pocket or wear it on a belt. In March
1992, the Company entered into a five-year agreement with McGaw, Inc. ("McGaw")
pursuant to which McGaw obtained the exclusive right to distribute the 50 mL,
100 mL and 250 mL sizes of ReadyMED in the United States and Puerto Rican
alternate site markets. The Company receives under its distribution agreement
with McGaw royalty payments based upon the selling price charged by McGaw for
ReadyMEDs.
The Company will distribute the microSTAR ambulatory pump pursuant to a
fifteen-year agreement with Debiotech SA, a privately-held company located in
Lausanne Switzerland, which grants the Company exclusive rights to distribute
the microSTAR ambulatory pump in certain North and Central American countries,
including the United States. The microSTAR ambulatory pump is electromechanical,
lightweight, compact and capable of multiple therapeutic applications including
continuous delivery, total parenteral nutrition administration with adjustable
tapering regimes, intermittent dose delivery (for example, intravenous
antibiotics), and an analgesia mode which includes full patient controlled
analgesia and epidural functionality. Design criteria for the development of
this pump have included patient safety, as well as ease of use for medical and
nonmedical personnel.
The microSTAR ambulatory pump includes many advanced features such as user
adjustable air-in-line sensitivity, automatic secondary delivery, and delayed
start. In consideration of evolving catheter technologies which have led to more
restrictive patient venous access, there are several levels of user selectable
occlusion pressure settings. In addition to its alternate site use, microSTAR is
well suited for patient transport, postoperative ambulation, and transition from
hospital to home infusion therapies.
DISPOSABLE ADMINISTRATION SETS. The Company estimates that it has
approximately 205,000 single and multi-channel large volume infusion pumps
installed in the United States, each of which uses proprietary disposable
administration sets designed and manufactured only by the Company. Disposable
administration sets consist of a plastic pump interface and tubing and have a
variety of features, such as volume control, pumping segments or cassette
pumping systems for more accurate delivery, clamps for flow regulation and
multiple entry ports for injecting medication and delivery of more than one
solution. Components such as burettes and filters may also be added for critical
drugs or special infusion. In addition, many of the Company's disposable
administration sets offer protection features designed to
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prevent free flow. Each of the Company's current and proposed large volume
infusion pumps uses only disposable administration sets designed by the Company
for that particular pump.
NEEDLELESS ACCESS PRODUCTS. There is increasing pressure by regulatory
agencies, such as the Occupational Safety and Health Administration ("OSHA") and
the FDA, for more stringent control of needles in hospitals. OSHA requires that
hospitals must put in place systems to reduce the potential for accidental
needle sticks. The FDA recommends using needleless systems or protected needle
systems to replace hypodermic needles for accessing intravenous lines. The
Company's needleless access products are designed to permit access to the
Company's disposable administration sets without the use of needles, thus
reducing the potential for accidental needle sticks. The Company's Needleless
System introduced in the fourth quarter of 1994, is a component which is
compatible with standard luer or luer-locking syringes and disposable
administration sets, thereby allowing users to integrate the Needleless System
into existing care practices. The VersaSafe system utilizes a blunt cannula
device combined with a split-septum "Y" site. The Company has a non-exclusive
license, which expires in April 2000, to the VersaSafe system which was a
cooperative development effort of IMED, Elcam Plastic of Israel and Medical
Associates Network. Additionally, the Company has entered into an agreement with
B. Braun, Inc. for the purchase of their SAFSITE valve. The SAFSITE valve
provides needle-free access through the use of a standard male luer, eliminating
the need for needleless blunt cannulae to access the administration set. The
Company's latest needleless access product, the SmartSite System, which is based
upon the Company's Needleless System, offers a fully integrated design and
eliminates the need for separate caps to maintain an infection control barrier.
The SmartSite System is latex-free and therefore reduces the risk of exposure of
patients and health care workers to latex which can cause severe allergic or
anaphylactic shock reactions. The Company's needleless access products have
received strong interest from customers and provide the Company with an
opportunity to increase revenues in what has previously been a commodity market.
THERMOMETRY. The Company is a leader in hospital thermometry systems, which
consist of thermometers and disposable probe covers, and maintains a strong
position in both the United States and Western Europe. The Company believes that
in 1995 its installed base comprised approximately 43% of the United States
hospital electronic and infrared thermometry market, thereby making the Company
the largest provider of hospital thermometry systems in the United States. The
Company's primary product is an electronic thermometer which is widely used in
hospitals and alternate site settings. The Company is currently developing the
"Fast" 2080, an improved cost-effective and technologically-advanced electronic
thermometer designed to provide a temperature reading in seven to ten seconds.
The Company also manufactures and markets the CORE-CHECK system, a thermometer
that measures temperature by detecting the emission of infrared energy in the
ear. In the infrared market, the fastest growing segment of the industry's
market, the Company is currently the second largest domestic participant, with a
United States hospital installed base market share of approximately 31% at
December 31, 1995. The only disposable probe covers which can be used with the
Company's thermometry instruments are those manufactured by the Company.
OTHER VITAL SIGNS MEASUREMENT PRODUCTS. The Company also produces
stand-alone, non-invasive, multi-parameter instruments which measure and monitor
temperature, pulse and blood pressure. In 1995, the Company's hospital installed
base of these instruments was approximately 14%, making it the second largest
participant in this market niche in the United States.
CUSTOMER SERVICE. The Company provides repair service for its products in
San Diego, Atlanta, Baltimore, Boston, Chicago and Houston, and at its
customers' facilities through third-party contractors. Customers may elect to
enter into service agreements or to receive service on a time and materials
basis. The Company also trains customers as to the use of its products and
maintains a technical support help-line to answer customers' questions. In
addition, the Company maintains its parts inventory at levels which enables it
to deliver critical supplies immediately and minimize back-ordered products. The
Company believes that the availability of such services is important for
maintaining strong customer relations.
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MARKETING AND SALES
The Company has historically focused its sales efforts on the hospital
market. In response to the industry shift toward health care delivery outside of
the hospital, the Company has recently begun to expand its selling efforts and
products to the alternate site market. The Company's sales strategy emphasizes
increasing instrument placements and the number of units installed in order to
increase sales of its proprietary disposable administration sets and probe
covers. Sales representatives work closely with on-site primary decision makers,
which include physicians, pharmacists, nurses, materials managers, biomedical
staff and administrators. The Company has over 5,000 hospital customers
worldwide. In addition, the Company has contracts with a number of national
buying groups and is working with a growing number of regional buying groups
that are emerging in response to cost containment pressures and health care
reform. See "Risk Factors--Concentration of Buying Power." No single account is
material to the business or operations of the Company.
The Company sells its products through a combined direct sales force
consisting of over 230 salespersons and through more than 150 distributors. The
Company's domestic marketing efforts are supported by a staff of nurses and
pharmacists who consult with customers providing ongoing clinical support in the
evaluation, installation and use of the Company's products. The Company believes
its sales force in the United States and internationally plays a key role in the
effective introduction of new products.
INTERNATIONAL OPERATIONS
The Company markets products in approximately 120 countries through its
direct sales force, affiliates and distributors. The primary markets for the
Company's products outside the United States are Western Europe, Canada and
Australia. The Company also has established positions in Asia and Latin America.
The principal products sold by the Company outside the United States are large
volume and syringe infusion pumps and related disposable administration sets.
The Company has manufacturing operations in England and Mexico. The Company has
also contracted with a number of foreign manufacturers to provide certain of its
sourcing needs. The following table sets forth, on a pro forma basis as if the
Transactions had occurred at the beginning of each period presented, the
approximate amount of net sales made to customers in each of the geographic
locations set forth below over the last three fiscal years:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
United States........................................................................ $ 252.8 $ 244.6 $ 254.6
Europe............................................................................... 61.5 71.2 77.2
Rest of World........................................................................ 19.8 19.5 20.9
--------- --------- ---------
Total net sales................................................................ $ 334.1 $ 335.3 $ 352.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company believes that sales of products to customers outside of the
United States represents a significant potential source of growth. As part of
its operating strategy, the Company intends to selectively pursue international
expansion opportunities, particularly in Europe, Japan, Southeast Asia and Latin
America.
MANUFACTURING
The Company manufactures its products at plants in San Diego, California;
Creedmoor, North Carolina; Tijuana, Mexico; and Hampshire, England. The San
Diego facilities are the primary manufacturing facilities for infusion pumps and
vital signs measurement instruments and also house a service operation for
installed infusion pumps and vital signs measurement instruments. The Creedmoor,
North Carolina facility houses a portion of the current disposables operations
and is a distribution center for North American disposable finished products.
Product sterilization and release are also executed in Creedmoor, North
Carolina. The Tijuana facility primarily focuses on the manual assembly of
disposables,
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and the England facility focuses on the manufacturing of syringe pumps.
Disposable products for international markets are currently supported through a
number of foreign manufacturers.
Two contractors provide the Company with assembly services for disposable
administration sets in Tijuana, Mexico. The agreements between the Company and
the contractors require that the Company pay the contractor an hourly rate per
employee hour worked on assembly of products.
During 1994, IMED sold its Irish manufacturing facility to Pharmacia &
Upjohn, Inc. The Irish manufacturing facility primarily produced molded
components used to assemble disposable administration sets. In connection with
the sale of the Irish manufacturing facility, IMED entered into an agreement
with Pharmacia & Upjohn, Inc. for the purchase, at fixed prices, of minimum
quantities of disposable administration sets and components used to assemble
disposable administration sets for three years, effective January 1, 1994. The
Company does not intend to renew this contract and does not expect its
termination to result in any interruption in the manufacturing of the Company's
products.
The Company has designed and implemented an integrated network of quality
systems, including control procedures that are planned and executed by
technically-trained professionals. These systems result in establishing written
specifications for raw materials, packaging, labels, sterilization and overall
manufacturing process control. A substantial number of raw materials require
certificates of analysis to help ensure that finished products conform to
specifications. In addition, the Company regularly tests components and products
at various stages of the manufacturing process to ensure compliance with
applicable specifications.
The Company purchases raw materials worldwide in the ordinary course of
business from numerous suppliers. The vast majority of these materials are
generally available and the Company has not experienced any serious shortages or
material delays in obtaining these materials. In some situations, the Company
has long-term supply contracts, although the Company purchases a significant
amount of its requirements of certain raw materials by purchase order. Although
the Company is generally not dependent upon any single source of supply, it
relies upon a limited number of suppliers for PC boards and other parts which
are used in certain of its infusion systems. The loss of any such supplier would
result in a temporary interruption in the manufacturing of the Company's
products. The Company believes, however, that these materials are available as
needed from alternative sources.
The Company has identified the reduction of production and operating costs
as a key component of its operating strategy. As part of this strategy, the
Company will focus on implementing the following programs: (i) reducing overall
head count through termination and attrition; (ii) consolidating supply sources;
and (iii) rationalizing underutilized assets, including consolidating executive
offices, warehouse operations and manufacturing operations. See "--Operating
Strategy."
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FACILITIES
The Company owns or leases the following properties:
<TABLE>
<CAPTION>
LEASE
APPROXIMATE LEASED EXPIRATION
CURRENT LESSEE SQUARE OR DATE
OR OWNER LOCATION FOOTAGE PURPOSE OWNED (IF LEASED)
- --------------- ----------------------- -------------- ------------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
IMED (1) San Diego, CA 49,284 Executive Offices Leased 1997
IMED San Diego, CA 45,000 Warehouse Leased 1997(4)
IMED (1) San Diego, CA 57,590 Manufacturing and Service Leased 1997(4)
IMED (1) San Diego, CA 35,500 Manufacturing, Research and Leased 1997
Development
IMED (1) Buckingham, England 8,000 Sales Office and Warehouse Leased 2001
IMED (2) Tijuana, Mexico 41,190 Contract Manufacturing of Leased 1997
Disposable Products
IVAC San Diego, CA 105,616 Executive Offices Leased 2006
IVAC (3) San Diego, CA 83,520 Manufacturing of Instruments Leased 2005
IVAC Creedmoor, NC 120,000 Manufacturing of Disposable Owned
Sets
IVAC Hampshire, England 10,000 Manufacturing of Syringe Pumps Leased 2012
IVAC Hampshire, England 7,500 International Headquarters Leased 2000
IVAC (2) Tijuana, Mexico 37,946 Contract Manufacturing of Leased (5)
Disposable Products
IVAC Geissen, Germany 6,200 Sales Office Leased 2005
IVAC Alcobendas, Spain 8,396 Sales Office Leased 1999
IVAC Taby, Sweden 3,337 Sales Office Leased 1997
IVAC Grimberger, Belgium 2,530 Sales Office Leased 2004
IVAC Amersfoort, The 2,562 Sales Office Leased 1998
Netherlands
IVAC Rueil Maimaison, France 1,939 Sales Office Leased 1998(4)
</TABLE>
- ------------------------
(1) It is currently anticipated that these leases will not be renewed and that
the operations at such facilities will be consolidated and conducted at
IVAC's San Diego facilities.
(2) Lessee of facility is a contractor that provides the Company with certain
assembly services.
(3) Primary instrument manufacturing facility.
(4) Cancellable upon six months written notice.
(5) Cancellable upon 180 days notice. The Company is a surety with respect to
the lease.
RESEARCH AND DEVELOPMENT
The Company believes that a well-targeted research and development program
constitutes an essential part of the Company's activities and is an integral
part of its future success. IMED has historically devoted a significant portion
of its research and development budget to the development of new projects. IMED
expended approximately $5.0 million, $6.3 million and $7.4 million on in-house
research and development for the years ended December 31, 1993, 1994 and 1995,
respectively. Approximately 85%, 90% and 98%, respectively, of each such amount
was dedicated to the development of new products. In
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addition, IMED expended $3.6 million for the year ended December 31, 1993 on
early-stage and new products research and development performed by a third-party
contractor.
IVAC's research and development efforts have most recently been focused
primarily on completing the development and commercial introduction of existing
product concepts, including the Signature Edition line and "Fast" 2080
electronic thermometer, as well as enhancing commercially available products
such as MS III and disposable administration sets. For information concerning
IVAC's expenditures on research and development during the last three years and
the nine months ended September 30, 1996, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations of IVAC."
The Company intends to focus a significant portion of its research and
development efforts on the development of new products. The Company believes
that the combination of IMED's and IVAC's research and development functions
will result in the elimination of redundant costs while increasing the
productivity of its research and development activities. The Company is
currently developing several new products and product line extensions.
PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS
The Company relies heavily on patented and other proprietary technology. The
Company believes its issued and pending patents are important to its competitive
position. The Company's policy is to secure patent protection for significant
inventions. The Company holds approximately 210 unexpired patents in the United
States and approximately 390 unexpired patents in foreign countries, principally
in Europe, Canada, Japan and Australia. Additional applications are pending or
in preparation. Within the next ten years, approximately 116 of the Company's
United States patents and approximately 146 of the Company's foreign patents
will expire. The Company does not believe that the expiration of any such
patents will, individually or in the aggregate, have a material adverse effect
on the Company's results of operations, business or financial condition.
The patent positions of medical device firms, including the Company, are
uncertain and involve complex legal and factual questions for which certain
legal principles are unresolved. The coverage claimed in a patent application
can be significantly reduced before a patent is issued. In addition, patent law
has recently been revised to give effect to international accords to which the
United States has become a party. Pursuant to such accords, the patent term has
been changed from 17 years from date of grant to 20 years from date of filing
and certain provisions favoring United States inventors over foreign inventors
have been eliminated. See "Risk Factors--Reliance on Patents and Proprietary
Rights."
The Company sells its products under a variety of trademarks, some of which
are considered by the Company to be of importance to warrant registration in the
United States and various foreign countries in which the Company does business.
The Company also relies on trade secrets, unpatented know-how and continuing
technological advancement to maintain its competitive position. It is the
Company's practice to enter into confidentiality agreements with key technical
employees and consultants. There can be no assurance that these measures will
prevent the unauthorized disclosure or use of the Company's trade secrets and
know-how or that others may not independently develop similar trade secrets or
know-how or obtain access to the Company's trade secrets, know-how or
proprietary technology. In addition, the Company from time to time seeks
copyright protection for the software used in certain of its products.
Legislation is pending in Congress that may limit the ability of medical
device manufacturers in the future to obtain patents on surgical and medical
procedures that are not performed by, or as part of, devices or compositions
which are themselves patentable. While the Company cannot predict whether the
legislation will be enacted, or what its effect on the Company will be, any
limitation or reduction in the patentability of medical and surgical methods and
procedures could have a material adverse effect on the Company's ability to
protect its proprietary methods and procedures.
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COMPETITION
The Company faces substantial competition in all of its markets. Many of the
Company's competitors have greater financial, research and development and
marketing resources than the Company. Some of the Company's principal
competitors are able to offer volume discounts based on "bundled" purchases of a
broad range of their medical equipment and supplies, a strategy that the Company
is currently unable to pursue. The Company expects the trend toward volume
discounts to continue in the future. The Company believes that the competitive
factors most important in its markets are quality of products and services,
technological innovation and price.
At September 30, 1996, on a pro forma basis, the Company had a market share
of approximately 40% of all installed channels in the United States. Major
competitors in this market include Baxter International Inc., Abbott
Laboratories, Inc. and McGaw, which in the aggregate had a market share of
approximately 54% of all installed channels in the United States as of September
30, 1996.
The European infusion systems market is much more regionalized and
fragmented, with a few strong competitors in each regional market. Major
competitors encountered in several markets include Graseby, Fresenius and B.
Braun Melsungen AG. The Company is among the leaders in a number of Western
European markets, with a number one or number two installed base market share in
eight countries.
The vital signs measurement products market is fragmented by product type.
The Company's key competitor in the United States electronic thermometer market
is Diatek and its key competitor in the infrared thermometer market is Sherwood
Medical Company ("Sherwood").
LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit filed in June 1996 by Sherwood
against IVAC. The lawsuit, which is pending in the United States District Court
for the Southern District of California, alleges infringement of two Sherwood
patents by reason of certain activities including the sale by IVAC of disposable
probe covers for use with infrared tympanic thermometers. The Company believes
it has sufficient defenses to all claims by Sherwood. However, there can be no
assurance that the Company will successfully defend all claims made by Sherwood
and the failure of the Company to successfully prevail in this lawsuit could
have a material adverse effect on the Company's operations, business and
financial condition.
The Company is a defendant in a QUI TAM lawsuit filed by a former IMED
employee in the United States District Court for the Northern District of
Illinois. On November 15, 1996, an amended complaint was filed which alleges
fraud in the inducement, breach of employment contract, common law fraud and
violations of the Federal False Claims Act and Medicare Fraud and Abuse Act. To
date, the United States has declined to intervene in this action. The Company
believes it has sufficient defenses to all claims by the plaintiff.
The Company is also involved in a number of legal proceedings arising in the
ordinary course of its business, none of which is expected to have a material
adverse effect on the Company's operations, business or financial condition. The
Company maintains insurance coverage against claims in an amount which it
believes to be adequate.
GOVERNMENT REGULATION
PRODUCT REGULATION. The research, development, testing, production and
marketing of the Company's products are subject to extensive governmental
regulation in the United States at the federal, state and local levels, and in
certain other countries. Non-compliance with applicable requirements may result
in recall or seizure of products, total or partial suspension of production,
refusal of the government to allow clinical testing or commercial distribution
of products, civil penalties or fines and criminal prosecution.
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The FDA regulates the development, production, distribution and promotion of
medical devices in the United States. Virtually all of the products being
developed, manufactured and sold by the Company (and products likely to be
developed, manufactured or sold in the foreseeable future) are subject to
regulation as medical devices by the FDA. Pursuant to the FDC Act, a medical
device is classified as a Class I, Class II or Class III device. Class I devices
are subject to general controls, including registration, device listing,
recordkeeping requirements, labeling requirements, "Good Manufacturing
Practices" (as defined in FDA regulations) ("GMP"), prohibitions on adulteration
and misbranding, and reporting of certain adverse events ("MDR"). In addition to
general controls, Class II devices may be subject to special controls that could
include performance standards, postmarket surveillance, patient registries,
guidelines, recommendations and other actions as the FDA deems necessary to
provide reasonable assurance of safety and effectiveness. Class III devices must
meet the most stringent regulatory requirements and must be approved by the FDA
before they can be marketed. Such premarket approval can involve extensive
preclinical and clinical testing to prove safety and effectiveness of the
devices.
Virtually all of the Company's products are Class II devices. The Company is
not currently developing, manufacturing or distributing any Class III devices,
although it may do so in the future. Unless otherwise exempt, all medical
devices introduced to the market since 1976 are required by the FDA, as a
condition of marketing, to secure a 510(k) premarket notification clearance
("510(k)") or a Premarket Approval Application ("PMA"). A product will be
cleared by the FDA under a 510(k) if it is found to be substantially equivalent
in terms of safety, effectiveness and intended use to another legally marketed
medical device that was on the market prior to May 28, 1976 or to a product that
has previously received a 510(k) and is lawfully on the market. If a product is
not substantially equivalent to such a medical device, and not otherwise exempt,
the FDA must first approve a PMA before it can be marketed. An approved PMA
indicates that the FDA has determined the product has been proven, through the
submission of clinical data and manufacturing and other information, to be safe
and effective for its labeled indications. The PMA process typically takes more
than a year and requires the submission of significant quantities of clinical
data and supporting information. The process of obtaining a 510(k) currently
takes, on average, approximately six months from the date of submission.
However, the review process for a particular product may be shorter or
substantially longer depending upon the circumstances. Moreover, there can be no
assurance that a 510(k) will be cleared. The 510(k) must include submission of
supporting information, including design details and labeling, and may be
required to contain safety and efficacy data. Product modifications intended to
be made to a cleared device also may require submission and clearance of a new
510(k) application or submission and approval of a PMA, during which time the
modified product cannot be distributed in interstate commerce. Although there
can be no assurance, the Company believes that its proposed products under
development will qualify for the 510(k) procedure.
As part of its normal course of business, the FDA regularly conducts
inquiries regarding the safety or efficacy of medical products, including those
manufactured by the Company, which may result in the Company's inability to
market a particular device or cause the Company to need to generate additional
data to support submissions for market clearance. Future products developed by
the Company may require FDA clearance through either the 510(k), PMA, new drug
approval application procedures or abbreviated new drug approval application
procedures. There can be no assurance that marketing clearances or approvals
will be obtained on a timely basis or at all. Delays in receiving such
clearances or approvals could have a material adverse effect on the Company.
The FDA also regulates the commencement and conduct of clinical
investigations to determine the safety and effectiveness of devices, including
investigations of devices not cleared or approved for marketing, and
investigations involving new intended uses of previously cleared or approved
devices. Clinical investigations are regulated by the FDA under the
investigational device exemption ("IDE") regulations. The IDE regulations
include significant requirements that must be met, including informed patient
consent, criteria for selection of study investigators and monitors, review and
approval of research protocols, reporting obligations to the FDA, recordkeeping
and prohibitions against commercialization of
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investigational devices. A sponsor must obtain FDA approval of an IDE before
starting the investigation, unless the device is found to be a non-significant
risk device by the sponsor and each institutional review board ("IRB") that
reviews the study. The FDA, however, has the authority to determine that a study
designated as involving a non-significant risk device by the sponsor and IRBs
involves a significant risk device and an IDE application must be submitted and
approved before the study can resume. In addition, a study of a non-significant
risk device must still comply with certain provisions of the IDE regulations,
and meet other regulatory requirements. The violation of the IDE regulations can
result in a variety of sanctions, such as warning letters, prohibition against
additional clinical research, the refusal to accept data and criminal
prosecution.
The Company is also providing devices for use in a clinical trial as a
contract manufacturer. There can be no assurance that this clinical study will
comply with all elements of the FDA's regulations, that the study will provide
evidence of the safety or effectiveness of the device, or that the study will
ultimately result in the approval of the device.
Devices manufactured by the Company in the United States are exported by the
Company to other countries. Such devices, if not approved for sale in the United
States, are subject to the FDA export requirements, including restriction on
distribution in the United States.
The Company has received ISO 9000 certification for certain of its
facilities regarding the quality of its manufacturing systems, a requirement for
doing business in EC countries, and is in the process of applying for ISO 9000
certification for the balance of its manufacturing facilities. The Company has
been granted approval to affix the EC mark, pursuant to the EC Medical Device
Directives, on certain of its products. Approval to affix the EC mark to a
product does not necessarily preclude, however, additional restrictions on
marketing in any individual country in the EC.
Certain countries require the Company to obtain clearances for its products
prior to marketing the products in those countries. In addition, certain
countries impose product specifications, standards or other requirements which
differ from or are in addition to those mandated in the United States. The EC
and certain other countries are in the process of developing new modes of
regulating medical products which may result in lengthening the time required to
obtain permission to market new products. These changes could have a material
adverse effect on the Company's ability to market its products in such countries
and would hinder or delay the successful implementation of the Company's planned
international expansion. In addition, since MS III and the 591 Series infusion
pumps do not meet the current EC Electromagnetic Capability Directive (Directive
89/336/EEC) for resistance to electromagnetic and radio frequency interference,
they are currently not cleared for marketing in Europe.
The Company is registered as a medical device manufacturer with the FDA and
certain state agencies. These agencies inspect the Company periodically to
determine whether the Company is in compliance with the FDC Act and regulations,
including regulations relating to MDR reporting, product labeling and promotion,
and medical device GMPs governing design, manufacturing, testing, quality
control, product packaging and storage practices. The FDA has recently proposed
revising certain GMP regulations which, if adopted, would increase the cost of
regulatory compliance for the Company. The MDR regulations promulgated by the
FDA require the Company to provide information to the FDA on certain
malfunctions, as well as serious injuries or deaths which may have been
associated with the use of a product. The EC Medical Device Directives also
require reporting of serious injuries or deaths which may be associated with the
use of a medical device to the competent authority in the country where the
incident occurred.
A determination that the Company is in material violation of the FDC Act or
such FDA regulations could lead to the issuance of warning letters, imposition
of civil or criminal sanctions against the Company, its officers and employees,
including fines, recalls, repair, replacement or refund to the user of the cost
of such products. In addition, if the FDA believes any of the Company's products
violate the law and present a potential health hazard, the FDA could seek to
detain and seize products, to require the Company to cease distribution and to
notify users to stop using the product. The FDA could also seek criminal
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sanctions or seek to close some or all of the Company's manufacturing
facilities. Such actions could also result in an inability of the Company to
obtain additional market clearances. Since 1992, the Company has on thirteen
occasions removed products from the market that were found not to meet
performance standards. None of such recalls materially interfered with the
Company's operations and all such affected product lines were subsequently
returned to the market. One such product recall, a recent voluntary recall
related to the Company's Signature Edition infusion pumps, has not yet been
terminated or otherwise closed by the FDA and the FDA could take further
regulatory action against the Company, including actions such as those described
above. Pursuant to this recall, the Company is in the process of upgrading and
replacing, at no charge to its customers, the current pressure monitoring system
contained in certain of the infusion pumps included within the Signature Edition
product line. This recall, which is believed to affect approximately 4,000
infusion pumps, is expected to be completed by the end of the first quarter of
1997. In addition, the Company has initiated a voluntary safety alert of its
P1000, P2000, P3000 and P4000 syringe pumps, which are marketed internationally.
This safety alert is based on certain operational anomalies that have been
observed in the course of electronic laboratory bench testing of these syringe
pumps. While the syringe pumps covered by the aforesaid safety alert have been
on the market for over three years, the Company is aware of no reported
instances of these anomalies occurring in connection with patient use. Although
not required to do so by the United Kingdom Department of Health, the Company
has offered to provide customers, at their request, with modified software for
the approximately 16,000 affected syringe pumps at no charge.
The Company's manufacturing facilities in San Diego have been licensed by
the State of California Department of Health Services, Food and Drug Branch,
under the applicable GMP and other regulations.
ANTI-REMUNERATION LAWS. The sale of the Company's products is subject to
the illegal remuneration/ "anti-kickback" provisions of the Social Security Act
of 1935, as amended (the "Social Security Act"), which prohibits knowingly and
willfully the offering, receiving or paying of any remuneration, whether
directly or indirectly, in return for inducing the purchase of items or
services, or patient referrals to providers of services, for which payment may
be made in whole or in part by Medicare, Medicaid or similar state programs.
Violations of the statute are punishable by civil and criminal penalties and
exclusion of the provider from future participation in the Medicare and Medicaid
programs. The Social Security Act contains exceptions to these prohibitions for,
among other things, properly reported discounts and payment of certain
administrative fees to GPOs. Because of the breadth of the statutory
prohibitions, the lack of court decisions or other authority addressing the
types of arrangements that are permissible under the law and the narrowness of
statutory exceptions, the Secretary of Health and Human Services published
regulations creating "safe harbors" identifying certain practices that will not
be treated as violating the "anti-kickback" provisions of the Social Security
Act. While failure to satisfy all of the criteria for a safe harbor does not
necessarily mean that an arrangement is unlawful, engaging in a business
practice for which there is a safe harbor may be regarded as suspect if the
practice fails to meet each of the prescribed criteria of the appropriate safe
harbor. The enumerated safe harbors include safe harbors which implement, and
further refine, the statutory exceptions for discounts and payments to GPOs.
Because the Company sells some of its products to customers at prices below list
price and in various combinations, the Company is engaged in giving discounts
within the meaning of the Social Security Act. The regulations require sellers
to fully and accurately report all discounts and inform buyers of their
obligations to report such discounts. The Company also pays administrative fees
to certain purchasing agents within the meaning of the Social Security Act. In
order to qualify for the GPO safe harbor, certain requirements must be met
including disclosure of the existence of the GPO fee arrangement to GPO members
and that members are neither wholly owned by the GPO nor subsidiaries of a
parent corporation that wholly owns the GPO. Certain of the Company's discounts
and arrangements with purchasing agents may not meet all the requirements of the
appropriate safe harbors.
Several states also have statutes or regulations prohibiting financial
relationships with referral sources that are not limited to services for which
Medicare, Medicaid or other state health care program payment
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may be made. A finding of non-compliance with these anti-remuneration laws by
federal or state regulatory officials, including non-compliance with appropriate
safe harbors, could have a material adverse effect on the Company.
COVERAGE AND REIMBURSEMENT. The Company's products are purchased or leased
by health care providers or suppliers which submit claims for reimbursement for
such products to third-party payors such as Medicare, Medicaid and private
health insurers. Although the Company has no knowledge that third-party payors
will adopt measures that would limit coverage of, or reimbursement for, its
products, any such measures that were applied to the Company's products could
have a material adverse effect on the Company.
HEALTH CARE REFORM. Because the cost of health care delivery has been
steadily rising and because the cost of a significant portion of medical care in
the United States and other countries is typically funded by governmental
insurance programs, there have been a number of government initiatives to reduce
health care costs. Congress and various state legislatures currently are
proposing changes in law and regulation that could effect major restructuring of
the health care industry. Although many of these proposals may seek to maintain
or expand access to health care services, the common objective of proposed
legislation is to achieve cost containment in the health care sector. Changes in
governmental support of health care services, the methods by which such services
are delivered, the prices for such services or the regulations governing such
services or mandated benefits may all have a material adverse effect on the
Company. Even if the ultimate impact of any such changes on net sales is
positive, no assurance can be given that the costs of complying with possible
new requirements would not have a negative impact on the Company's future
earnings. No assurance can be given that any such legislation will not have a
material adverse effect on the Company.
ENVIRONMENTAL MATTERS. The Company is subject to regulation by OSHA, the
Environmental Protection Agency and their state and local counterparts, and
under extensive and changing foreign, federal, state and local environmental
standards, including those governing the handling and disposal of solid and
hazardous wastes, discharges to the air and water, and the remediation of
contamination associated with releases of hazardous substances. Such standards
are imposed by, among other statutes, the Toxic Substances Control Act, the
Clean Air Act, the Federal Water Pollution Control Act, the Resource
Conservation and Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"). Although there can be no assurances,
the Company believes that it is currently in material compliance with current
environmental standards. Nevertheless, the Company uses hazardous substances in
its day-to-day operations and, as is the case with manufacturers in general, if
a release of hazardous substances occurs on or from the Company's properties,
the Company may be held liable and may be required to pay the cost of remedying
the condition. The amount of any such liability could be material.
The Company has made, and will continue to make, expenditures to comply with
current and future environmental standards. Although no material capital or
operating expenditures relating to environmental controls are anticipated, there
can be no assurance that changes in, additions to or differing interpretations
of, statutory and regulatory requirements will not require material expenditures
in the future.
The Company is subject to liability under CERCLA and analogous state laws
for the investigation and remediation of environmental contamination at
properties owned and/or operated by it and at off-site locations where it has
arranged for the disposal of hazardous substances. Courts have determined that
liability under CERCLA is, in most cases, joint and several, meaning that any
responsible party could be held liable for all costs necessary for investigating
and remediating a release or threatened release of hazardous substances. As a
practical matter, liability at most CERCLA (and similar) sites is shared among
all the solvent "potentially responsible parties" ("PRPs"). The most relevant
factors in determining the probable liability of a party at a CERCLA site
usually are the cost of the investigation and remediation, the
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relative amount of hazardous substances contributed by the party to the site and
the number of solvent PRPs.
The Company currently is involved in one such matter at the Seaboard
Chemical site in Jamestown, North Carolina. There are over 675 PRPs at this
site. Although there can be no assurance of the final resolution of this matter,
the Company believes that the amount of its liability at this site will be de
minimis.
The Company is aware that at one other location at which the Company has
disposed of 1,205 gallons of waste alcohol a governmental agency completed a
remedial investigation and feasability study in 1991 and an integrated
assessment in 1995. As a result, the Company believes that it could be
identified as a PRP at some time in the future; however, the Company has not
received notice of the commencement of any proceeding against it with respect to
such site. If the Company were identified as a PRP with respect to such site,
there can be no assurance that such designation, and any resulting liability
associated therewith, would not have a material adverse effect on the Company.
In addition, the Company has recently received notice from a group claiming
that the Company has violated California Proposition 65 ("Proposition 65").
Proposition 65 requires, among other things, that warnings be given in
connection with the exposure of consumers to products containing certain listed
substances. Certain of the Company's disposable administration sets contain one
such substance, DEHP. The Company believes that it has meritorious defenses to
such claim and intends to defend the action vigorously. No assurance can be
given that the Company will be successful in defending such claim or that an
adverse determination of such claim would not have a material adverse effect on
the Company.
EMPLOYEES
As of December 15, 1996, the Company had a total of 1,378 full-time
employees, of which 544 employees were employed in manufacturing, 491 employees
in sales and marketing, 207 employees in research and development and 136
employees in executive and administrative functions. None of the employees of
the Company is subject to a collective bargaining agreement, nor has the Company
experienced any work stoppages.
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MANAGEMENT
DIRECTORS AND KEY EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and certain key executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ----------------------------------------------
<S> <C> <C>
Jeffry M. Picower...................... 54 Director, Chairman of the Board
William J. Mercer...................... 48 Director, President, Chief Executive Officer
Joseph W. Kuhn......................... 36 Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
Norman M. Dean......................... 76 Director
Henry Green............................ 54 Director
Richard B. Kelsky...................... 41 Director
Frederic Greenberg..................... 55 Director
</TABLE>
JEFFRY M. PICOWER--Mr. Picower has been a Director of IMED since March 1993
and Chairman of the Board since May 1993. Mr. Picower has served at Advanced
Medical as Chief Executive Officer since September 1993, Chairman of the Board
since May 1993, a Director since March 1993 and Co-Chairman of the Board from
March 1993 to May 1993. He was also a Director, Vice President and Assistant
Treasurer of Advanced Medical from September 1988 to March 1989 and Vice
Chairman from December 1988 to June 1989. Since 1984, Mr. Picower has been
Chairman of the Board and Chief Executive Officer of Monroe Systems for
Business, Inc. ("Monroe"), a worldwide office equipment, distribution and
service organization. Mr. Picower has been a Director of Physician Computer
Network, Inc. ("PCN") since January 1994 and Chairman of the Board since June
1994. PCN, a corporation whose principal shareholder is Mr. Picower, operates a
computer network linking its office-based physician members to health care
organizations.
WILLIAM J. MERCER--Mr. Mercer became a Director, the President and the Chief
Executive Officer of each of the Company and Advanced Medical upon consummation
of the Merger. Prior thereto, Mr. Mercer served as President, Chief Executive
Officer and a Director of IVAC Medical Systems and President and a Director of
IVAC Holdings since May 1995 and Chief Executive Officer of IVAC Holdings since
January 1996. Prior to joining IVAC Medical Systems, Mr. Mercer held various
positions at Mallinckrodt Group Inc. for 17 years, most recently as Senior Vice
President.
JOSEPH W. KUHN--Mr. Kuhn became Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the Company and an Executive Vice President
of Advanced Medical upon consummation of the Merger. Prior thereto, Mr. Kuhn
served as President of IMED since January 1995, and Treasurer and Secretary
since August 1993. From August 1993 to January 1995, Mr. Kuhn was Executive Vice
President of IMED and a member of the Office of the President of IMED. Mr. Kuhn
served as President of Advanced Medical since January 1995, and, since August
1993, has served as Chief Financial Officer, Treasurer and Secretary of Advanced
Medical. Mr. Kuhn was Corporate Controller of Advanced Medical from January 1990
to August 1993.
NORMAN M. DEAN--Mr. Dean was elected as a Director of IMED in April 1990. He
has been a Director of Advanced Medical since March 1989. Mr. Dean has been a
Director and President of Foothills Financial Corporation, a venture capital
company, since January 1985 and Chairman of the Board of Miller Diversified
Corp. since May 1990.
HENRY GREEN--Mr. Green has been a Director of IMED since September 1991. Mr.
Green was President and Chief Operating Officer of Advanced Medical from
September 1990 to March 1993 and has been a Director of Advanced Medical since
1991. Mr. Green was employed by PCN in March 1993.
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Mr. Green was elected President of PCN in May 1993 and Chief Executive Officer
in June 1994. He was elected as a Director of PCN in July 1993. From 1988 to
September 1990, Mr. Green was Vice President of Johnson & Johnson International.
RICHARD B. KELSKY--Mr. Kelsky has been a Director of IMED since April 1990.
He has served as a Director of Advanced Medical since June 1989. Mr. Kelsky is a
Director of Monroe and from 1984 to 1996 was its Vice President and General
Counsel and its Vice Chairman since 1996. Mr. Kelsky has been a Director of PCN
since January 1992.
FREDERIC GREENBERG--Mr. Greenberg was elected to the Board of Directors of
IMED in October 1996. He has been a Director of Advanced Medical since June 7,
1995. Mr. Greenberg is a partner with EGS Partners LLC, an asset management and
merchant banking firm which Mr. Greenberg founded in 1989. From 1974 to 1989,
Mr. Greenberg served as a pharmaceutical analyst with Goldman Sachs & Company,
an investment banking firm. Mr. Greenberg serves as an advisor to various health
care companies and has been a Director of PCN since July 1993.
There are no family relationships among the above Directors.
BOARD OF DIRECTORS
The Board of Directors of the Company consists of six members. Directors
serve for terms of one year and until their successors are duly elected and have
qualified. The members of the Board of Directors of the Company also serve as
and constitute all of the members of the Board of Directors of Advanced Medical.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company are
paid $10,000 per annum. In addition, every three years such directors receive
options to purchase 12,000 shares of Advanced Medical common stock pursuant to
the Directors Plan, which options vest at a rate of 4,000 shares per annum. See
"Stock-Based Benefit Plans--Directors Plan." Travel and accommodation expenses
of Directors incurred in connection with meetings are reimbursed by the Company.
All of the Company's Directors are covered by Advanced Medical's director's
liability insurance policy.
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EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation
paid or accrued by Advanced Medical, IMED or IVAC to or on behalf of the
Company's Chief Executive Officer and each of the other most highly compensated
executive officers of the Company whose total annual salary and bonus for the
year ended December 31, 1995 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- ----------------------------------
OTHER ALL
ANNUAL SECURITIES OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
YEAR ($) ($) ($)(1) OPTIONS ($)
--------- --------- ------------ ------------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffry M. Picower (2)............. 1995 -- -- 10,000 -- --
Chairman of the Board
William J. Mercer (3)............. 1995 180,239(4) 200,000 -- -- 57,700(5)
Joseph W. Kuhn.................... 1995 175,000(6) 60,000 9,250 -- 2,053(7)
President, Chief Financial
Officer, Treasurer and Secretary
</TABLE>
- ------------------------------
(1) "Other Annual Compensation" includes annual compensation, other than salary
or bonus, including perquisites and other personal benefits where such
exceed the lesser of $50,000 or 10% of the Named Executive Officers' annual
salary and bonus. In 1995, Mr. Kuhn received supplemental income for the use
of a vehicle valued at $9,250.
(2) Mr. Picower did not receive an annual salary or bonus from IMED. "Other
Annual Compensation" for Mr. Picower represents compensation earned as a
Director of Advanced Medical. See "Compensation of Directors."
(3) All amounts were paid by IVAC.
(4) Mr. Mercer's employment as President and Chief Executive Officer of IVAC
commenced in May 1995 and January 1996, respectively. In connection with the
Merger, Mr. Mercer entered into a new employment agreement with the Company
and Advanced Medical.
(5) Represents amounts paid to Mr. Mercer to offset relocation expenses.
(6) Mr. Kuhn's annual base salary for 1996 is $225,000. In connection with the
Merger, Mr. Kuhn entered into a new employment agreement with the Company
and Advanced Medical.
(7) The respective amounts reported as "All Other Compensation" for Mr. Kuhn
represents contributions made by Advanced Medical to Advanced Medical's
401(k) Plan on behalf of Mr. Kuhn to match pre-tax elective deferral
contributions (included under salary) made by Mr. Kuhn to such plan.
EMPLOYMENT AGREEMENTS
In August 1996, Mr. Mercer entered into an employment agreement whereby he
became employed full time by the Company and Advanced Medical upon consummation
of the Merger. The agreement is for a term of five years, subject to automatic
renewal for successive one-year periods and to earlier termination as provided
therein. The agreement provides for, among other things, a base salary of
$400,000, certain annual and additional bonuses beginning in the Company's 1997
fiscal year in an aggregate amount up to 100% of Mr. Mercer's base annual salary
in each such year, options to purchase an aggregate of 600,000 shares of common
stock of Advanced Medical, and, in the event Mr. Mercer's employment is
terminated by the Company or Advanced Medical without cause or disability (as
defined in the agreement), or by Mr. Mercer for good reason (as defined in the
agreement), severance payments in an amount equal to Mr. Mercer's base salary
annually until the end of the employment term. The agreement also contains
certain confidentiality, non-solicitation and non-competition provisions.
In August 1996, Mr. Kuhn entered an employment agreement whereby he became
employed full time by the Company and Advanced Medical upon consummation of the
Merger. The agreement is for a term
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of three years, subject to a one-year automatic extension and to earlier
termination as provided therein. The agreement provides for, among other things,
a base salary of $250,000, certain annual and additional bonuses beginning in
the Company's 1997 fiscal year in an aggregate amount up to 75% of Mr. Kuhn's
base annual salary in each such year, options to purchase an aggregate of 75,000
shares of common stock of Advanced Medical, and, in the event Mr. Kuhn's
employment is terminated without cause, severance payments in an amount equal to
one year's base salary plus prorated bonus payments as determined by the
Company. The agreement also contains certain confidentiality, non-solicitation,
and non-competition provisions.
STOCK-BASED BENEFIT PLANS
STOCK OPTION PLAN. Certain employees of the Company will be eligible to
participate in the Third Amended and Restated 1988 Stock Option Plan of Advanced
Medical (the "Option Plan"). The Option Plan was approved by the Board of
Directors of Advanced Medical and became effective on June 28, 1994. Under the
Option Plan, incentive stock options with respect to the common stock of
Advanced Medical ("ISOs"), as provided in Section 422 of the Internal Revenue
Code, may be granted to key employees of Advanced Medical and its subsidiaries
(including the Company), and non-qualified stock options ("NQSOs") may be
granted to key employees, Directors (except Directors eligible to participate in
the Directors Plan), and officers of Advanced Medical, its subsidiaries
(including the Company) and affiliates, as well as independent contractors and
consultants performing services for such entities. The maximum aggregate number
of shares of Advanced Medical's common stock that may be issued under the Option
Plan is 1,700,200. The number of shares of common stock which remain available
for issuance under the Option Plan is 1,638,680 of which 1,045,311 are subject
to currently outstanding options. The number of shares of common stock available
under the Option Plan will be reduced on a share-for-share basis in respect of
each share issued other than under the Option Plan to persons eligible to
participate in the Option Plan. In the event of a change in the capitalization
of Advanced Medical which affects the common stock, the Committee may make
proportionate adjustments to the number of shares of common stock for which
options may be granted and the number and exercise price of shares of common
stock subject to outstanding options. Options may not be granted under the
Option Plan on or after December 27, 1998.
The Option Plan provides for administration by a committee appointed by the
Board of Directors of Advanced Medical (the "Committee"). No member of the
Committee is eligible to receive options under the Option Plan. The Committee
has authority, subject to the terms of the Option Plan, to determine the
individuals to whom options may be granted, the exercise price and number of
shares of common stock subject to each option, whether the options granted to
employees are to be ISOs, the time or times during which all or a portion of
each option may be exercised and certain other provisions of each option.
Pursuant to the Option Plan, the purchase price of shares of common stock
subject to ISOs must be not less than the fair market value of the common stock
at the date of the grant; PROVIDED, that the purchase price of shares subject to
ISOs granted to any optionee who owns shares possessing more than 10% of the
combined voting power of Advanced Medical or any parent or subsidiary of
Advanced Medical ("Ten Percent Shareholder") must be not less than 110% of the
fair market value of the common stock at the date of the grant. With respect to
NQSOs, the purchase price of shares will be determined by the Committee at the
time of the grant, but will not be less than the par value of a share of common
stock. The maximum term of an option may not exceed 10 years from the date of
grant, except with respect to ISOs granted to Ten Percent Shareholders which
must expire within five years of the date of grant. Options granted vest and
become exercisable as determined by the Committee. The Committee will limit the
grant so that no more than 250,000 shares of common stock (subject to certain
adjustments) may be awarded to any one employee in any calendar year. During the
lifetime of an optionee, his or her options may be exercised only by such
optionee. Options are not transferable other than by will or by the laws of
descent and distribution.
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Payment of the purchase price for the shares of common stock to be received
upon exercise of an option may be made in cash, in shares of common stock or in
any combination thereof. In addition, the Committee may, pursuant to the terms
of the stock option agreement between the optionee and Advanced Medical, provide
for payment of the purchase price by promissory note or by any other form of
consideration permitted by law.
Options granted to participants under the Option Plan are subject to
forfeiture under certain circumstances in the event an optionee is no longer
employed by or performing services for Advanced Medical or the Company. In the
event an optionee is terminated for cause, all unexercised options held by such
optionee (whether or not vested) expire upon such termination. If an optionee is
no longer an officer, Director or employee other than as the result of having
been terminated for cause, all unvested options expire at such time and all
vested options expire twelve months thereafter, unless by their terms such
options expire sooner.
In the event of a change of control, as defined in the Option Plan, unless
otherwise determined by the Committee at the time of grant or by amendment (with
the holder's consent) of such grant, all options not vested on or prior to the
effective time of any such change of control shall immediately vest as of such
effective time.
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers who were employees of IMED
during 1995 pursuant to the Option Plan. Information regarding stock options
granted to Mr. Mercer by IVAC during 1995 is provided in the footnotes in the
table:
OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATE
OF
NUMBER OF % OF TOTAL STOCK APPRECIATION FOR
SECURITIES OPTIONS EXERCISE THE
UNDERLYING GRANTED TO OF BASE OPTIONS TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR(1) ($/SHARE)(1) DATE 5%($) 10%($)
- -------------------------- ----------- --------------- ------------- ----------- ---------- ----------
Joseph W. Kuhn(2)......... 125,000 11.2% 1.8125 1-5-05 $ 142,188 $ 360,938
</TABLE>
- ------------------------------
(1) During 1995, IVAC granted Mr. Mercer options to purchase 400,000 shares of
IVAC common stock at an exercise price of $1.00 per share. Such options
represented 11% of the total options granted to all employees of IVAC during
1995.
(2) In January 1996, Mr Kuhn was granted an option to purchase 100,000 shares of
Advanced Medical common stock at an exercise price of $2.46875 per share.
The following table sets forth certain information with respect to
unexercised stock options during 1995:
AGGREGATED OPTION EXERCISE IN FISCAL YEAR 1995
AND OPTION VALUES AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED
ACQUIRED VALUE OPTIONS AT 12/31/95
ON REALIZED --------------------------------
NAME EXERCISE $ EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- --------------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
Jeffry M. Picower............................. -- -- -- --
Joseph W. Kuhn(2)............................. -- -- -- 125,000
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT 12/31/95 ($)(1)
--------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ----------------- -------------
<S> <C> <C>
Jeffry M. Picower............................. -- --
Joseph W. Kuhn(2)............................. -- $ 148,438
</TABLE>
- ------------------------
(1) Calculated based on the excess of the closing price of Advanced Medical's
common stock on December 31, 1995 ($3.00) as reported in the American Stock
Exchange Composite Transactions published in THE WALL STREET JOURNAL over
the option exercise price.
(2) On January 5, 1995, Advanced Medical canceled the options to acquire 30,000
shares of common stock owned by Mr. Kuhn and granted Mr. Kuhn an option to
acquire 125,000 shares of common stock ($1.8125 per share).
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DIRECTORS PLAN. Certain Directors of the Company will be eligible to
participate in the Second Amended and Restated 1990 Non-Qualified Stock Option
Plan for Non-Employee Directors of Advanced Medical (the "Directors Plan"). The
Directors Plan was approved by the Board of Directors and became effective on
June 28, 1994. Directors who are eligible participants in the Directors Plan are
not eligible to receive awards under the Option Plan. An aggregate of 250,000
shares of Advanced Medical's common stock may be issued under the Directors
Plan. The number of shares of common stock which remained available for issuance
under the Directors Plan was 240,000, of which 48,000 are subject to currently
outstanding options. The number of shares of common stock available under the
Directors Plan will be reduced on a share-for-share basis in respect of each
share issued other than under the Directors Plan to persons eligible to
participate in the Directors Plan. In the event of a change in the
capitalization of Advanced Medical which affects the common stock, the committee
of the Board of Directors of Advanced Medical which administers the Directors
Plan (the "Plan Committee") may make proportionate adjustments to the number of
shares of common stock for NQSOs which may be granted and to the number and
exercise price of shares of common stock subject to outstanding NQSOs. NQSOs may
not be granted under the Directors Plan on or after September 7, 2000.
The Plan Committee consists of at least two individuals who are not eligible
to participate in the Directors Plan. The Plan Committee has the authority to
administer all aspects of the Directors Plan other than (i) the grant of NQSOs;
(ii) the number of shares of common stock subject to NQSOs; (iii) the rate at
which options granted thereunder vest and become first exercisable; and (iv) the
price at which each share covered by a NQSO may be purchased, all of which are
determined automatically under the Directors Plan.
On September 10, 1990, initial grants of NQSOs covering 12,000 shares of
common stock were made automatically under the Directors Plan to each of
Advanced Medical's three non-employee Directors. An initial grant of NQSOs
covering 12,000 shares of common stock also will be made automatically to any
person who becomes an eligible participant after September 10, 1990, on the
business day following such person's election to the Board of Directors of the
Company or Advanced Medical. During the term of the Directors Plan, additional
grants of NQSOs covering 12,000 shares of common stock will be made to each
participant in the Directors Plan every three years on the anniversary of such
person's initial NQSO grant. The NQSOs granted under the Directors Plan will
vest and become exercisable at the rate of 4,000 shares for every twelve-month
period of continuous service on the Board, provided that the optionee is still a
member of the Board on that date. For purposes of vesting, participants will
receive credit for any period of continuous service prior to September 7, 1990.
The term of each NQSO is five years from the date of grant. During the lifetime
of an optionee, his or her NQSOs may be exercised only by the optionee and the
NQSOs are not transferable other than by will or by the laws of descent and
distribution. NQSOs granted under the Directors Plan which have not yet vested
are subject to termination if the optionee ceases to be a Director or becomes an
employee of Advanced Medical or the Company and all NQSOs which have vested
expire twelve months after such change in status, unless by their terms such
NQSOs expire sooner. In the event that an optionee is removed from the Board for
cause, all unexercised NQSOs, whether or not vested, expire upon such removal.
The purchase price of shares of common stock subject to NQSOs is the fair
market value of the common stock on the date of the grant. Payment for the
shares of common stock to be received by a optionee upon exercise of a NQSO may
be in cash or in shares of common stock. In addition, the Plan Committee may
provide in such optionee's stock option agreement for payment of the purchase
price by promissory note or any other form of consideration permitted by law.
In the event of a change of control, as defined in the Directors Plan, all
NQSOs not vested on or prior to the effective time of any such change in control
shall immediately vest as of such effective time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no reportable compensation committee interlocks or insider
participation transactions.
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In connection with the Merger, each of Messrs. Mercer and Kuhn entered into
a new employment agreement with the Company and Advanced Medical. See
"--Employment Agreements."
For further information regarding certain relationships and related
transactions, see "Certain Relationships and Related Transactions."
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PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of the Company is owned by Advanced
Medical. The following table sets forth, as of December 24, 1996, information
regarding the beneficial ownership of Advanced Medical's common stock by (i) all
persons known by the Company who own beneficially more than 5% of Advanced
Medical's outstanding common stock; (ii) each Director of the Company; (iii)
each of the Named Executive Officers; and (iv) all directors and officers of the
Company as a group. Unless otherwise stated, the Company believes that the
beneficial owners of the shares listed below have sole investment and voting
power with respect to such shares. In addition, unless otherwise indicated, each
such person's business address is 10221 Wateridge Circle, San Diego, California
92121.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF OF CLASS
BENEFICIAL OWNERS NUMBER (1)
- --------------------------------------------- ---------- ----------
<S> <C> <C>
Jeffry M. Picower............................ 46,643,209(2) 79.1%
South Ocean Blvd.
Palm Beach, FL 33480
William J. Mercer............................ 100,000(3) *
Norman M. Dean............................... 16,000(4) *
Henry Green.................................. 5,000 *
Frederic Greenberg........................... 10,000(4) *
Richard B. Kelsky............................ 94,100(4) *
Joseph W. Kuhn............................... 25,000(4) *
All directors and officers as a group (7 46,893,309(5) 79.5%
individuals)...............................
</TABLE>
- ------------------------
* Less than 1%
(1) Calculated in accordance with Rule 13d-3(d)(1) under the Exchange Act.
(2) Includes (i) 1,404,327 shares of common stock owned by Decisions and (ii)
2,489,463 shares of common stock owned by JA Special. Mr. Picower is the
sole stockholder and sole director of Decisions and the sole general partner
of JA Special and, as such, shares or has the sole power to vote or direct
the vote of and to dispose or direct the disposition of such shares of
common stock and may be deemed to be the beneficial owner of such shares.
(3) Represents options on 100,000 shares of Advanced Medical common stock
granted upon consummation of the Merger. In addition, pursuant to an
employment agreement with the Company and Advanced Medical, Mr. Mercer will
be granted additional options on 500,000 shares of Advanced Medical common
stock that vest over time. See "Management--Employment Agreements."
(4) Includes currently exercisable options on 12,000 shares of common stock for
each of Messrs. Dean and Kelsky under the Directors Plan. Includes currently
exercisable options on 25,000 shares of common stock for Mr. Kuhn under the
Option Plan. Does not include options on 10,000 shares of common stock,
which first vest on August 1997, granted to each of Messrs. Dean and
Greenberg pursuant to a special grant of the Board of Directors of Advanced
Medical.
(5) Includes currently exercisable options on 36,000 shares under the Directors
Plan and 25,000 shares under the Option Plan. Includes options to be granted
to Mr. Mercer upon consummation of the Merger. See Note (3).
POSSIBLE CHANGES IN CONTROL
The Company is a wholly owned subsidiary of Advanced Medical. All of the
Company's outstanding equity securities will be pledged by Advanced Medical to
secure the Company's obligations under the New Credit Facility. In the event of
a default under the New Credit Facility, the lenders thereunder have certain
rights as secured creditors under the terms of the New Credit Facility to vote
and to sell or otherwise dispose of such pledged shares. See "Description of New
Credit Facility--Events of Default."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DECISIONS CONTRIBUTION
In connection with the Merger, Advanced Medical made the Capital
Contribution to IMED. The Capital Contribution was funded in part through the
sale to Decisions by Advanced Medical of shares of its common stock. The balance
of the Capital Contribution was funded with existing cash balances of Advanced
Medical. See "Prospectus Summary--Funding of the Merger and Related
Transactions." Mr. Picower is the sole stockholder and sole director of
Decisions. See "Risk Factors--Control of the Company" and "Management--Key
Executive Officers and Directors."
NON-CASH CONTRIBUTIONS
Effective June 30, 1996, Advanced Medical made non-cash contributions
totaling $41,160,000 to IMED. Included in this capital contribution was
$2,885,000 representing Advanced Medical's net carrying value of certain patents
which up to June 30, 1996 had been licensed to IMED for $1.1 million per year.
Amounts accrued to Advanced Medical under this license, as well as other
intercompany charges due to Advanced Medical totaling $9,399,000 were
contributed to IMED. Additionally, Advanced Medical contributed $8,776,000
representing the outstanding par value and accrued dividends on all outstanding
shares of IMED's 12% preferred stock. These preferred shares were then
cancelled. Payments to Advanced Medical relating to each of the contributed
items were restricted pursuant to the Existing Credit Facility.
Pursuant to IMED's tax sharing agreement with Advanced Medical, for Federal
and California income tax purposes, IMED was required to calculate its current
income tax liability on a stand-alone basis as if it were not included in the
Advanced Medical consolidated income tax return. The resulting tax liability was
payable to Advanced Medical. Due to restrictions on payments from IMED to
Advanced Medical contained in the Existing Credit Facility, income tax payments
to Advanced Medical were limited to actual tax liabilities of Advanced Medical.
Due to losses incurred at the Advanced Medical level which served to reduce the
consolidated taxable income, the income tax liabilities recorded by IMED on a
stand-alone basis were significantly greater than the amounts actually paid to
Advanced Medical. As of June 30, 1996, Advanced Medical agreed to contribute to
IMED's stockholder's equity, income tax payments due from IMED but which could
not be paid pursuant to the Existing Credit Facility. As a result of this
agreement by Advanced Medical, approximately $20,100,000 was credited to IMED's
capital in excess of par and the corresponding income tax liabilities were
eliminated from the IMED consolidated balance sheet. Such liabilities amounted
to approximately $18,900,000 at December 31, 1995.
TRANSACTIONS WITH MANAGEMENT
In connection with the Merger, certain members of management entered into
new employment agreements with the Company and Advanced Medical. See
"Management--Employment Agreements."
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DESCRIPTION OF NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to the
Indenture dated as of November 26, 1996 (the "Indenture") between the Company,
the Guaranteeing Subsidiaries and United States Trust Company of New York, as
trustee (the "Trustee"). The form and terms of the New Notes are identical in
all material respects to the form and terms of the Old Notes, except that the
New Notes (i) have been registered under the Securities Act and therefore, will
not bear legends restricting their transfer and (ii) do not contain certain
provisions providing for the payment of Liquidated Damages under certain
circumstances relating to the Registration Rights Agreement.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and the Trust Indenture Act
for a statement thereof. The following summary of certain provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below. A copy of the Indenture is available as set forth below under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions."
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Debt of the Company,
including Indebtedness pursuant to the New Credit Facility. See "Subordination."
The Notes are guaranteed, jointly and severally, on a senior subordinated basis
by the Guaranteeing Subsidiaries. The Subsidiary Guarantees are subordinated in
right of payment to all existing and future Senior Debt of the Guaranteeing
Subsidiaries, including the guarantees of the Guaranteeing Subsidiaries of the
Company's obligations under the New Credit Facility. See "Subsidiary
Guarantees." At September 30, 1996, on a pro forma basis, the Company would have
had approximately $210.6 million of Senior Debt outstanding and the Guaranteeing
Subsidiaries would have had no Senior Debt outstanding (excluding guarantees by
the Guaranteeing Subsidiaries of the Company's obligations under the New Credit
Facility).
Restrictions in the Indenture on the ability of the Company and its
Restricted Subsidiaries to incur additional Indebtedness, to make Asset Sales,
to enter into transactions with Affiliates and to enter into mergers,
consolidations or sales of all or substantially all of its assets, may make more
difficult or discourage a takeover of the Company, whether favored or opposed by
the management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford holders of Notes protection in all
circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
As of the date of this Prospectus, all of the Company's Subsidiaries are
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries are not subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $200.0 million and
mature on December 1, 2006. Interest on the Notes accrues at the rate of 9.75%
per annum and is payable semi-annually in arrears on June 1 and December 1,
commencing on June 1, 1997, to Holders of record on the immediately preceding
May 15 and November 15. Interest on the Notes accrues from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest is
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computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Notes is payable at the office
or agency of the Company maintained for such purpose within the City and State
of New York or, at the option of the Company, payment of interest may be made by
check mailed to the Holders of the Notes at their respective addresses set forth
in the register of Holders of Notes. Until otherwise designated by the Company,
the Company's office or agency in New York is the office of the Trustee
maintained for such purpose. The Notes are issued in denominations of $1,000 and
integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Guaranteeing Subsidiaries. The
Subsidiary Guarantee of each Guaranteeing Subsidiary is subordinated to the
prior payment in full of all existing and future Senior Debt of such
Guaranteeing Subsidiary on substantially the same terms as the Notes are
subordinated to the Senior Debt of the Company. The obligations of each
Guaranteeing Subsidiary under its Subsidiary Guarantee are limited so as not to
constitute a fraudulent conveyance under applicable law. See "Risk Factors--
Enforceability of Subsidiary Guarantees."
The Indenture provides that no Guaranteeing Subsidiary may consolidate with
or merge with or into (whether or not such Guaranteeing Subsidiary is the
surviving Person), another corporation, Person or entity whether or not
affiliated with such Guaranteeing Subsidiary unless: (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guaranteeing Subsidiary)
assumes all the obligations of such Guaranteeing Subsidiary pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists; and (iii) the
Company would be permitted by virtue of the Company's pro forma Fixed Charge
Coverage Ratio, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio set forth in the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock." The foregoing does not prohibit a merger between a
Guaranteeing Subsidiary and another Guaranteeing Subsidiary or a merger between
a Guaranteeing Subsidiary and the Company.
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Guaranteeing Subsidiary, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Guaranteeing Subsidiary, then such Guaranteeing Subsidiary
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guaranteeing
Subsidiary) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guaranteeing Subsidiary) will be
released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Asset Sales."
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash or
Marketable Securities of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash or Marketable
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Securities of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt, whether or not such interest is in an allowed claim
under applicable law) before the Holders of Notes will be entitled to receive
any payment with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full in cash or Marketable Securities, any distribution
to which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive Permitted Junior
Securities and any other Permitted Junior Securities issued in exchange for any
Permitted Junior Securities and payments made from the trust described under
"Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in such Permitted Junior Securities, Permitted Junior Securities issued
in exchange for such Permitted Junior Securities or from the trust described
under "Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, premium, if any, or interest on Designated Senior
Debt occurs and is continuing or (ii) any other default occurs and is continuing
with respect to Designated Senior Debt that permits holders of the Designated
Senior Debt as to which such default relates to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
holders of any Designated Senior Debt. Payments on the Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in case of a nonpayment default, the earlier
of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated. No new
period of payment blockage may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. See "Risk
Factors--Subordination."
OPTIONAL REDEMPTION
Except as provided in the next paragraph, the Notes are not redeemable at
the Company's option prior to December 1, 2001. Thereafter, the Notes are
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, together with
accrued and unpaid interest, if any, thereon to the applicable redemption date,
if redeemed during the twelve-month period beginning on December 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2001.............................................................................. 104.875%
2002.............................................................................. 103.250%
2003.............................................................................. 101.625%
2004 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to December 1, 1999, the
Company on one or more occasions may redeem up to $70.0 million in aggregate
principal amount of Notes with any of the net proceeds of one or more public or
private offerings of common stock of: (i) Advanced Medical or any other
corporate parent of the Company to the extent the net proceeds thereof are
contributed to the
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<PAGE>
Company as a capital contribution to common equity or (ii) the Company, in each
case, at a redemption price of 109.75% of the principal amount thereof plus
accrued and unpaid interest, if any, thereon to the applicable date of
redemption; PROVIDED that at least $130.0 million in aggregate principal amount
of the Notes remain outstanding immediately after the occurrence of each such
redemption; PROVIDED, FURTHER, that with respect to any private offering of the
common stock (other than of Advanced Medical), such common stock shall be issued
at a price no lower than the fair market value thereof, as evidenced by an
independent investment banking firm of national standing delivered to the
Trustee; and PROVIDED, FURTHER, that any such redemption must occur within 90
days of the date of the closing of such public or private offering.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make any mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture provides that,
prior to being required to comply with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar restructuring.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precisely established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash
and/or Marketable Securities; PROVIDED that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto) of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Notes or any
guarantee thereof) that are assumed by the transferee of any such assets and (y)
any notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash received), will
be deemed to be cash for purposes of this provision; PROVIDED FURTHER, that the
75% limitation referred to above shall not apply to any sale, transfer or other
disposition of assets in which the cash portion of the consideration received
therefor is equal to or greater than the after-tax net cash proceeds that would
have been received by the Company had a transaction involving the same assets
complied with the aforementioned 75% limitation but was not structured with the
same tax benefits as the actual transaction.
Within 367 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or any Restricted Subsidiary may apply such Net Proceeds (a) to
permanently reduce long-term Indebtedness of a Restricted Subsidiary that is not
a Guaranteeing Subsidiary, (b) to permanently reduce Senior Debt (and, in the
case of revolving Indebtedness, to permanently reduce the commitments) of the
Company or any Guaranteeing Subsidiary, (c) to cash collateralize letters of
credit under the New Credit Facility and concurrently therewith permanently
reduce commitments under the New Credit Facility by an amount equal to the Net
Proceeds applied to such cash collateralization (PROVIDED that any such cash
collateral released to the Company and/or its Restricted Subsidiaries upon the
expiration of such letters of credit is applied in accordance with clause (a),
(b) or (d) of this sentence not later than the last to occur of (i) 367 days
after the original receipt of such Net Proceeds and (ii) 90 days after such
release), or (d) to an investment in another business, the making of a capital
expenditure or the acquisition of other tangible assets, product distribution
rights or intellectual property or rights thereto, in each case, in a line of
business permitted by the covenant entitled "Line of Business." Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the preceding
sentence of this paragraph will be deemed to constitute, "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will
be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company or any
Restricted Subsidiary may use any remaining Excess Proceeds for any purpose not
prohibited under the Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased
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on a PRO RATA basis. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
Notwithstanding the two immediately preceding paragraphs, the Company and
the Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration received in connection with such Asset Sale constitutes
Replacement Assets or a combination of Replacement Assets and cash and (ii) such
Asset Sale is for fair market value (which, in the case of any Replacement
Assets the fair market value of which exceeds $3.0 million, will be evidenced by
the opinion of an accounting, appraisal or investment banking firm of national
standing delivered to the Trustee); PROVIDED that any Net Proceeds in the form
of cash received by the Company or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated pursuant to this
paragraph shall be subject to the provisions of the immediately preceding
paragraph.
The New Credit Facility prohibits the Company from purchasing any Notes and
also provides that certain change of control events with respect to Advanced
Medical and/or the Company and certain asset sales will constitute a default
thereunder. Any future credit agreements or other agreements relating to Senior
Debt to which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs or the Company is required
to make an Asset Sale Offer at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the New Credit Facility. In such circumstances, the subordination provisions in
the Indenture would likely restrict payments to the Holders of the Notes. See
"Risk Factors--Subordination."
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or by such other method as the Trustee deems fair and appropriate, PROVIDED that
no Notes with a principal amount of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any distribution (including in connection with any merger or
consolidation) on account of any Equity Interests of the Company or any of its
Restricted Subsidiaries (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company, any of its Restricted Subsidiaries or any
other Affiliate of the Company (other than any such Equity Interests owned by
the Company or any Wholly Owned Restricted
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Subsidiary of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated in right of payment to the Notes or a Subsidiary Guarantee,
except at the original final maturity thereof or in accordance with the
scheduled mandatory redemption or repayment provisions set forth in the original
documentation governing such Indebtedness (but not pursuant to any mandatory
offer to repurchase upon the occurrence of any event); or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof, and
(b) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (v), (vi), (x) and (xii) of the next succeeding
paragraph), is less than the sum of (1) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, minus 100% of such deficit), plus (2) 100% of the aggregate net
cash proceeds received by the Company from contributions of capital or the
issue or sale since the date of the Indenture of Equity Interests of the
Company or of debt securities of the Company that have been converted into
such Equity Interests (other than Equity Interests (or convertible debt
securities) sold to a Subsidiary of the Company and other than Disqualified
Stock or debt securities that have been converted into Disqualified Stock),
PLUS (3) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any); PROVIDED that no cash
proceeds received by the Company from the issue or sale of any Equity
Interests issued by the Company will be counted in determining the amount
available for Restricted Payments under this clause (b) to the extent such
proceeds were used to redeem, repurchase, retire or acquire any Equity
Interests of the Company pursuant to clause (ii) of the next succeeding
paragraph, to defease, redeem or repurchase any subordinated Indebtedness
pursuant to clause (iii) of the next succeeding paragraph or to repurchase,
redeem or acquire any Equity Interests of the Company pursuant to clause
(iv) of the next succeeding paragraph, and
(c) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
under "--Incurrence of Indebtedness and Issuance of Preferred Stock."
The foregoing provisions do not prohibit any or all of the following (each
and all of which: (1) constitutes an independent exception to the foregoing
provisions and (2) may occur in addition to any action permitted to occur under
any other exception): (i) the payment of any dividend within 60 days after the
date of declaration thereof, if at such date of declaration such payment would
have complied with the provisions of the Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the net proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than Disqualified Stock); PROVIDED that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (b)(2)
of the preceding paragraph; (iii) the defeasance, redemption or repurchase of
subordinated Indebtedness with the net proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
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Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (b)(2) of the preceding paragraph;
(iv) a Restricted Payment to fund the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of Advanced Medical
or the Company held by any member of Advanced Medical's, the Company's or any of
its Restricted Subsidiaries' management pursuant to any management equity
subscription agreement or stock option agreement; PROVIDED that (A) the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any twelve-month period (or
$3.0 million in any single twelve month period during the term of the Notes)
PLUS the aggregate cash proceeds received by the Company during such
twelve-month period from any reissuance of Equity Interests by Advanced Medical
or the Company to members of management of Advanced Medical, the Company and its
Restricted Subsidiaries and (B) no Default or Event of Default shall have
occurred and be continuing immediately after such transaction; PROVIDED that the
amount in excess of $1.0 million (or $3.0 million, as the case may be) expended
for all such repurchases, redemptions and other acquisitions and retirements of
Equity Interests pursuant to this clause (iv) in any twelve month period shall
be excluded from clause (b)(2) of the preceding paragraph; (v) the payment of
dividends (A) by a Restricted Subsidiary on any class of common stock of such
Restricted Subsidiary if such dividend is paid PRO RATA to all holders of such
class of common stock and (B) by a Guaranteeing Subsidiary on any class of
preferred stock issued in compliance with the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock;" (vi) the repurchase of any class
of common stock of a Restricted Subsidiary if such repurchase is made PRO RATA
with respect to such class of common stock; (vii) the payment of dividends or
the making of loans or advances by the Company to Advanced Medical in order to
permit the payment by Advanced Medical of interest in respect of the Convertible
Debentures in accordance with their terms; (viii) the payment of dividends or
the making of loans or advances by the Company to Advanced Medical in order to
permit the payment by Advanced Medical of principal in respect of the
Convertible Debentures at January 15, 2002 in accordance with their terms if, at
the time of such Restricted Payment, the Company would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant entitled "Incurrence
of Indebtedness and Issuance of Preferred Stock;" (ix) the payment of dividends
or the making of loans or advances by the Company to Advanced Medical not to
exceed $1.5 million in any fiscal year for, among other things, costs, expenses
and capital expenditures incurred by Advanced Medical in its capacity as a
holding company; (x) payments to Advanced Medical pursuant to the Tax Sharing
Agreement; (xi) any other Restricted Payment (other than (A) a dividend or other
distribution on account of any Equity Interests of the Company or any of its
Restricted Subsidiaries and (B) a purchase, redemption or other acquisition of
any Equity Interests of the Company, any of its Restricted Subsidiaries or any
Affiliate of the Company) if the amount thereof, together with all other
Restricted Payments made pursuant to this clause (xi) since the date of the
Indenture does not exceed $15.0 million; and (xii) the redemption, repurchase or
other acquisition of Notes.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such designation, all outstanding Investments by the Company
and its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All such outstanding Investments
will be deemed to constitute Restricted Investments in an amount equal to the
greater of (i) the net book value of such Investments at the time of such
designation and (ii) the fair market value of such Investments at the time of
such designation. Such designation will only be permitted if such Restricted
Investment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which calculations
shall be based upon the Company's latest available financial statements.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Debt) and the Company and any Guaranteeing Subsidiary will not issue
any Disqualified Stock and will not permit any of their respective Restricted
Subsidiaries that are not Guaranteeing Subsidiaries to issue any shares of
preferred stock; PROVIDED, HOWEVER, that the Company and any Guaranteeing
Subsidiary may Incur Indebtedness or issue shares of Disqualified Stock, if the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least (x) 2.25 to 1 if
such incurrence or issuance occurs on or before December 1, 1999, or (y) 2.5 to
1 if such incurrence or issuance occurs at any time thereafter, in each case,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions will not apply to any of the following (each and
all of which (1) may be issued or incurred, (2) constitutes an independent
exception to the foregoing provisions and (3) may be incurred in addition to any
other Indebtedness permitted to be incurred under any other exception): (i) the
incurrence by the Company or any Guaranteeing Subsidiary of Indebtedness and
letters of credit pursuant to any New Credit Facility (with letters of credit
being deemed to have a principal amount equal to the maximum potential liability
of the Company or the relevant Guaranteeing Subsidiary thereunder) in an
aggregate principal amount outstanding at any one time not to exceed $265.0
million (A) LESS the aggregate amount of all mandatory repayments (a "Mandatory
Repayment") of the principal of any term Indebtedness under the New Credit
Facility that have been made since the date of the Indenture pursuant to the
amortization schedule of any New Credit Facility (other than any Mandatory
Repayment made concurrently with refinancing or refunding of the New Credit
Facility) (B) PLUS the Excess Amount and (C) LESS the aggregate amount of all
Net Proceeds of Asset Sales applied pursuant to clause (b) or (c) of the first
sentence of the second paragraph under the covenant entitled "Asset Sales" to
permanently reduce Indebtedness (and, in the case of revolving Indebtedness, the
commitments) under the New Credit Facility or to cash collateralize letters of
credit and permanently reduce commitments with respect to revolving Indebtedness
under the New Credit Facility; PROVIDED that the amount of Indebtedness
permitted to be incurred pursuant to the New Credit Facility in accordance with
this clause (i) shall be in addition to any Indebtedness permitted to be
incurred pursuant to the New Credit Facility or otherwise in reliance on, and in
accordance with, clause (ix) below; (ii) the incurrence by the Company and any
Guaranteeing Subsidiary of Indebtedness represented by the Notes and any
Subsidiary Guarantee; (iii) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness (A) represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each case,
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property used in the business of the
Company or such Restricted Subsidiary, or (B) in connection with sale and
leaseback transactions, in an aggregate principal amount with respect to clause
(iii) not to exceed $20.0 million at any time outstanding; PROVIDED THAT in no
event shall the aggregate principal amount of Indebtedness incurred pursuant to
clause (iii)(B) exceed $5.0 million at any time outstanding; (iv) Existing
Indebtedness; (v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund, Indebtedness that was permitted by the Indenture; (vi) the incurrence by
Company or any of its Restricted Subsidiaries of intercompany Indebtedness
between or among the Company and any of its Restricted Subsidiaries; PROVIDED,
HOWEVER, that (a) any subsequent issuance or transfer (other than for security
purposes) of Equity Interests and (b) any subsequent sale or other transfer
(including for security purposes other than to secure Indebtedness permitted to
be incurred pursuant to clause (i) of this paragraph) of such Indebtedness, in
each case, that results in any such Indebtedness being held by a Person other
than the Company or any of its Restricted Subsidiaries shall be deemed to
constitute an incurrence of such
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Indebtedness by the Company or such Restricted Subsidiary, as the case may be,
not permitted pursuant to this clause (vi); (vii) the incurrence by the Company
or any of its Restricted Subsidiaries of Hedging Obligations that are incurred
for the purpose of fixing or hedging (a) interest rate risk with respect to any
floating rate Indebtedness of such Person so long as such floating rate
Indebtedness is permitted by the terms of the Indenture to be outstanding or (b)
exchange rate risk with respect to agreements or indebtedness of such Person
payable or denominated in a currency other than U.S. dollars; (viii) the
incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt;
PROVIDED, HOWEVER, that if any such Indebtedness ceases to be Non-Recourse Debt
of an Unrestricted Subsidiary, such event shall be deemed to constitute an
incurrence of Indebtedness by a Restricted Subsidiary of the Company; (ix) the
incurrence by the Company and any Guaranteeing Subsidiary of Indebtedness in an
aggregate principal amount at any time outstanding not to exceed $25.0 million;
(x) the incurrence by any Foreign Subsidiary of Indebtedness and letters of
credit to fund working capital and capital expenditure requirements (with
letters of credit being deemed to have a principal amount equal to the maximum
potential liability of such Foreign Subsidiary thereunder) in an aggregate
maximum principal amount outstanding at any one time not to exceed $15.0
million; (xi) Obligations in respect of performance and surety bonds provided by
the Company or any Guaranteeing Subsidiary in the ordinary course of business;
and (xii) the incurrence or issuance by any Restricted Subsidiary of the Company
of Indebtedness or preferred stock (in addition to Indebtedness and preferred
stock that may be incurred or issued pursuant to any other clause of this
paragraph) in an aggregate principal amount not to exceed $1.0 million.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
PROVIDED that the Company and any Guaranteeing Subsidiary may enter into a sale
and leaseback transaction if (i) the Company or such Guaranteeing Subsidiary
could have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to (A) the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant "Incurrence
of Additional Indebtedness and Issuance of Preferred Stock" and/or (B) clause
(iii)(B) of the covenant "Incurrence of Additional Indebtedness and Issuance of
Preferred Stock" (as limited by the proviso to such clause), (ii) the Lien to
secure such Indebtedness does not extend to or cover any assets of the Company
or such Guaranteeing Subsidiary other than the assets which are the subject of
the sale leaseback transaction, (iii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by the Board of Directors of the Company and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iv) the transfer of assets
in such sale and leaseback transaction is permitted by, and the proceeds of such
transaction are applied in compliance with, the covenant "Asset Sales."
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) securing any Obligations
on any property or asset now owned or hereafter acquired, or on any income or
profits therefrom or assign or convey any right to receive income therefrom,
unless the Notes and the Subsidiary Guarantees, as applicable, are either (i)
secured by a Lien on such property, assets, income or profits, if such other
Obligations are subordinated in right of payment to the Notes and/or the
Subsidiary Guarantees, that is senior in priority to the Lien securing such
other Obligations or (ii) equally and ratably secured by a Lien on such
property, assets, income or profits with the Lien securing such other
Obligations, if such other Obligations are PARI PASSU in right of payment to the
Notes and/or the Subsidiary Guarantees.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to: (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries on its Capital Stock or (b) pay any Indebtedness owed to the
Company or any of its Restricted Subsidiaries; (ii) make loans or advances to
the Company or any of its Restricted Subsidiaries; or (iii) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reasons of (a)
Existing Indebtedness, as in effect on the date of the Indenture; (b) the New
Credit Facility as in effect on the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive in the aggregate than those
contained in the New Credit Facility as in effect on the date of the Indenture;
(c) the Indenture and the Notes; (d) applicable law; (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries, as in effect at the time of acquisition
(except to the extent such Indebtedness was incurred in connection with, or in
contemplation of, such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired; PROVIDED that
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred; (f) customary non-assignment provisions in leases and
other agreements entered into in the ordinary course of business and consistent
with past practices; (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired; (h) Permitted Refinancing
Indebtedness; PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive in the
aggregate than those contained in the agreements governing the Indebtedness
being refinanced; (i) an agreement that has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or property or
assets of a Restricted Subsidiary; PROVIDED that such restrictions are limited
to the Restricted Subsidiary that is the subject of such agreement; or (j)
restrictions applicable to any Foreign Subsidiary pursuant to Indebtedness
permitted to be incurred pursuant to clause (x) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock";
PROVIDED that such restrictions shall be limited to customary net worth,
leverage, cash flow and other financial ratios applicable to such Foreign
Subsidiary, customary restrictions on mergers and consolidations involving such
Foreign Subsidiary, customary restrictions on transactions with affiliates of
such Foreign Subsidiary and customary provisions subordinating the payment of
intercompany Indebtedness owed by such Foreign Subsidiary to the Company or any
of its Restricted Subsidiaries upon the occurrence of a default in respect of
Indebtedness of such Foreign Subsidiary or its Subsidiaries and/or events of
insolvency with respect to such Foreign Subsidiary or its Subsidiaries; and
PROVIDED FURTHER that in no event shall any Indebtedness incurred by a Foreign
Subsidiary prohibit such Foreign Subsidiary from making any dividend or other
distribution to the Company or its Restricted Subsidiaries or from otherwise
making any loan to the Company or its Restricted Subsidiaries in the absence of
a breach by such Foreign Subsidiary of the covenants contained in such
Indebtedness.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United
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States, any state thereof or the District of Columbia; (ii) the Person formed by
or surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made assumes all the obligations of the Company under
the Notes and the Indenture pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; and (iv) the Company or the
Person formed by or surviving any such consolidation or merger, or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made will, at the time of such transaction after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock." The foregoing does not prohibit a consolidation or
merger between the Company and a Wholly Owned Restricted Subsidiary, the
transfer of all or substantially all of the properties or assets of the Company
to a Wholly Owned Restricted Subsidiary or the transfer of all or substantially
all of the properties or assets of a Wholly Owned Restricted Subsidiary to the
Company; PROVIDED that if the Company is not the surviving entity of such
transaction or the Person to which such transfer is made, the surviving entity
or the Person to which such transfer is made shall comply with clause (ii) of
this paragraph.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) if such Affiliate
Transaction involves aggregate payments in excess of $5.0 million, the Company
delivers to the Trustee a resolution of the Board of Directors of the Company
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and such Affiliate Transaction is approved by a
majority of the disinterested members of the Board of Directors of the Company;
PROVIDED, HOWEVER, that (a) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business of the
Company or such Restricted Subsidiary, (b) transactions between or among the
Company and/or its Restricted Subsidiaries, (c) payment of employee benefits,
including bonuses, retirement plans and stock options, and director fees in the
ordinary course of business, (d) Restricted Payments permitted by the provisions
of the Indenture described above under clauses (i), (iv), (v), (vi), (vii),
(viii), (ix) and (x) of the second paragraph of the covenant entitled
"Restricted Payments," and (e) transactions permitted by the provisions of the
Indenture described below under the covenant entitled "Sales of Accounts
Receivable," in each case, shall not be deemed Affiliate Transactions.
ANTI-LAYERING
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is both
(a) subordinate or junior in right of payment to any Senior Debt and (b) senior
in any respect in right of payment to the Notes; and (ii) no Guaranteeing
Subsidiary will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is both (a) subordinate or junior in right of
payment to its Senior Debt and (b) senior in any respect in right of payment to
its Subsidiary Guarantee.
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LINE OF BUSINESS
The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage in any line of business other than (i) the same or a similar line of
business as the Company and its Restricted Subsidiaries are engaged in on the
date of the Indenture and (ii) such business activities as are complementary to
or are incidental, ancillary or related to the foregoing.
SALES OF ACCOUNTS RECEIVABLE
The Company may, and any of its Restricted Subsidiaries may, sell, at any
time and from time to time, all of their respective accounts receivable to an
Accounts Receivable Subsidiary; PROVIDED that (i) the cash received in each such
sale is not less than 90% of the aggregate face value of the receivables sold
and the remainder of the consideration received in each such sale is a
promissory note (a "Promissory Note") which is subordinated to no Indebtedness
or obligation other than the financial institution or other entity providing the
financing to the Accounts Receivable Subsidiary with respect to such accounts
receivable (a "Financier"); PROVIDED FURTHER that the Initial Sale will include
all eligible accounts receivable of the Company and/or its Restricted
Subsidiaries that will be party to such arrangements in existence on the date of
the Initial Sale, (ii) the cash proceeds received from the Initial Sale less
reasonable and customary transaction costs will be deemed to be Net Proceeds and
will be applied in accordance with the second paragraph of the covenant entitled
"Asset Sales;" and (iii) the Company and its Restricted Subsidiaries will sell
their accounts receivable to the Accounts Receivable Subsidiary no less
frequently than on a weekly basis.
The Company (i) will not permit any Accounts Receivable Subsidiary to sell
any accounts receivable purchased from the Company or any of its Restricted
Subsidiaries to any other person except on an arms-length basis and solely for
consideration in the form of cash or Marketable Securities, (ii) will not permit
the Accounts Receivable Subsidiary to engage in any business or transaction
other than the purchase, financing and sale of accounts receivable of the
Company and its Restricted Subsidiaries and activities incidental thereto, (iii)
will not permit any Accounts Receivable Subsidiary to incur Indebtedness in an
amount in excess of the book value of such Accounts Receivable Subsidiary's
total assets, as determined in accordance with GAAP, (iv) will, at least as
frequently as monthly, cause the Accounts Receivable Subsidiary to remit to the
Company as payment on the Promissory Notes, all available cash or Marketable
Securities not held in a collection account pledged to a Financier, to the
extent not applied to pay or maintain reserves for reasonable operating expenses
of the Account Receivable Subsidiary or to satisfy reasonable minimum operating
capital requirements and (v) will not, and will not permit any of its
Subsidiaries to, sell accounts receivable to any Accounts Receivable Subsidiary
upon (1) the occurrence of a Default with respect to the Company and its
Restricted Subsidiaries and (2) the occurrence of certain events of bankruptcy
or insolvency with respect to such Accounts Receivable Subsidiary.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its Restricted Subsidiaries and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports. In addition, whether or not required by the rules and regulations
of the Commission, from and after the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, the Company will file a copy
of all such information and reports with the
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Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the
Guaranteeing Subsidiaries have agreed that, for so long as any Notes remain
outstanding, they will furnish to Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest with respect
to the Notes (whether or not prohibited by the subordination provisions of
the Indenture);
(ii) default in payment when due of principal or premium, if any, on the
Notes at maturity, upon redemption or otherwise (whether or not prohibited
by the subordination provisions of the Indenture);
(iii) failure by the Company or any Guaranteeing Subsidiary for 30 days
after receipt of notice from the Trustee or Holders of at least 25% in
principal amount of the Notes then outstanding to comply with the provisions
described under the covenants entitled "Change of Control," "Asset Sales,"
"Sale and Leaseback Transactions," "Restricted Payments," "Incurrence of
Indebtedness and Issuance of Preferred Stock," "Sales of Accounts
Receivable" or "Merger, Consolidation or Sale of Assets;"
(iv) failure by the Company or any Guaranteeing Subsidiary for 60 days
after notice from the Trustee or the Holders of at least 25% in principal
amount of the Notes then outstanding to comply with its other agreements in
the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of their respective
Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of their respective Restricted Subsidiaries) whether such
Indebtedness or Guarantee now exists, or is created after the date of the
Indenture, which default (A) (i) is caused by a failure to pay when due at
final stated maturity (giving effect to any grace period related thereto)
principal of (a "Payment Default") or (ii) results in the acceleration of
such Indebtedness prior to its express maturity and (B) in each case, the
principal amount of any such Indebtedness due to be paid, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been accelerated as a result of
any matter contemplated in clause (v)(A)(i) or (v)(A)(ii), aggregates $15.0
million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments (to the extent not covered by insurance and as to which the
insurer has not acknowledged coverage in writing) aggregating in excess of
$15.0 million, which judgments are not paid, fully bonded, discharged or
stayed within 60 days after their entry;
(vii) certain events of bankruptcy or insolvency with respect to the
Company or any Restricted Subsidiary of the Company that is a Significant
Subsidiary or group of Restricted Subsidiaries of the Company that,
together, would constitute a Significant Subsidiary; and
(viii) the termination of the Subsidiary Guarantee(s) of either a
Guaranteeing Subsidiary that is a Significant Subsidiary or group of
Guaranteeing Subsidiaries that together constitute a Significant Subsidiary
for any reason not permitted by the Indenture, or the denial of any Person
acting on behalf of any such Guaranteeing Subsidiary or group of
Guaranteeing Subsidiaries of its Obligations under any such Subsidiary
Guarantee(s).
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To the extent that the last day of the period referred to in clauses (i),
(iii), (iv) or (vi) of the immediately preceding paragraph is not a Business
Day, then the first Business Day following such day shall be deemed to be the
last day of the period referred to in such clauses. Any "day" will be deemed to
end as of 11:59 p.m., New York City time.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the New Credit Facility, shall become immediately due and payable upon the first
to occur of an acceleration under the New Credit Facility or 5 Business Days
after receipt by the Company and the Representative under the New Credit
Facility of such Acceleration Notice but only if such Event of Default is then
continuing. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee, may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest or premium on, or principal of, the Notes. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in such
Holders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Guaranteeing Subsidiary, as such, shall have any liability for any
obligations of the Company under the Notes, any Subsidiary Guarantee or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all
obligations of the Company and the Guaranteeing Subsidiaries discharged with
respect to the outstanding Notes and the Subsidiary Guarantees ("legal
defeasance"). Such legal defeasance means that the Company will be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (a) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on the
Notes when such payments are due, or on the redemption date, as the case may be,
(b) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (c) the rights, powers, trust, duties and
immunities of the Trustee, and the Company's obligations in connection therewith
and (d) the legal defeasance provisions of
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the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guaranteeing Subsidiaries
released with respect to certain covenants that are described in the Indenture
("covenant defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event covenant defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default and Remedies" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either legal defeasance or covenant defeasance, the
Company must, among other things, irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants selected by the Trustee, to pay the principal of,
premium, if any, and interest on the outstanding Notes on the stated maturity or
on the applicable optional redemption date, as the case may be.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes or the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for Notes), and any existing default or compliance with any
provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
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Without the consent of each Holder affected, however, an amendment or waiver
may not (with respect to any Note held by a non-consenting Holder): (i) reduce
the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
or any change of control offer; (iii) reduce the rate of or change the time for
payment of interest on any Notes; (iv) waive a Default or Event of Default in
the payment of principal of or premium, if any, or interest on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration); (v) make any Note payable in money other
than that stated in the Notes; (vi) waive a redemption or repurchase payment
with respect to any Note; (vii) make any change in the foregoing amendment and
waiver provisions; or (viii) except as provided under "Legal Defeasance and
Discharge," "Covenant Defeasance" or the third paragraph under "Subsidiary
Guarantees," release any of the Guaranteeing Subsidiaries from their obligations
under the Subsidiary Guarantees or make any change in the Subsidiary Guarantees
that would adversely affect the Holders. Notwithstanding the foregoing, the
provisions with respect to Asset Sales may be amended or supplemented with the
consent of the Holders of at least two-thirds in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for the Notes). In addition, any amendment to the provisions
of Article 10 of the Indenture (which relate to subordination) will require the
consent of the Holders of at least 75% in aggregate amount of Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Guaranteeing Subsidiaries and the Trustee may amend or
supplement the Indenture, the Subsidiary Guarantees or the Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or a Guaranteeing Subsidiary's obligations to Holders of the Notes
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to allow any
Guaranteeing Subsidiary to guarantee the Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions with the Company; however, if the Trustee acquires any
conflicting interest, it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as Trustee or resign.
The Holders of a majority in principal amount of the then outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that in case an Event of Default shall occur
(which shall not be cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Company, 10221 Wateridge Circle, San Diego,
California 92121, Attention: Corporate Secretary.
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BOOK-ENTRY, DELIVERY AND FORM
The Old Notes were, and the New Notes will be initially issued in the form
of one Global Note (the "Global Note"). The Global Note for the Old Notes was,
and the Global Note for the New Notes will be, deposited with, or on behalf of,
the Depositary and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
Notes that are issued as described below under "Certificated Securities,"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
Pursuant to procedures established by the Depositary, ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
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CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
under the Indenture, then, upon surrender by the Global Note Holder of its
Global Note, Notes in such form will be issued to each person that the Global
Note Holder and the Depositary identify as being the beneficial owner of the
related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, and interest) be made by
wire transfer of immediately available funds to the accounts specified by the
Global Note Holder. With respect to Certificated Securities, the Company will
make all payments of principal, premium, if any, and interest by wire transfer
of immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, Notes represented by the Global Note are eligible to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Securities will also be settled in
immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as,
any other capitalized terms used herein for which no definition is provided. All
calculations made pursuant hereto for any four-quarter period the last day of
which is on or prior to December 31, 1997 shall be made on a pro forma basis (i)
to exclude the operating results of River for all periods prior to the date of
the Indenture and (ii) to exclude any restructuring charges associated with the
River Divestiture made prior to the date of the Indenture and in each case, as
if such transactions had occurred on September 30, 1995. For purposes of making
any determination of any amount under any single definition set forth below,
such determination shall be made without double counting of any item; PROVIDED
that with respect to the definition of "Fixed Charge Coverage Ratio" it shall
not be deemed to be double counting if an item is included in the calculation of
each of "Consolidated EBITDA" and "Fixed Charges."
"ACCOUNTS RECEIVABLE SUBSIDIARY" means a newly created, Wholly Owned
Subsidiary of the Company which is formed solely for the purpose of, and which
engages in no activities other than activities in connection with, financing
accounts receivable of the Company and/or its Restricted Subsidiaries, (ii)
which is designated by the Board of Directors of the Company as an Accounts
Receivables Subsidiary pursuant to a Board of Directors' resolution set forth in
an Officers' Certificate and delivered to the Trustee, (iii) that has total
assets at the time of such creation and designation with a book value of $10,000
or less, (iv) no portion of the Indebtedness or any other obligation (contingent
or otherwise) of which (a) is
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at any time guaranteed by the Company or any Restricted Subsidiary of the
Company, (b) is at any time recourse to or obligates the Company or any other
Restricted Subsidiary of the Company in any way, other than pursuant to
representations and covenants entered into in the ordinary course of business in
connection with the sale of accounts receivable to such Accounts Receivable
Subsidiary or (c) subjects any property or asset of the Company or any other
Restricted Subsidiary of the Company, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations
and covenants entered into in the ordinary course of business in connection with
sales of accounts receivable, (v) with which neither the Company nor any
Restricted Subsidiary of the Company has any contract, agreement, arrangement or
understanding other than contracts, agreements, arrangements and understandings
entered into in the ordinary course of business in connection with sales of
accounts receivable in accordance with the covenant entitled "Sale of Accounts
Receivables" and fees payable in the ordinary course of business in connection
with servicing accounts receivable and (vi) with respect to which neither the
Company nor any Restricted Subsidiary of the Company has any obligation (a) to
subscribe for additional shares of Capital Stock or other Equity Interests
therein or make any additional capital contribution or similar payment or
transfer thereto or (b) to maintain or preserve the solvency or any balance
sheet term, financial condition, level of income or results of operations
thereof.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person merges
with or into or becomes a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person,
and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or, indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"ASSET SALE" means (i) the sale, lease, conveyance, or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than (A) in the ordinary course of business or (B) sales of accounts receivables
to the Accounts Receivable Subsidiary in accordance with the covenant entitled
"Sales of Accounts Receivable" (PROVIDED that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the covenant entitled "Change of Control" and/
or the provisions described above under the covenant entitled "Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of their respective
Restricted Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of clauses (i) and (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $3.0 million or (b) for net proceeds in excess of $3.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii)
a Restricted Payment that is permitted by the covenant described above under the
covenant entitled "Restricted Payments," and (iv) the sale and leaseback of any
assets within 90 days of the acquisition of such assets will not be deemed to be
Asset Sales.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
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"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, rights or other equivalents (however designated) of
corporate stock and (iii) in the case of a partnership, partnership interests
(whether general or limited).
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) any
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation) in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as defined in Section 13 (d) of the Exchange Act) or
"group" (as defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other
than the Principal and his Related Parties; (ii) the adoption of a plan for the
liquidation or dissolution of the Company other than a liquidation or
dissolution that results in substantially all of the assets of the Company being
held by the corporate parent of the Company; (iii) the Company consolidates
with, or merges with or into, another "person" (as defined above) or "group" (as
defined above) in a transaction or series of related transactions in which the
Voting Stock of the Company is converted into or exchanged for cash, securities
or other property, other than any transaction where (A) the outstanding Voting
Stock of the Company is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation and (B) either
(1) the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) of
the outstanding Voting Stock of the Company immediately prior to such
transaction own beneficially, directly or indirectly through one or more
Subsidiaries, not less than a majority of the total outstanding Voting Stock of
the surviving or transferee corporation immediately after such transaction or
(2) if, immediately prior to such transaction the Company is a direct or
indirect Subsidiary of any other Person (each such other Person, the "Holding
Company"), the "beneficial owners" (as defined above) of the outstanding Voting
Stock of such Holding Company immediately prior to such transaction own
beneficially, directly or indirectly through one or more Subsidiaries, not less
than a majority of the outstanding Voting Stock of the surviving or transferee
corporation immediately after such transaction; (iv) the consummation of any
transaction or series of related transactions (including, without limitation, by
way of merger or consolidation) the result of which is that any "person" (as
defined above) or "group" (as defined above) other than the Principal and his
Related Parties becomes the "beneficial owner" (as defined above) of more than
40% of the voting power of the Voting Stock of the Company, or (v) during any
consecutive two-year period, the first day on which a majority of the members of
the Board of Directors of Parent who were members of the Board of Directors at
the beginning of such period are not Continuing Directors.
"CONSOLIDATED EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, PLUS, to the extent deducted in computing Consolidated Net Income, (i)
provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, (ii) Consolidated Interest Expense of such Person
for such period, (iii) depreciation and amortization (including amortization of
goodwill and other intangibles) and all other non-cash charges (excluding any
such non-cash charge to the extent that it represents an accrual of or reserve
for cash charges in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period, (iv) any extraordinary or non-recurring loss and any net loss
realized in connection with either an Asset Sale or the extinguishment of
Indebtedness, in each case, on a consolidated basis determined in accordance
with GAAP and (v) cash severance, restructuring and transaction costs incurred
within one year of the date of the Indenture in connection with the Merger in an
amount not to exceed $17.0 million to the extent included in computing
Consolidated Net Income. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent
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(and in the same proportion) that the Net Income of such Restricted Subsidiary
was included in calculating the Consolidated Net Income of such Person.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the interest expense of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP
(including amortization of original issue discount and deferred financing costs,
except as set forth in the proviso to this definition, non-cash interest
payments, the interest component of all payments associated with Capital Lease
Obligations, net payments, if any, pursuant to Hedging Obligations and imputed
interest with respect to Attributable Debt; PROVIDED, HOWEVER, that in no event
shall any amortization of deferred financing cost incurred on or prior to the
date of the Indenture in connection with the New Credit Facility or any
amortization of deferred financing costs incurred in connection with the
issuance of the Notes be included in Consolidated Interest Expense).
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED, HOWEVER, that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to the referent Person or a Restricted Subsidiary thereof in
cash, (ii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iii) the cumulative effect of a change in accounting principles shall
be excluded, and (iv) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of Net Income is not, at the date of
determination, permitted without any prior governmental approval (which has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary.
"CONVERTIBLE DEBENTURES" means the 7 1/4% Convertible Subordinated
Debentures due 2002 of Advanced Medical issued pursuant to the Indenture, dated
as of January 15, 1992, between Advanced Medical and U.S. Trust Company of
California, N.A. as in effect on the date of the Indenture.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the relevant Person who (i) was a member of such Board
of Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election, or (iii) became a member of the Board of Directors as a
result of the actions of the Principal; PROVIDED that at the time the Principal
took any such action, the Principal was the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) in excess of 50% of the Voting Stock of the
Company.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) so long as any Indebtedness is
outstanding under the New Credit Facility, such Indebtedness, and (ii)
thereafter, any other Senior Debt permitted under the Indenture the principal
amount of which is $50.0 million or more and that has been designated by the
Company as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable, except to the extent such capital stock is exchangeable into
indebtedness at the option of the issuer thereof and only subject to the terms
of any debt instrument to which such issuer is a party), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, or convertible or exchangeable into Indebtedness on or prior
to date on which the Notes mature.
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"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus of not less than $100.0 million or its equivalent
in foreign currency, whose short-term debt is rated "A-3" (or higher) according
to Standard & Poor's Ratings Group ("S&P") or "P-2" or higher according to
Moody's Investor Services, Inc. ("Moody's") or carrying an equivalent rating by
a nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCESS AMOUNT" means, with respect to any New Credit Facility, the amount
by which aggregate payments of principal thereunder exceed the aggregate
payments of principal required to by made through the date of determination, in
respect of any term Indebtedness, under the amortization schedule of such New
Credit Facility.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of the Indenture until such amounts are repaid, including,
without limitation, the Existing Senior Notes as amended on the date of the
Indenture.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(i) the Consolidated Interest Expense of such Person for such period and (ii)
any interest expense on Indebtedness of another Person that is (A) Guaranteed by
the referent Person or one of its Restricted Subsidiaries (whether or not such
Guarantee is called upon) or (B) secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries (whether or not such Lien is called upon);
PROVIDED THAT with respect to clause (ii)(B), the amount of Indebtedness (and
attributable interest expense) shall be equal to the lesser of (I) the principal
amount of the Indebtedness secured by the assets of such Person or one of its
Restricted Subsidiaries and (II) the fair market value (as determined by the
Board of Directors of such Person and set forth in an Officers' Certificate
delivered to the Trustee) of the assets securing such Indebtedness and (iii) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Subsidiary) on any series of preferred stock of such
Person, TIMES (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but on or prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above, (i)
acquisitions that have been made the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and shall give pro forma effect to the Indebtedness and the Consolidated
EBITDA of the Person which is the subject of any such acquisition, (ii) the
Consolidated EBITDA attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the
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Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"FOREIGN SUBSIDIARY" means any Restricted Subsidiary of the Company
organized and existing under the laws of any jurisdiction outside of the United
States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, the Securities and Exchange Commission
or in such other statements by such other entity as may be approved by a
significant segment of the accounting profession of the United States, which are
in effect from time to time; PROVIDED, HOWEVER, that all reports and other
financial information provided by the Company to the Holders, the Trustee and/or
the Commission shall be prepared in accordance with GAAP, as in effect on the
date of such report or other financial information.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTEEING SUBSIDIARY" means (i) prior to the Merger, IMED International
Trading Corp., (ii) immediately subsequent to the Merger, each of IMED
International Trading Corp. and IVAC Overseas Holdings, Inc., (iii) any other
Restricted Subsidiary of the Company that executes a Subsidiary Guarantee in
accordance with the terms of the Indenture and (iv) each of their respective
successors and assigns unless and until any successor replaces any such
Guaranteeing Subsidiary in accordance with the Indenture and thereafter includes
each such successor.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or foreign exchange rates and (iii) indemnity agreements and arrangements
entered into in connection with the agreements and arrangements described in
clauses (i) and (ii).
"INCUR OR INCUR" means, with respect to any Indebtedness (including Acquired
Debt), to create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable for or with respect to, or become responsible for, the payment
of such Indebtedness (including Acquired Debt); PROVIDED that (i) neither the
accrual of interest nor the accretion of original issue discount shall be
considered an incurrence of Indebtedness, (ii) the issuance of any New Notes in
exchange for a like principal amount of Notes shall not be deemed to be an
Incurrence of Indebtedness and (iii) the assumption of Indebtedness by the
surviving entity of a transaction permitted by the last sentence of the second
paragraph under "Subsidiary Guarantees" or the last sentence of the covenant
entitled "Merger, Consolidation, or Sale of Assets" in existence at the time of
such transaction shall not be deemed to be an incurrence of Indebtedness. The
term "incurrence" has corresponding meaning.
"INDEBTEDNESS" means, with respect to any Person without duplication, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or representing
Capital Lease Obligations or the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable, or representing any Hedging Obligations if and to the
extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not
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such indebtedness is assumed by such Person), the maximum fixed repurchase price
of Disqualified Stock issued by such Person and the liquidation preference of
preferred stock issued by such Person, in each case if held by any Person other
than the Company or a Wholly Owned Restricted Subsidiary of the Company, and, to
the extent not otherwise included, the Guarantee by such Person of any such
indebtedness of any other Person.
"INITIAL SALE" means the first transaction in which accounts receivable are
sold by the Company and/or its Restricted Subsidiaries to an Accounts Receivable
Subsidiary.
"INSTRUMENT CONTRACT" means any contract or agreement to which the Company
or any of its Restricted Subsidiaries is a party pursuant to which the other
party to any such contract or agreement acquires on behalf of itself or another
party instruments from the Company or such Restricted Subsidiary at no or
reduced initial cost by paying a premium (a portion of which is recorded by the
Company in accordance with GAAP as interest income) for subsequent purchases of
disposable administration sets.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
PROVIDED that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company, or any
Restricted Subsidiary of the Company issues Equity Interests, such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale, disposition or issuance equal to the
fair market value of the Equity Interests of such Person held by the Company or
such Restricted Subsidiary immediately following any such sale, disposition or
issuance.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest).
"MARKETABLE SECURITIES" means (i) Government Securities, (ii) any
certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution or any lender
under the New Credit Facility, (iii) commercial paper maturing not more than 270
days after the date of acquisition of an issuer (other than an Affiliate of the
Company) with a rating, at the time as of which any investment therein is made,
of "A-3" (or higher) according to S&P or "P-2" (or higher) according to Moody's
or carrying an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of investments,
(iv) any bankers acceptances or money market deposit accounts issued by an
Eligible Institution and (v) any fund investing exclusively in investments of
the types described in clauses (i) through (iv) above.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions or
(b) the extinguishment of any Indebtedness of such Person or any of its
Restricted Subsidiaries, and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating
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to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, amounts
required to be applied to the repayment of Indebtedness (other than long-term
Indebtedness of a Restricted Subsidiary of such Person and Indebtedness under
the New Credit Facility) secured by a Lien on the asset or assets that are the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"NEW CREDIT FACILITY" means that certain credit agreement, dated as of
November 26, 1996, by and among the Company, Advanced Medical, Bankers Trust
Company, as administration agent and syndication agent, Banque Paribas, as
documentation agent and syndication agent, Donaldson, Lufkin & Jenrette
Securities Corporation, as syndication agent, and the lenders party thereto,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time (together
with any amendment, modification, renewal, refunding, replacement or refinancing
to or of any of the foregoing (collectively, a "Modification") or to any
Modification, ad infinitum), including, without limitation, any agreement
modifying the maturity or amortization schedule of or refinancing or refunding
all or any portion of the Indebtedness thereunder or increasing the amount that
may be borrowed under such agreement or any successor agreement, whether or not
among the same parties.
"NON-RECOURSE DEBT" means Indebtedness (i) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (ii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that in no event shall Indebtedness
of any Unrestricted Subsidiary fail to be Non-Recourse Debt solely as a result
of an default provisions contained in a Guarantee thereof by the Company or any
of its Restricted Subsidiaries if the Company or such Restricted Subsidiary was
otherwise permitted to incur such Guarantee pursuant to the Indenture.
"OBLIGATIONS" means any principal, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"PARENT" means (i) Advanced Medical or (ii) if Advanced Medical ceases to
either (i) exist or (ii) beneficially own, directly or indirectly, in excess of
50% of the Capital Stock of the Company, the ultimate corporate parent of the
Company that owns all of the outstanding Capital Stock of the Company either
directly or through one or more Wholly Owned Subsidiaries or (iii) if there
exists no corporate parent of the Company, the Company.
"PERMITTED INVESTMENTS" means (i) Investments in the Company or in a
Restricted Subsidiary of the Company (including, without limitation, Guarantees
of the Indebtedness and/or other Obligations of the Company and/or any
Restricted Subsidiary of the Company, so long as such Indebtedness and/or other
Obligations are permitted under the Indenture), (ii) Investments in Marketable
Securities, (iii) Investments by the Company or any Restricted Subsidiary of the
Company in, or the purchase of the securities of, a Person if, as a result of
such Investment, (a) such person becomes a Restricted Subsidiary of the Company
or (b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary of the Company, (iv) Investments in
accounts and notes receivable acquired in the ordinary course of business, (v)
Investments in connection with the sale of medical instruments pursuant to
Instrument Contracts or any leasing of medical instruments in the ordinary
course of business, (vi) any non-cash consideration received in connection with
an Asset Sale that complies with the covenant entitled "Asset Sales," (vi)
Investments in connection with Hedging Obligations permitted to be incurred
under the covenant
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entitled "Incurrence of Indebtedness and Issuance of Preferred Stock," (vii)
loans to employees not to exceed $1,000,000 at any time outstanding, and (viii)
Investments in an Accounts Receivable Subsidiary received in consideration of
sales of accounts receivable in accordance with the covenant entitled "Sales of
Accounts Receivable."
"PERMITTED JUNIOR SECURITIES" means (i) equity securities of Parent and (ii)
debt securities of the Company that are unsecured and subordinated at least to
the same extent as the Notes to Senior Debt of the Company and guarantees of any
such debt by any Guaranteeing Subsidiary that are unsecured and subordinated at
least to the same extent as the Subsidiary Guarantee of such Guaranteeing
Subsidiary to the Senior Debt of such Guaranteeing Subsidiary, as the case may
be, and has a final maturity date at least as late as the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Notes.
"PERMITTED LIENS" means (i) Liens on property of the Company and any
Guaranteeing Subsidiary securing (a) Senior Debt and/or (b) Hedging Obligations
permitted to be incurred under the Indenture; (ii) Liens in favor of the Company
or any of its Restricted Subsidiaries, (iii) Liens on property of a Person
existing at the time such Person is merged with or into or consolidated with the
Company or any Restricted Subsidiary of the Company; PROVIDED, that such Liens
were not incurred in connection with, or in contemplation of, such merger or
consolidation and do not extend to any assets of the Company or any Restricted
Subsidiary of the Company other than the assets acquired in such merger or
consolidation; (iv) Liens on property of a Person existing at the time such
Person becomes a Restricted Subsidiary of the Company; PROVIDED that such Liens
were not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary and do not extend to any assets of the Company
or any other Restricted Subsidiary of the Company; (v) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
Subsidiary of the Company; PROVIDED that such Liens were not incurred in
connection with, or in contemplation of, such acquisition and do not extend to
any assets of the Company or any of its Restricted Subsidiaries other than the
property so acquired; (vi) Liens to secure the performance of statutory
obligations, surety or appeal bonds or performance bonds, or landlords',
carriers', warehousemen's, mechanics', suppliers', materialmen's or other like
Liens, in any case incurred in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
process of law, if a reserve or other appropriate provision, if any, as is
required by GAAP shall have been made therefor; (vii) Liens existing on the date
of the Indenture; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; PROVIDED
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens to secure (A)
Indebtedness (including Capital Lease Obligations) permitted by clause (iii) of
the second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" covering only the assets acquired with such
Indebtedness or the assets which are the subject of the sale leaseback
transaction, as the case may be, and (B) Indebtedness of any Restricted
Subsidiary (other than a Guaranteeing Subsidiary) permitted to be incurred by
such Restricted Subsidiary pursuant to the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock;" (x) Liens incurred in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company with respect to obligations not constituting Indebtedness for borrowed
money that do not exceed $15.0 million in the aggregate at any one time
outstanding; (xi) Liens securing Indebtedness incurred to refinance Indebtedness
that has been secured by a Lien permitted under the Indenture; PROVIDED that (a)
any such Lien shall not extend to or cover any assets or property not securing
the Indebtedness so refinanced and (b) the refinancing Indebtedness secured by
such Lien shall have been permitted to be incurred under the covenant entitled
"Incurrence of Indebtedness and Issuance of Preferred Stock;" (xii) Liens in
favor of the lessee on instruments which are the subject of leases entered into
in the ordinary course of business; PROVIDED that any such Lien shall not extend
to or cover any assets or property of the Company and its Restricted
Subsidiaries that is not the subject of any such lease; (xiii) Liens in favor of
the contracting party in instruments which are the subject of Instrument
Contracts entered into in the ordinary
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course of business; PROVIDED that any such Lien shall not extend to or cover any
assets or property of the Company and its Restricted Subsidiaries that is not
the subject of any such Instrument Contract; and (xiv) Liens to secure
Attributable Debt that is permitted to be incurred pursuant to the covenant
entitled "Sale and Leaseback Transactions;" PROVIDED that any such Lien shall
not extend to or cover any assets of the Company or any Guaranteeing Subsidiary
other than the assets which are the subject of the sale leaseback transaction in
which the Attributable Debt is incurred.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
PROVIDED that: (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date at least as late as the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred by the Company or
by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PRINCIPAL" means Jeffry M. Picower.
"RELATED PARTY" means, with respect to the Principal, (i) any spouse or
immediate family member of the Principal or (ii) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding (directly or through one or more Subsidiaries) a
80% or more controlling interest of which consist of the Principal and/or such
other Persons referred to in the immediately preceding clauses (i).
"REPLACEMENT ASSETS" means (i) a business permitted by the covenant entitled
"Line of Business," (ii) a controlling equity interest in any Person engaged in
a line of business permitted by the covenant entitled "Line of Business," or
(iii) tangible assets, product distribution rights or intellectual property or
rights thereto used in a line of business permitted by the covenant entitled
"Line of Business."
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"RIVER DIVESTITURE" means the discontinuance of the operations of River
Medical, Inc. in June 1996.
"SENIOR DEBT" means (a) with respect to the Company, (i) all Obligations
permitted to be incurred pursuant to the Indenture under or in respect of the
New Credit Facility and (ii) any other Indebtedness permitted to be incurred by
the Company under the terms of the Indenture and any Hedging Obligation
permitted to be incurred under the terms of the Indenture, unless the instrument
under which the foregoing is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes and (b) with respect to
any Guaranteeing Subsidiary, (i) all Obligations permitted to be incurred
pursuant to the Indenture under or in respect of the New Credit Facility and
(ii) any other Indebtedness permitted to be incurred by such Guaranteeing
Subsidiary under the terms of the Indenture and any Hedging Obligation permitted
to be incurred under the terms of the Indenture, unless the instrument under
which the foregoing is incurred expressly provides that such Indebtedness is on
parity with or
130
<PAGE>
subordinated in right of payment to the Subsidiary Guarantee of such
Guaranteeing Subsidiary. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (w) any liability for federal, state,
local or other taxes; (x) any Indebtedness of the Company or any Guaranteeing
Subsidiary to the Company or any Subsidiary of the Company or any of their
respective Affiliates, (y) any trade payables or (z) any Indebtedness that is
incurred in violation of the Indenture.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of Voting Stock is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or one
or more Subsidiaries of such Person (or any combination thereof); PROVIDED,
HOWEVER, that the Accounts Receivable Subsidiary and its Subsidiaries shall not
be deemed Subsidiaries of the Company or any of its other Subsidiaries.
"TAX SHARING AGREEMENT" means the tax sharing agreement, dated as of
November 26, 1996, between the Company and Advanced Medical as in effect on the
date of the Indenture.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary: (i) has no
Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (iii) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity Interests or (b) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (iv) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the covenant entitled "Restricted Payments." If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant entitled "Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant from the date of such incurrence). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant entitled
"Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) no Default
or Event of Default would be in existence following such designation.
"VOTING STOCK" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any Person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
131
<PAGE>
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
principal amount of such Indebtedness into (ii) the total of the product
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
132
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
GENERAL
In connection with the Merger, the Company entered into a credit facility
(the "New Credit Facility") which is comprised of a Term Loan Facility and a
Revolving Credit Facility. The following summary of certain provisions of the
New Credit Facility is generalized, does not purport to be complete, and is
subject to and is qualified in its entirety by reference to the provisions of
the New Credit Facility, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part and to which exhibit
reference is hereby made. Capitalized terms that are used but not otherwise
defined herein shall have the meanings assigned to them in the New Credit
Facility and those definitions are incorporated herein by reference.
The New Credit Facility consists of a $200.0 million Term Loan Facility and
a $50.0 million 68-month Revolving Credit Facility. The Term Loan Facility is
comprised of $75.0 million of Tranche A Term Loans amortizing over 68 months,
$42.5 million of Tranche B Term Loans amortizing over 83 months, $42.5 million
of Tranche C Term Loans amortizing over 95 months and $40.0 million of Tranche D
Term Loans amortizing over 101 months.
The proceeds of the Term Loan Facility were used by the Company to fund
certain amounts payable in connection with the Merger. The Revolving Credit
Facility, in addition to being partially drawn upon to pay certain amounts in
connection with the Merger, is also available for general corporate purposes.
INTEREST RATE; FEES
Borrowings made as: (i) Revolving Credit Loans and Tranche A Term Loans bear
interest at a rate equal to the Eurodollar Rate (as adjusted) plus 2.5% or the
Base Rate plus 1.25% (in each case, less 0.25% if the leverage ratio on the test
date is less than 3.0:1.0 and less 0.50% if the leverage ratio on such test date
is less than 2.5:1.0); (ii) Tranche B Term Loans bear interest at a rate equal
to the Eurodollar Rate (as adjusted) plus 3.0% or the Base Rate plus 1.75%;
(iii) Tranche C Term Loans bear interest at a rate equal to the Eurodollar Rate
(as adjusted) plus 3.5% or the Base Rate plus 2.25%; and (iv) Tranche D Term
Loans bear interest at a rate equal to the Eurodollar Rate (as adjusted) plus
3.75% or the Base Rate plus 2.50%. The "Base Rate" equal to the higher of 0.50%
in excess of the Federal Reserve reported certificate of deposit rate and (ii)
the prime rate, as in effect from time to time, of Bankers Trust Company.
Overdue principal and interest will bear interest at a rate per annum equal to
the greater of (i) the rate which is 2.0% in excess of the rate otherwise
applicable to Base Rate Loans from time to time and (ii) the rate which is 2.0%
in excess of the rate then borne by such borrowings.
The commitment fee payable by the Company is calculated at a rate equal to
0.50% of 1.0% per annum of the Aggregate Unutilized Commitment (less 0.125% if
the leverage ratio on the test date is less than 2.5:1.0). Such a fee was paid
on the Merger Closing, and will be payable quarterly in arrears after the Merger
Closing and upon the termination of the New Credit Facility.
The letter of credit fee payable by the Company is calculated at a rate
equal to the applicable margin for Eurodollar Loans under the Revolving Credit
Facility plus an additional 0.25% per annum of the face amount of each letter of
credit.
AMORTIZATION; PREPAYMENTS
The final scheduled maturity of the Tranche A Term Loans is the date that is
approximately five years and nine months after the Merger Closing, and such
loans are subject to interim scheduled amortization (i) in equal quarterly
installments totalling $10.4 million in the second year after the Merger
Closing; (ii) in equal quarterly installments totalling $11.2 million in the
third year after the Merger Closing; (iii) in equal quarterly installments
totalling $12.4 million in the fourth year after the Merger Closing; (iv) in
equal quarterly installments totalling $20.4 million in the fifth year after the
Merger Closing; and (v) in equal quarterly installments totalling $20.6 million
in the final nine months prior to the final maturity of the Tranche A Term
Loans. The final scheduled maturity of the Tranche B Term Loans is the date that
is approximately seven years after the Merger Closing, and such loans are
subject to interim scheduled amortization (i) in equal quarterly installments
totalling $425,000 in each of the first five years after the
133
<PAGE>
Merger Closing; (ii) in equal quarterly installments totalling $7.6 million in
the sixth year after the Merger Closing; and (iii) in equal quarterly
installments totalling $32.8 million in the final year prior to final maturity
of the Tranche B Term Loans. The final scheduled maturity of the Tranche C Term
Loans is the date that is approximately eight years after the Merger Closing,
and such loans are subject to interim scheduled amortization (i) in equal
quarterly installments totalling $425,000 in each of the first seven years after
the Merger Closing and (ii) in equal quarterly installments totalling $39.5
million during the final year prior to final maturity of the Tranche C Term
Loans. The final scheduled maturity of the Tranche D Term Loans is the date that
is approximately eight years and six months after the Merger Closing, and such
loans will be subject to interim scheduled amortization (i) in equal quarterly
installments totalling $400,000 in each of the first eight years after the
Merger Closing; and (ii) in equal quarterly installments totalling $36.8 million
in the final six months prior to final maturity of the Tranche D Term Loans. The
commitments under the Revolving Credit Facility terminate automatically five
years and nine months after the Merger Closing.
The Company is required to make certain mandatory prepayments with (i) 100%
of the Net Cash Proceeds from sales or other dispositions of property not in the
ordinary course of business, equity issuances or capital contributions,
insurance or condemnation proceeds, pension plan refunds or the incurrence of
indebtedness, PROVIDED that the first $20.0 million of certain proceeds is not
required to reduce indebtedness under the New Credit Facility, and (ii) 75% of
the Excess Cash Flow for each fiscal year, PROVIDED that such percentage shall
be reduced to 50% when the leverage ratio is less than 3.0:1.0. Such mandatory
prepayments will be allocated among the tranches of the Term Loan Facility on a
pro rata basis. Optional prepayments are permitted without premium or penalty.
GUARANTEES; SECURITY
All obligations of the Company under the New Credit Facility are guaranteed
by Advanced Medical and each existing and subsequently formed or acquired
domestic subsidiary of Advanced Medical (other than the Company, Fidata and
River).
The New Credit Facility and the related guarantees (a) are secured by (i) a
perfected first priority pledge of the security interest in all of the common
stock owned by Advanced Medical in each existing and subsequently formed or
acquired direct or indirect domestic subsidiary of Advanced Medical (other than
Fidata and River but including the Company) and (ii) all assets of Advanced
Medical and each of its direct and indirect domestic subsidiaries (other than
Fidata and River but including the Company) and (b) are secured by a perfected
first priority pledge of and security interest in 65% of the common stock owned
by Advanced Medical in each existing and subsequently formed or acquired direct
or indirect first-tier foreign subsidiary of Advanced Medical (other than IMED
Holding Co. Ltd. British Virgin Islands).
CERTAIN COVENANTS
The New Credit Facility contains numerous operating and financial covenants,
including, without limitation, requirements to maintain ratios of earnings to
interest and fixed charges and maximum levels of indebtedness in relation to
earnings. In addition, the New Credit Facility includes customary covenants
relating to the delivery of financial statements, reports, notices, and other
information, access to information and properties, maintenance of insurance,
payment of taxes, maintenance of assets, nature of business, corporate existence
and rights, compliance with applicable laws, transactions with affiliates, use
of proceeds, limitations on indebtedness, limitations on liens, limitations on
certain mergers and sales of assets, limitations on investments, limitations on
dividends and other distributions and limitations on debt payments, including
prepayment or redemption of the Notes.
EVENTS OF DEFAULT
The New Credit Facility contains certain events of default after expiration
of applicable grace periods, including failure to make payments under the New
Credit Facility, breach of representations and warranties, breach of covenants,
default under other agreements or conditions relating to indebtedness, certain
events of insolvency or bankruptcy with respect to the Company or certain
subsidiaries, certain ERISA violations, invalidity or disaffirmance of the
guarantee or any pledge agreement, certain judgments and certain events relating
to changes in control of the Company and Advanced Medical.
134
<PAGE>
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company and
the Guaranteeing Subsidiaries have agreed that for a period of 180 days after
the Expiration Date, they will make this Prospectus, as it may be amended or
supplemented from time to time, available to any Participating Broker-Dealer for
use in connection with any such resale. In addition, until , 1997, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
Participating Broker-Dealers. New Notes received by Participating Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such Participating Broker-Dealer and/or the purchasers of any such New Notes.
Any Participating Broker-Dealer that resells New Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of the New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company and the
Guaranteeing Subsidiaries promptly will send additional copies of this
Prospectus, as it may be amended or supplemented from time to time, to any
Participating Broker-Dealer upon request. The Company and the Guaranteeing
Subsidiaries have agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for all of the holders of Old Notes)
other than commissions or concessions of any brokers or dealers and transfer
taxes and will indemnify the holders of the Old Notes against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes will be
passed upon for the Company by Gordon Altman Butowsky Weitzen Shalov & Wein, New
York, New York.
135
<PAGE>
EXPERTS
The financial statements of IMED Corporation as of December 31, 1994 and
1995 and for each of the three years in the period ended December 31, 1995, the
financial statements of IVAC Holdings, Inc. as of December 31, 1995 and for the
year then ended, and the financial statements of IVAC Corporation as of December
31, 1994 and for the year then ended included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of IVAC Corporation and subsidiaries and certain
IVAC related entities as of December 31, 1993 and for the year then ended,
appearing in this Prospectus and the Registration Statement, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given the authority of such firm as experts in
auditing and accounting.
136
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
IMED (unaudited)
Condensed Consolidated Balance Sheet at December 31, 1995 and September 30, 1996........................... F-2
Condensed Consolidated Statement of Operations for the nine months ended September 30, 1995 and 1996....... F-3
Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1995 and 1996....... F-4
Condensed Consolidated Statement of Stockholder's Equity for the nine months ended September 30, 1996...... F-5
Notes to the Condensed Consolidated Financial Statements................................................... F-6
IMED (audited)
Report of Independent Accountants.......................................................................... F-10
Consolidated Balance Sheet at December 31, 1994 and 1995................................................... F-11
Consolidated Statement of Operations for the years ended December 31, 1993, 1994 and 1995.................. F-12
Consolidated Statement of Cash Flows for the years ended December 31, 1993, 1994 and 1995.................. F-13
Consolidated Statement of Stockholder's Equity for the years ended December 31, 1993, 1994 and 1995........ F-14
Notes to the Consolidated Financial Statements............................................................. F-15
IVAC HOLDINGS, INC. (unaudited)
Condensed Consolidated Balance Sheet at December 31, 1995 and September 30, 1996........................... F-29
Condensed Consolidated Statement of Operations for the nine months ended September 30, 1995 and 1996....... F-30
Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1995 and 1996....... F-31
Notes to the Condensed Consolidated Financial Statements................................................... F-32
IVAC HOLDINGS, INC. (audited)
Report of Independent Accountants.......................................................................... F-36
Consolidated Balance Sheet at December 31, 1995............................................................ F-37
Consolidated Statement of Operations for the Year Ended December 31, 1995.................................. F-38
Consolidated Statement of Cash Flows for the Year Ended December 31, 1995.................................. F-39
Consolidated Statement of Shareholders' Equity (Deficit) for the Year Ended December 31, 1995.............. F-40
Notes to the Consolidated Financial Statements............................................................. F-41
IVAC Corporation (Predecessor Company) (audited)
Report of Independent Accountants.......................................................................... F-56
Report of Independent Auditors............................................................................. F-57
Consolidated Balance Sheet at December 31, 1993 and 1994................................................... F-58
Consolidated Statements of Operations for the years ended December 31, 1993 and 1994....................... F-59
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and 1994....................... F-60
Consolidated Statements of Shareholder's Equity for the years ended December 31, 1993 and 1994............. F-61
Notes to the Consolidated Financial Statements............................................................. F-62
</TABLE>
F-1
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 436 $ 851
Receivables, net.................................................................. 27,014 24,714
Inventories....................................................................... 15,829 20,339
Prepaid expenses and other current assets......................................... 3,696 3,246
------------ -------------
Total current assets............................................................ 46,975 49,150
Net investment in sales-type and direct financing leases............................ 15,179 13,559
Property, plant and equipment, net.................................................. 12,652 14,212
Other non-current assets............................................................ 5,485 5,072
Intangible assets, net.............................................................. 42,306 48,344
------------ -------------
$ 122,597 $ 130,337
------------ -------------
------------ -------------
LIABILITIES, MANDATORILY REDEEMABLE EQUITY SECURITIES
AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt................................................. $ 140 $ 149
Accounts payable.................................................................. 7,871 8,255
Accrued expenses and other current liabilities.................................... 13,211 13,043
------------ -------------
Total current liabilities....................................................... 21,222 21,447
------------ -------------
Amounts due related parties......................................................... 28,004 --
Long-term debt...................................................................... 11,213 19,865
Other non-current liabilities....................................................... 6,050 1,532
------------ -------------
45,267 21,397
------------ -------------
Contingent liabilities (Note 5)
Mandatorily redeemable equity securities............................................ 23,631 --
------------ -------------
Non-redeemable preferred stock, common stock and other stockholder's equity:
Preferred stock, authorized 3,700 shares at $.01 par value; issued and outstanding
none at December 31, 1995 and September 30, 1996 -- --
Common stock and capital in excess of par, authorized 3,000 common shares at $.01
par value; issued and outstanding 900 shares at December 31, 1995 and September
30, 1996........................................................................ 24,398 77,058
Retained earnings................................................................. 8,049 10,226
Other equity...................................................................... 30 209
------------ -------------
Total non-redeemable preferred stock, common stock and other stockholder's
equity........................................................................ 32,477 87,493
------------ -------------
$ 122,597 $ 130,337
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Sales....................................................................................... $ 83,012 $ 81,770
Cost of sales............................................................................... 46,633 44,757
--------- ---------
Gross margin.............................................................................. 36,379 37,013
--------- ---------
Selling and marketing expenses.............................................................. 12,965 13,167
General and administrative expenses......................................................... 6,502 7,050
Research and development expenses........................................................... 5,603 5,773
--------- ---------
Total operating expenses.................................................................. 25,070 25,990
--------- ---------
Income from operations.................................................................... 11,309 11,023
--------- ---------
Other income (expense):
Interest income........................................................................... 1,766 1,921
Interest expense.......................................................................... (1,647) (1,119)
Other, net................................................................................ (307) (49)
--------- ---------
(188) 753
--------- ---------
Income before income taxes.................................................................. 11,121 11,776
Provision for income taxes.................................................................. 5,076 5,573
--------- ---------
Net income.................................................................................. 6,045 6,203
Dividends on mandatorily redeemable preferred stock......................................... 1,170 589
--------- ---------
Net income applicable to common stock....................................................... $ 4,875 $ 5,614
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net cash provided by operating activities................................................... $ 20,284 $ 15,575
--------- ---------
Cash flows from investing activities:
Capital expenditures...................................................................... (4,629) (4,013)
Payment for product distribution rights................................................... (3,391) (1,503)
Proceeds from disposal of property........................................................ 29 101
Purchase of European distribution rights.................................................. (11,053)
--------- ---------
Net cash used in investing activities....................................................... (7,991) (16,468)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities....................................... (6,351) 8,801
Principal payments on long-term debt...................................................... (530) (140)
Redemption of preferred stock............................................................. -- (3,350)
Dividends................................................................................. (6,032) (4,031)
--------- ---------
Net cash provided by (used in) financing activities......................................... (12,913) 1,280
--------- ---------
Effect of exchange rate changes on cash..................................................... (71) 28
--------- ---------
Net increase (decrease) in cash and cash equivalents........................................ (691) 415
Cash and cash equivalents at beginning of period............................................ 1,124 436
--------- ---------
Cash and cash equivalents at end of period.................................................. $ 433 $ 851
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-4
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
AND CAPITAL
IN EXCESS OF PAR
VALUE
--------------------
<S> <C> <C> <C> <C> <C>
RETAINED OTHER
SHARES AMOUNT EARNINGS EQUITY TOTAL
--------- --------- --------- ----------- ---------
Balance at December 31, 1995................................... 900 $ 24,398 $ 8,049 $ 30 $ 32,477
Dividends on mandatorily redeemable preferred stock............ -- -- (589) -- (589)
Cancellation of stock warrants................................. -- 11,500 -- -- 11,500
Non-cash capital contribution.................................. -- 41,160 -- -- 41,160
Dividends to Advanced Medical.................................. -- -- (3,437) -- (3,437)
Other equity transactions...................................... -- -- -- 179 179
Net income for the period...................................... -- -- 6,203 -- 6,203
--------- --------- --------- ----- ---------
Balance at September 30, 1996.................................. 900 $ 77,058 $ 10,226 $ 209 $ 87,493
--------- --------- --------- ----- ---------
--------- --------- --------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-5
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--BUSINESS AND STATEMENT OF ACCOUNTING POLICY
BUSINESS:
IMED Corporation ("IMED" or the Company"), a subsidiary of Advanced Medical,
Inc. ("Advanced Medical"), is a leading developer and manufacturer of infusion
products and related technologies for the health care industry.
STATEMENT OF ACCOUNTING POLICY:
The accompanying financial statements have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information not misleading.
In the opinion of the Company, the accompanying financial statements contain
all adjustments, consisting of normal recurring adjustments, necessary for a
fair statement of the Company's financial position as of September 30, 1996, and
the results of its operations and its cash flows for the nine months ended
September 30, 1995 and 1996.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
NOTE 2--INVENTORIES
Inventories comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Raw materials................................................... $ 6,946 $ 6,922
Work-in-process................................................. 1,686 4,112
Finished goods.................................................. 7,197 9,305
------------ -------------
$ 15,829 $ 20,339
------------ -------------
------------ -------------
</TABLE>
NOTE 3--INTANGIBLE ASSETS
Pursuant to the exclusive 15-year distribution agreement with Debiotech SA
("Debiotech") ("the Agreement"), IMED paid Debiotech $1,500 during the nine
months ended September 30, 1996 upon the attainment of certain milestones
related to the development of the product. The additional payment has been
classified as an intangible asset with previous payments made under the
Agreement, and is being amortized on a straight-line basis over the term of the
Agreement.
F-6
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--PURCHASE OF IMED COMMON STOCK WARRANT
On June 28, 1996, Advanced Medical purchased General Electric Capital
Corporation's ("GECC") warrant to acquire common shares equal to 10% of IMED's
common stock, on a fully diluted basis, for $12,500. The IMED common stock
warrant held by GECC had been valued at $11,500 and included in mandatorily
redeemable equity securities in the condensed consolidated balance sheet at
December 31, 1995. The warrant acquired by Advanced Medical was then cancelled.
NOTE 5--LITIGATION AND CONTINGENCIES
The Company is a defendant in various actions, claims and legal proceedings
arising from normal business operations. Management believes they have
meritorious defenses and intends to vigorously defend against all allegations
and claims. As the ultimate outcome of these matters is uncertain, no provisions
have been recorded in the accompanying financial statements for such matters.
However, in management's opinion, based upon discussion with legal counsel,
liabilities arising from these matters, if any, will not have a material adverse
affect on the Company's consolidated financial position, results of operations
or cash flows.
NOTE 6--SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Income taxes paid during the nine months ended September 30, 1995 and 1996
totaled $1,199 and $3,300, respectively. Interest paid during the nine months
ended September 30, 1995 and 1996 totaled $1,449 and $839, respectively.
Depreciation and amortization expense for the nine months ended September 30,
1995 and 1996 totaled $5,078 and $5,688, respectively, which amounts included
debt issue cost amortization of $189 and $180, respectively.
NOTE 7--PURCHASE OF EUROPEAN DISTRIBUTION RIGHTS
On June 27, 1996, IMED entered into an agreement, which closed in August
1996, with its European marketing and distribution partner, Pharmacia & Upjohn,
Inc. ("Pharmacia"), to reacquire for approximately $11 million the European
Distribution Rights to its IMED line of intravenous infusion pumps and related
disposable administration sets and retain related assets. The purchase price was
financed using IMED's existing credit facility.
NOTE 8--NON-CASH CONTRIBUTIONS
Effective June 30, 1996, Advanced Medical made non-cash contributions
totaling $41,160 to the Company. Included in this capital contribution was
$2,885, representing Advanced Medical's net carrying value of certain patents
which up to June 30, 1996 had been licensed to the Company for $1.1 million per
year. Amounts accrued to Advanced Medical under this license as well as other
intercompany charges due to Advanced Medical totaling $9,399 were contributed to
the Company. Additionally, Advanced Medical contributed $8,776 representing the
outstanding par value and accrued dividends on all outstanding shares of the
Company's 12% preferred stock. The preferred shares were then cancelled.
Payments to Advanced Medical relating to each of the contributed items were
restricted pursuant to the GECC revolving credit facility agreement.
Pursuant to IMED's tax sharing agreement with Advanced Medical, for Federal
and California income tax purposes, IMED is required to calculate its current
income tax liability on a stand-alone basis as if it were not
F-7
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 8--NON-CASH CONTRIBUTIONS (CONTINUED)
included in the Advanced Medical consolidated income tax return. The resulting
tax liability is payable to Advanced Medical. Due to restrictions on payments
from IMED to Advanced Medical contained in the GECC revolving credit facility
agreement, income tax payments to Advanced Medical are limited to actual tax
liabilities of Advanced Medical. Due to losses incurred at the Advanced Medical
level which have served to reduce the consolidated taxable income, the income
tax liabilities recorded by IMED on a stand-alone basis have been significantly
greater than the amounts actually paid to Advanced Medical. As of June 30, 1996
Advanced Medical agreed to contribute to IMED's stockholder's equity, income tax
payments due from IMED but which could not be paid pursuant to the GECC
revolving credit facility agreement. As a result of this agreement by Advanced
Medical, approximately $20.1 million was credited to IMED's capital in excess of
par and the corresponding income tax liabilities were eliminated from the IMED
consolidated balance sheet. Such liabilities amounted to approximately $18.9
million at December 31, 1995 and were included in non-current liabilities as
amounts due to related parties at December 31, 1995.
NOTE 9--MERGER
On August 23, 1996, IMED entered into a tentative agreement for the
acquisition of IVAC Holdings, Inc. ("Holdings") and IVAC Medical Systems, Inc.,
and a plan of merger of Holdings and IMED in a cash transaction valued at
approximately $400,000. The proposed transaction received regulatory approval in
October 1996 and is subject to certain other closing conditions including the
completion of the financing necessary to consumate the merger (the "Merger").
NOTE 10--GUARANTOR SUBSIDIARY
Following the consummation of the Merger, the operations of IMED and IVAC
Medical Systems, Inc. will be transferred to Holdings and Holdings will become
the successor obligor under the Senior Subordinated Notes due 2006 of IMED (the
"IMED Notes") that will be issued in connection with the Merger. In addition,
certain subsidiaries of Holdings will guarantee the IMED Notes. Accordingly,
condensed combining financial information for IMED and its guarantor, IMED
International Trading Corp., and non-guarantor subsidiaries at September 30,
1996 and for the nine months ended September 30, 1996 is as follows:
<TABLE>
<CAPTION>
COMBINED
CONDENSED BALANCE SHEET IMED GUARANTOR NON-GUARANTOR
SEPTEMBER 30, 1996 CORPORATION SUBSIDIARY SUBSIDIARIES ELIMINATION CONSOLIDATED
- -------------------------------------------- ----------- ----------- -------------- ----------- ------------
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets.............................. $ 41,899 $ 1 $ 7,250 $ -- $ 49,150
Non-current assets.......................... 70,722 8,183 4,721 (2,439) 81,187
----------- ----------- -------------- ----------- ------------
$ 112,621 $ 8,184 $ 11,971 $ (2,439) $ 130,337
----------- ----------- -------------- ----------- ------------
Current liabilities......................... $ 19,792 $ -- $ 1,655 $ -- $ 21,447
Amounts due related parties................. (16,061) 8,223 7,838 -- --
Long-term debt and other liabilities........ 21,397 -- -- -- 21,397
----------- ----------- -------------- ----------- ------------
25,128 8,223 9,493 -- 42,844
----------- ----------- -------------- ----------- ------------
Common stock and other stockholder's
equity..................................... 87,493 (39) 2,478 (2,439) 87,493
----------- ----------- -------------- ----------- ------------
$ 112,621 $ 8,184 $ 11,971 $ (2,439) $ 130,337
----------- ----------- -------------- ----------- ------------
----------- ----------- -------------- ----------- ------------
</TABLE>
F-8
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10--GUARANTOR SUBSIDIARY (CONTINUED)
<TABLE>
<CAPTION>
COMBINED
CONDENSED STATEMENT OF OPERATIONS IMED GUARANTOR NON-GUARANTOR
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 CORPORATION SUBSIDIARY SUBSIDIARIES ELIMINATION CONSOLIDATED
- -------------------------------------------- ----------- ----------- -------------- ----------- ------------
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales....................................... $ 79,155 $ 419 $ 9,147 $ (6,951) $ 81,770
Cost of sales............................... 44,857 458 6,393 (6,951) 44,757
----------- ----------- -------------- ----------- ------------
34,298 (39) 2,754 -- 37,013
Operating expenses.......................... 23,998 -- 1,992 -- 25,990
----------- ----------- -------------- ----------- ------------
Income (loss) from operations............... 10,300 (39) 762 -- 11,023
Other income (expense)...................... 757 -- (4) -- 753
Equity interest in subsidiary income........ 370 -- -- (370) --
Provision for income taxes.................. 5,224 -- 349 -- 5,573
----------- ----------- -------------- ----------- ------------
Net income (loss)......................... $ 6,203 $ (39) $ 409 $ (370) $ 6,203
----------- ----------- -------------- ----------- ------------
----------- ----------- -------------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- --------------------------------------------
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activi-
ties....................................... $ 13,527 $ 1 $ 2,047 $ -- $ 15,575
----------- ----------- -------------- ----------- ------------
Cash flows from investing activities:
Capital expenditures...................... (2,321) -- (1,692) -- (4,013)
Payment for product distribution rights... (1,503) -- -- -- (1,503)
Proceeds from disposal of property........ 101 -- -- -- 101
Purchase of European distribution
rights.................................. (219) (8,251) (2,583) -- (11,053)
----------- ----------- -------------- ----------- ------------
Net cash used in investing activities....... (3,942) (8,251) (4,275) -- (16,468)
----------- ----------- -------------- ----------- ------------
Cash flows from financing activities:
Net borrowings under credit facility...... 8,801 -- -- -- 8,801
Principal payments on long-term debt...... (140) -- -- -- (140)
Redemption of preferred stock............. (3,350) -- -- -- (3,350)
Dividends................................. (4,031) -- -- -- (4,031)
(Decrease) increase in due to IMED........ (10,834) 8,251 2,583 -- --
----------- ----------- -------------- ----------- ------------
Net cash (used in) provided by financing
activities................................. (9,554) 8,251 2,583 -- 1,280
----------- ----------- -------------- ----------- ------------
Effect of exchange rate changes in cash..... -- -- 28 -- 28
----------- ----------- -------------- ----------- ------------
Net increase in cash and cash equiva-
lents...................................... 31 1 383 -- 415
Cash and cash equivalents at beginning of
period..................................... 209 -- 227 -- 436
----------- ----------- -------------- ----------- ------------
Cash and cash equivalents at end of
period..................................... $ 240 $ 1 $ 610 $ -- $ 851
----------- ----------- -------------- ----------- ------------
----------- ----------- -------------- ----------- ------------
</TABLE>
F-9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of IMED Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of stockholder's equity
present fairly, in all material respects, the financial position of IMED
Corporation (a wholly owned subsidiary of Advanced Medical, Inc.) and its
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, in a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 5 to the financial statements, the Company changed its
method of accounting for income taxes in 1993 to comply with the provisions of
Statement of Financial Accounting Standards No. 109.
PRICE WATERHOUSE LLP
San Diego, California
March 19, 1996
F-10
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1994 1995
---------- ----------
ASSETS
Current assets:
Cash.................................................................................... $ 1,124 $ 436
Receivables............................................................................. 24,827 27,014
Inventories............................................................................. 20,347 15,829
Prepaid expenses and other current assets............................................... 3,071 3,696
---------- ----------
Total current assets................................................................ 49,369 46,975
Net investment in sales-type and direct financing leases.................................. 14,807 15,179
Property, plant and equipment, net........................................................ 11,587 12,652
Other non-current assets.................................................................. 5,828 5,485
Intangible assets, net.................................................................... 41,392 42,306
---------- ----------
$ 122,983 $ 122,597
---------- ----------
---------- ----------
LIABILITIES, MANDATORILY REDEEMABLE EQUITY
SECURITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt....................................................... $ 530 $ 140
Accounts payable........................................................................ 8,408 7,871
Accrued expenses and other current liabilities.......................................... 10,242 13,211
---------- ----------
Total current liabilities........................................................... 19,180 21,222
---------- ----------
Amounts due related parties............................................................... 21,794 28,004
Long-term debt............................................................................ 19,117 11,213
Other non-current liabilities............................................................. 6,826 6,050
---------- ----------
Total non-current liabilities....................................................... 47,737 45,267
---------- ----------
Contingent liabilities and commitments (Notes 6, 9 and 11)
Mandatorily redeemable equity securities.................................................. 23,137 23,631
---------- ----------
Non-redeemable preferred stock, common stock and other stockholder's equity:
Preferred stock, authorized 3,700 shares at $0.01 par value; issued and
outstanding--none..................................................................... -- --
Common stock and capital in excess of par value, authorized 3,000 common shares at $.01
par value; issued and outstanding--900 shares......................................... 24,398 24,398
Retained earnings....................................................................... 7,841 8,049
Equity adjustment from foreign currency translation..................................... 690 30
---------- ----------
Total non-redeemable preferred stock, common stock and other stockholder's equity... 32,929 32,477
---------- ----------
$ 122,983 $ 122,597
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales........................................................................ $ 119,858 $ 112,122 $ 112,551
Cost of sales................................................................ 72,197 65,641 63,270
---------- ---------- ----------
Gross margin............................................................... 47,661 46,481 49,281
---------- ---------- ----------
Selling and marketing expense................................................ 18,882 16,850 16,567
General and administrative expense........................................... 10,409 8,726 8,893
Research and development expense............................................. 8,630 6,345 7,386
Restructuring charges........................................................ 4,503 -- --
---------- ---------- ----------
Total operating expense.................................................... 42,424 31,921 32,846
---------- ---------- ----------
Income from operations..................................................... 5,237 14,560 16,435
---------- ---------- ----------
Other income (expense):
Interest expense......................................................... (4,159) (2,805) (2,052)
Interest income.......................................................... 2,660 2,461 2,361
Other, net............................................................... (4,115) (261) (379)
---------- ---------- ----------
Total other expense........................................................ (5,614) (605) (70)
---------- ---------- ----------
Income (loss) before income taxes and cumulative effect of a change in
accounting principle....................................................... (377) 13,955 16,365
Provision for income taxes................................................... 1,863 8,310 8,099
---------- ---------- ----------
Net income (loss) before cumulative effect of a change in accounting
principle.................................................................. (2,240) 5,645 8,266
Cumulative effect of a change in accounting principle........................ 768 -- --
---------- ---------- ----------
Net income (loss)............................................................ (1,472) 5,645 8,266
Dividends on mandatorily redeemable preferred stock and adjustment of common
stock warrant to redemption amount......................................... 2,182 (1,560) (8,058)
---------- ---------- ----------
Net income applicable to common stock........................................ $ 710 $ 4,085 $ 208
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................. $ (1,472) $ 5,645 $ 8,266
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 8,667 6,969 6,790
Loss on disposal/write-off of property, plant and equipment..................... 565 525 220
Loss on write-off of License Agreement.......................................... 1,649 -- --
Cumulative effect of change in accounting principle............................. (768) -- --
Restructuring charges........................................................... 4,503 -- --
Loss on write-off of patent..................................................... 150
(Increase) decrease in assets, net of effects from divestiture:
Receivables..................................................................... 4,965 1,210 (2,101)
Inventories..................................................................... (1,233) (976) 4,518
Prepaid expenses and other current assets....................................... (294) 1,326 (625)
Net investment in sales-type and direct financing leases........................ (107) 458 (458)
Other non-current assets........................................................ (1,593) 326 105
Increase (decrease) in liabilities, net of effects from divestiture:
Accounts payable................................................................ (2,939) 2,368 (537)
Litigation notes payable........................................................ 1,275 (125) --
Accrued expenses and other current liabilities.................................. (389) (9,038) 2,262
Amounts due related parties..................................................... 1,017 14,680 6,210
Other non-current liabilities................................................... (405) (3,185) (776)
Litigation settlement............................................................. (1,000) (250) --
--------- --------- ---------
Net cash provided by operating activities......................................... 12,441 19,933 24,024
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (1,616) (4,549) (4,803)
Proceeds from disposal of property, plant and equipment......................... 104 253 17
Proceeds from sale of Irish operations.......................................... -- 3,766 --
Payments for product distribution rights........................................ -- -- (3,402)
--------- --------- ---------
Net cash used in investing activities............................................. (1,512) (530) (8,188)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under credit facilities.......................................... (2,823) (5,296) (7,764)
Principal payments on long-term debt............................................ (8,037) (34,690) (530)
Proceeds from issuance of long-term credit facilities........................... -- 23,793 --
Dividends on preferred stock.................................................... -- (2,273) (6,684)
Redemption of preferred stock................................................... -- -- (880)
Offering costs.................................................................. -- (1,205) (10)
Other........................................................................... -- 99 --
--------- --------- ---------
Net cash used in financing activities............................................. (10,860) (19,572) (15,868)
--------- --------- ---------
Effect of exchange rate changes on cash........................................... 197 312 (656)
--------- --------- ---------
Net (decrease) increase in cash................................................... 266 143 (688)
Cash at beginning of period....................................................... 715 981 1,124
--------- --------- ---------
Cash at end of period............................................................. $ 981 $ 1,124 $ 436
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY EQUITY
COMMON STOCK ADJUSTMENT ADJUSTMENT
AND CAPITAL FOR FROM
IN EXCESS OF PAR VALUE MINIMUM FOREIGN TOTAL
-------------------------- RETAINED PENSION CURRENCY STOCKHOLDER'S
SHARES AMOUNT EARNINGS LIABILITY TRANSLATION EQUITY
------------- ----------- --------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993.................... 900 $ 24,398 $ 2,947 $ (482) $ 425 $ 27,288
Net loss for the year......................... -- -- (1,472) -- -- (1,472)
Accrual of dividends on mandatorily redeemable
preferred stock............................. -- -- (1,560) -- -- (1,560)
Adjustment of common stock warrant to
redemption amount........................... -- -- 3,742 -- -- 3,742
Equity adjustment for minimum pension
liability................................... -- -- -- 482 -- 482
Equity adjustment for foreign currency
translation................................. -- -- -- -- 34 34
--- ----------- --------- ----- ----- ------------
Balance at December 31, 1993.................. 900 24,398 3,657 -- 459 28,514
--- ----------- --------- ----- ----- ------------
Net income for the year....................... -- -- 5,645 -- -- 5,645
Accrual of dividends on mandatorily redeemable
preferred stock............................. -- -- (1,560) -- -- (1,560)
Other......................................... -- -- 99 -- -- 99
Equity adjustment from foreign currency
translation................................. -- -- -- -- 231 231
--- ----------- --------- ----- ----- ------------
Balance at December 31, 1994.................. 900 24,398 7,841 -- 690 32,929
--- ----------- --------- ----- ----- ------------
Net income for the year....................... -- -- 8,266 -- -- 8,266
Accrual of dividends on mandatorily redeemable
preferred stock............................. -- -- (1,558) -- -- (1,558)
Adjustment of common stock warrant to
redemption amount........................... -- -- (6,500) -- -- (6,500)
Equity adjustment from foreign currency
translation................................. -- -- -- -- (660) (660)
--- ----------- --------- ----- ----- ------------
Balance at December 31, 1995.................. 900 $ 24,398 $ 8,049 -- $ 30 $ 32,477
--- ----------- --------- ----- ----- ------------
--- ----------- --------- ----- ----- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 1-- BUSINESS AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND ORGANIZATION:
IMED Corporation (the "Company"), a Delaware corporation, is a leading
developer and manufacturer of infusion products and related technologies for the
health care industry. On April 2, 1990 the Company, a newly formed entity,
acquired the IMED Division of Fisher Scientific Company ("Fisher"). The Company
is a wholly owned subsidiary of Advanced Medical, Inc. ("AM").
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION:
The financial statements include the accounts of the Company and its greater
than 50 percent-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company's foreign
subsidiaries are consolidated as of and for the periods ended November 30, 1993,
1994 and 1995 in the December 31, 1993, 1994 and 1995 consolidated financial
statements, respectively.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION:
Revenues from sales of fluid delivery instruments and related disposable
products, and from instrument capital lease contracts, are recognized at the
time such products are shipped. Revenues from instrument operating lease
contracts are recognized over the terms of the lease agreements, ranging from 1
to 6 years.
LICENSE FEE REVENUE RECOGNITION:
During 1991, IMED entered into a marketing, distribution and development
agreement with Pharmacia AB ("Pharmacia"). Pursuant to the agreement, a product
distribution fee of $6,530 was classified as deferred revenue (a non-current
liability) and is recognized on a straight-line basis over the 15-year term of
the agreement.
CONCENTRATIONS OF CREDIT RISK:
The Company provides a variety of financing arrangements for its customers.
The majority of the Company's accounts receivable are from hospitals throughout
the United States with credit terms of generally 30 days. The Company maintains
adequate reserves for potential credit losses and such losses, which have been
minimal, have been within management's estimates.
F-15
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 1-- BUSINESS AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVENTORIES:
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost. Depreciation and
amortization is provided using the straight-line method based upon the following
estimated useful lives of the assets or lease terms, if shorter, for leasehold
improvements and instrument operating leases:
<TABLE>
<S> <C>
3 to 10
Leasehold improvements........................................ years
3 to 10
Machinery and equipment....................................... years
Furniture and fixtures........................................ 4 to 8 years
Instruments on operating lease contracts...................... 1 to 6 years
</TABLE>
INTANGIBLE ASSETS:
The excess of purchase price over the estimated fair values of assets
acquired and liabilities assumed has been recorded as goodwill and is amortized
using the straight-line method over 35 years. Patents are amortized using the
straight-line method over estimated useful lives of 7 years. The product
distribution license fee (see Note 3) and related expenses are amortized using
the straight-line method over the term of the agreement, 15 years. Management
periodically reviews intangible assets for impairment.
DEBT ISSUE COSTS:
Debt issue costs aggregating $1,115 and $877 at December 31, 1994 and 1995,
respectively, are amortized using the straight-line method over the respective
terms of the debt agreements and are included in other non-current assets.
FOREIGN CURRENCY TRANSLATION:
The accounts of foreign subsidiaries which use local currencies as
functional currencies are translated into U.S. dollars using year-end exchange
rates for assets and liabilities, historical exchange rates for equity and
weighted average exchange rates during the period for revenues and expenses. The
gains or losses resulting from translations are excluded from results of
operations and accumulated as a separate component of stockholder's equity.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are expensed as incurred.
INCOME TAXES:
Pursuant to an intercorporate tax sharing agreement, income taxes are
provided on a stand-alone basis. The Company is included in AM's consolidated
federal income tax return. The Company files income tax returns in multiple
states on either a stand-alone or combined basis. Foreign subsidiaries file
F-16
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 1-- BUSINESS AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
income tax returns in their respective jurisdictions based on their separate
taxable income. The Company provides income taxes on undistributed earnings of
its foreign subsidiaries.
Deferred tax liabilities and assets are recognized for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse (see Note 5).
STOCK-BASED COMPENSATION:
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of
accounting for an employee stock option or similar equity plans. It also allows
an entity to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). The
Company has elected to continue to measure its stock-based compensation in
accordance with APB 25. Certain pro forma disclosures required by SFAS 123 will
be made in 1996, in accordance with SFAS 123. The Company intends to elect the
pro forma disclosures allowed by SFAS 123, accordingly, the adoption of SFAS 123
will not have a significant effect on its financial position or results of
operations.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS 121") which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by such
assets are less than the assets' recorded amount. The Company will adopt SFAS
121 in 1996, and, based upon current circumstances, does not believe the
adoption will have a material effect on the Company's financial position or
results of operations.
F-17
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 2--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1994 1995
---------- ----------
RECEIVABLES:
Trade receivables....................................................................... $ 17,822 $ 20,473
Allowance for doubtful accounts......................................................... (855) (875)
---------- ----------
16,967 19,598
Current portion of net investment in sales-type and direct financing leases (Note 9) 6,948 7,034
Other................................................................................... 912 382
---------- ----------
$ 24,827 $ 27,014
---------- ----------
---------- ----------
INVENTORIES:
Raw materials........................................................................... $ 5,311 $ 6,946
Work-in-process......................................................................... 3,753 1,686
Finished goods.......................................................................... 11,283 7,197
---------- ----------
$ 20,347 $ 15,829
---------- ----------
---------- ----------
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Deferred tax asset...................................................................... $ 2,445 $ 2,637
Other................................................................................... 626 1,059
---------- ----------
$ 3,071 $ 3,696
---------- ----------
---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements.................................................................. $ 2,776 $ 2,681
Machinery and equipment................................................................. 8,494 9,835
Furniture and fixtures.................................................................. 2,915 3,371
Instruments on operating lease contracts................................................ 10,729 12,762
Construction-in-process................................................................. 1,717 1,991
---------- ----------
26,631 30,640
Accumulated depreciation and amortization............................................... (15,044) (17,988)
---------- ----------
$ 11,587 $ 12,652
---------- ----------
---------- ----------
</TABLE>
F-18
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 2--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS (CONTINUED)
Depreciation expense was $5,644, $3,886 and $4,204 during 1993, 1994 and
1995, respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1994 1995
---------- ----------
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Income taxes payable................................................ $ 1,400 $ 2,555
Compensation........................................................ 2,958 3,819
Warranty............................................................ 2,355 2,210
Other............................................................... 3,529 4,627
---------- ----------
$ 10,242 $ 13,211
---------- ----------
---------- ----------
OTHER NON-CURRENT LIABILITIES:
Deferred revenue.................................................... $ 5,119 $ 4,618
Other............................................................... 1,707 1,432
---------- ----------
$ 6,826 $ 6,050
---------- ----------
---------- ----------
</TABLE>
NOTE 3--INTANGIBLE ASSETS
<TABLE>
<S> <C> <C>
Goodwill.............................................. $ 45,683 $ 45,683
Patents............................................... 6,376 5,676
Product distribution license fee...................... -- 3,402
--------- ---------
52,059 54,761
Accumulated amortization................................ (10,667) (12,455)
--------- ---------
$ 41,392 $ 42,306
--------- ---------
--------- ---------
</TABLE>
Amortization expense was $2,468, $2,210 and $2,338 during 1993, 1994 and
1995, respectively.
During 1995, the Company entered into a development and exclusive
distribution agreement (the "Agreement") with Debiotech SA ("Debiotech").
Pursuant to the Agreement, Debiotech granted the Company the exclusive right to
distribute Debiotech's products in certain North and Central American countries.
The Company paid Debiotech $3,000 upon the signing of the Agreement and also
agreed to pay Debiotech additional amounts upon attainment of agreed upon
milestones by Debiotech with respect to the development of certain future
products. The Company will purchase the products it sells from Debiotech at
predetermined prices. The product distribution fee of $3,000 and related
expenses of $402 have been classified as an intangible asset and are being
amortized on a straight-line basis over the 15-year term of the Agreement.
F-19
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 4--NOTES PAYABLE AND LONG-TERM DEBT
The Company has a revolving credit agreement with GECC, the terms of which
were amended during 1994 ("Amended Loan Agreement").
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1994 1995
--------- ---------
LONG-TERM DEBT COMPRISES THE FOLLOWING:
GECC revolving credit facility........................................ $ 18,497 $ 10,733
Other................................................................. 1,150 620
--------- ---------
19,647 11,353
Current portion..................................................... (530) (140)
--------- ---------
Long-term debt...................................................... $ 19,117 $ 11,213
--------- ---------
--------- ---------
</TABLE>
The Amended Loan Agreement includes a $38,500 ($42,000 at December 31, 1994)
revolving credit facility. The interest rate on the Amended Loan Agreement is
the index rate plus 2% (10 1/2% and 10 3/4% at December 31, 1994 and 1995,
respectively). Outstanding indebtedness under the Amended Loan Agreement matures
in March 1999. Advances under the Amended Loan Agreement are made against a
borrowing base consisting of 85% of eligible accounts receivable, 65% of
eligible inventory and 85% of the future value of eligible instrument lease
receivables (aggregating $38,019 at December 31, 1995). At December 31, 1995,
$27,286 was available and undrawn under the terms of the Agreement. The Amended
Loan Agreement contains affirmative and negative covenants, including, among
others, the maintenance of certain financial ratios, balances, and earnings
levels, limitations on capital expenditures and transfer of funds to AM and
restrictions on incurring additional debt. The Amended Loan Agreement is secured
by a first priority interest in all of IMED's assets and the IMED capital stock
and certain patents used in IMED's business, each owned by AM.
MATURITIES:
Maturities of long-term debt subsequent to December 31, 1996 are as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1997............................................................... $ 149
1998............................................................... 160
1999............................................................... 10,904
---------
$ 11,213
---------
---------
</TABLE>
F-20
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 5--INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1993 1994 1995
--------- --------- ---------
Income (loss) before income taxes is comprised of the
following:
Domestic operations........................................ $ (4,510) $ 8,907 $ 15,430
Foreign operations......................................... 4,133 5,048 935
--------- --------- ---------
Income (loss) before income taxes........................ $ (377) $ 13,955 $ 16,365
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes comprises the following:
<TABLE>
<S> <C> <C> <C>
Current:
Federal........................................... $ 2,218 $ 5,182 $ 6,239
State............................................. 561 1,068 1,741
Foreign........................................... 818 1,049 157
--------- --------- ---------
3,597 7,299 8,137
--------- --------- ---------
Deferred:
Federal........................................... (956) 827 (519)
State............................................. (402) 268 474
Foreign........................................... (376) (84) 7
--------- --------- ---------
(1,734) 1,011 (38)
--------- --------- ---------
Provision for income taxes........................ $ 1,863 $ 8,310 $ 8,099
--------- --------- ---------
--------- --------- ---------
</TABLE>
The principal items accounting for the differences in income taxes computed
at the U.S. federal statutory rate (34%) and the effective income tax rate
comprise the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1993 1994 1995
--------- --------- ---------
Taxes computed at statutory rate................................. $ (128) $ 4,745 $ 5,564
State income taxes (net of federal benefit)...................... 105 882 1,462
Taxes above the U.S. rate on earnings deemed repatriated......... 816 1,722 105
Amortization of nondeductible intangibles........................ 744 442 442
Other 326 519 526
--------- --------- ---------
Provision for income taxes....................................... $ 1,863 $ 8,310 $ 8,099
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 5--INCOME TAXES (CONTINUED)
The components of the net deferred tax assets included in other assets as of
December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves......................................... $ 2,988 $ 3,003
Unearned income.......................................................... 2,394 2,085
Inventory................................................................ 984 966
Patents.................................................................. 518 778
Computer software........................................................ 82 71
Miscellaneous............................................................ 282 369
--------- ---------
Total deferred tax assets................................................ 7,248 7,272
Deferred tax liabilities:
Miscellaneous............................................................ 217 154
--------- ---------
Net deferred tax assets.................................................... $ 7,031 $ 7,118
--------- ---------
--------- ---------
</TABLE>
Pursuant to IMED's tax sharing agreement with AM, for Federal and California
income tax purposes, IMED is required to calculate its current income tax
liability on a stand-alone basis as if it were not included in the AM
consolidated income tax return. The resulting tax liability is payable to AM.
Due to restrictions on payments from IMED to AM contained in IMED's revolving
credit facility agreement with GECC, income tax payments to AM are limited to
actual tax liabilities per the AM consolidated income tax returns. Due to losses
incurred at the AM level which have served to reduce the consolidated taxable
income, the income tax liabilities recorded by IMED on a stand-alone basis have
been significantly greater than the amounts actually paid to AM. The excess of
the total current income tax liability over the amount which can be paid to AM
amounted to approximately $13.4 million and $18.9 million at December 31, 1994
and 1995, respectively, and is included in other non-current liabilities.
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"). Upon implementation, the Company recorded a cumulative benefit resulting
from the change in accounting principle of $768, which represented the amount of
net deferred tax assets which had not previously been recognized by the Company.
NOTE 6--LITIGATION AND CONTINGENCIES
The Company is a defendant in various actions, claims, and legal proceedings
arising from its normal business operations. Management believes they have
meritorious defenses and intends to vigorously defend against all allegations
and claims. As the ultimate outcome of these matters is uncertain, no contingent
liabilities or provisions have been recorded in the accompanying financial
statements for such matters. However, in management's opinion, based on
discussions with legal counsel, liabilities arising from such matters, if any,
will not have a material adverse effect on consolidated financial position,
results of operations or cash flows.
An action was commenced during 1991 against the Company, Fisher and various
other parties alleging, among other matters, breach of contract and
misappropriation of trade secrets. During 1994, the
F-22
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 6--LITIGATION AND CONTINGENCIES (CONTINUED)
Company settled this action with the plaintiffs. Pursuant to the settlement
agreement, the action was dismissed and the Company paid $250 to the plaintiff
and delivered to a subsidiary of Fisher a promissory note, payable over 5 years,
in the principal amount of $750. The amount was fully accrued during 1993.
NOTE 7--MANDATORILY REDEEMABLE EQUITY SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1994 1995
--------- ---------
Mandatorily redeemable equity securities comprise the following:
Preferred stock (includes accrued dividends of $5,137 and $11 at December 31, 1994 and
1995)..................................................................................... $ 18,137 $ 12,131
Common stock warrant (includes cumulative accretion to estimated redemption price of $2,491
and $8,991 at December 31, 1994 and 1995)................................................. 5,000 11,500
--------- ---------
$ 23,137 $ 23,631
--------- ---------
--------- ---------
</TABLE>
MANDATORILY REDEEMABLE PREFERRED STOCK:
The Company's articles of incorporation authorize the issuance of 5,000
shares of $0.01 par value preferred stock. In September 1993, AM acquired all
the ownership interests of the Company held by Deka Products Limited Partnership
which included 169 of these preferred shares (see Note 11). At December 31, 1994
and 1995, the Company had outstanding 1,300 and 1,212 shares of preferred stock,
all of which were owned by AM.
The holder of the preferred stock is entitled to receive cumulative
dividends at 12% per annum on the stated value of $10,000 per share. The
preferred shares are redeemable at the option of the holder at any time after
January 1, 2000 and have redemption and liquidation values of $10,000 per share,
plus accrued and unpaid dividends.
In accordance with the Amended Loan Agreement, the Company made dividend
payments to AM of $2,273 and $6,684 during 1994 and 1995, respectively. During
1995, the Company redeemed 88 shares of preferred stock from AM for $880.
The par value outstanding at December 31, 1994 and 1995 was $13,000 and
$12,120, respectively.
COMMON STOCK WARRANT:
In connection with the loan agreements (Note 4), the Company issued a
warrant allowing GECC to purchase 10% of the Company's common stock on a
fully-diluted basis for nominal consideration, subject to adjustment as provided
in the Amended Loan Agreement, and exercisable at any time until August 12,
2004. The Company is required to purchase not less than 25% of the shares under
the warrant, or warrant stock if exercised, at the option of GECC, and also upon
(a) the filing of a registration statement for the offering of the Company's
common stock; (b) the sale of the Company; (c) the prepayment in full of the
GECC loans; or (d) the termination by GECC of the revolving loan under
provisions of the loan agreement. Additionally, the Company has the option to
redeem not less than 25% of the shares under warrant, or warrant stock if
exercised, beginning April 2, 1995. The purchase price per share will be the
F-23
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 7--MANDATORILY REDEEMABLE EQUITY SECURITIES (CONTINUED)
higher of fair value (determined by either an investment banking firm or at
quoted price if the shares are publicly traded) or fully-diluted net book value
at the purchase date. Additionally, the warrant shares, or warrant stock if
exercised, have specified registration rights. The Company adjusts the carrying
value of the warrant based on its estimated fair value.
NOTE 8--BENEFIT PLANS
PENSION PLANS:
The Company had a defined benefit pension plan (the "Plan") which covered
substantially all of its U.S. employees as of December 31, 1993. On December 1,
1993, the Company's Board of Directors approved amendments to the Plan
provisions which include, among other matters, cessation of benefit accruals
after December 31, 1993. All earned benefits as of that date were preserved and
the Company will continue to contribute to the Plan as necessary to fund earned
benefits. During 1993, the projected benefit obligation based on the expected
future compensation levels decreased $1,377 (and the accumulated benefit
obligation decreased $504). The Plan also had an unrecognized net loss,
resulting principally from actual Plan asset performance as compared to asset
performance assumptions, of $1,219 at December 31, 1993. The sum of these
resulted in a Plan curtailment gain of $662 and is a component of the
restructuring charges at December 31, 1993 (see Note 10). No contributions to
the Plan were required during 1994 or 1995 due to the prepaid position of the
Plan during those years.
The following table sets forth the Plan's estimated funded status and
amounts recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1994 1995
--------- ---------
DOMESTIC
Actuarial present value of benefit obligation:
Vested benefit obligation.............................................. $ 7,080 $ 10,343
--------- ---------
--------- ---------
Accumulated benefit obligation......................................... $ 7,310 $ 10,440
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date.............. $ 7,310 $ 10,440
Plan assets at fair value, consisting of equity and fixed income mutual
funds.................................................................. 8,937 11,305
--------- ---------
Plan assets greater than projected benefit obligation.................... 1,627 865
Unrecognized net gain.................................................... (1,533) (697)
--------- ---------
Prepaid pension cost..................................................... $ 94 $ 168
--------- ---------
--------- ---------
</TABLE>
F-24
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 8--BENEFIT PLANS (CONTINUED)
The components of net periodic pension cost (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C> <C>
1993
------------------------
DOMESTIC FOREIGN 1994 1995
----------- ----------- --------- ---------
Service cost-benefits earned during the period.......................... $ 1,344 $ 230 $ 143 $ 146
Interest cost on projected benefit obligation........................... 663 135 631 608
Actual return on Plan assets............................................ (768) (129) 263 (2,494)
Amortization and deferred amounts....................................... 142 17 (1,075) 1,666
Employee contributions.................................................. -- (108) -- --
----------- ----- --------- ---------
Net periodic pension cost (benefit)..................................... $ 1,381 $ 145 $ (38) $ (74)
----------- ----- --------- ---------
----------- ----- --------- ---------
Assumptions used in the accounting are as follows:
Discount rates........................................................ 7.02% 7.50% 8.56% 6.82%
Rates of increase in compensation levels.............................. 4.00% 5.50% 4.00% 4.00%
Expected long-term rates of return on assets.......................... 9.00% 8.00% 9.00% 9.00%
</TABLE>
NOTE 9--LEASES
LEASE RECEIVABLES:
The Company leases instruments to customers under non-cancelable capital and
operating lease contracts with terms ranging generally from 1 to 6 years.
Scheduled future minimum lease receivables as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
Year ending December 31,
1996...................................................................... $ 9,577 $ 2,349
1997...................................................................... 7,116 1,855
1998...................................................................... 4,881 1,521
1999...................................................................... 3,353 1,056
2000...................................................................... 1,592 99
Thereafter................................................................ 186 --
--------- -----------
Total minimum lease receivables............................................. 26,705 $ 6,880
-----------
-----------
Allowance for uncollectible lease receivables............................... (396)
Unearned interest income.................................................... (4,096)
---------
22,213
Current portion............................................................. (7,034)
---------
Net investment in sales-type and direct financing leases.................... $ 15,179
---------
---------
</TABLE>
Operating lease revenue totaled $2,838, $2,033 and $1,476 during 1993, 1994
and 1995, respectively.
F-25
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 9--LEASES (CONTINUED)
LEASE COMMITMENTS:
The Company leases buildings and equipment under non-cancelable operating
leases with terms ranging from 2 to 10 years. Scheduled future minimum lease
commitments as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1996.............................................................. $ 2,773
1997.............................................................. 1,366
1998.............................................................. 498
1999.............................................................. 210
2000.............................................................. 85
Thereafter........................................................ 14
---------
$ 4,946
---------
---------
</TABLE>
Rental expense was $3,756, $3,679 and $3,138 during 1993, 1994 and 1995,
respectively.
NOTE 10--RESTRUCTURING CHARGES
During 1993, the Company adopted a plan to sell its Irish manufacturing
facility to Pharmacia. The Irish manufacturing facility primarily produces
molded components used to assemble disposable administration sets ("Sets"). The
Company recorded a $3,515 restructuring charge during 1993 in connection with
the proposed sale of its Irish manufacturing operations and the relocation of
its molding operations to the United States. Professional fees and relocation
costs of $1,300 are included in such restructuring charge.
During 1993, the Company recorded a $988 charge to consolidate certain of
the Company's operations. The provision includes severance payments, facilities
consolidation costs and the write-off of equipment associated with discontinued
products, net of the defined benefit plan curtailment gain as described in Note
8. Accrued severance costs and other restructuring expenses recorded in 1993
were paid during 1994 and 1995.
NOTE 11--RELATED PARTY ARRANGEMENTS AND COMMITMENTS
In October 1991, IMED sold certain European assets to Pharmacia and entered
into a marketing, distribution and development arrangement with Pharmacia (the
"Pharmacia Transaction"), pursuant to which Pharmacia obtained the exclusive
right to market and distribute IMED's infusion products in a territory that
includes most of Europe. In August 1994, the Company, IMED and Pharmacia amended
their distribution agreement. Under the terms of the Amended and Restated
Distribution Agreement ("Amended Distribution Agreement"), Pharmacia retains the
exclusive right (subject to certain exceptions) to distribute IMED's infusion
products in the territory that includes most of Europe. Under the Amended
Distribution Agreement, Pharmacia has the right not to distribute certain
products currently under development by IMED. In the event of such an election,
IMED has the right to sell such products directly or through others, and under
certain circumstances, has the right to repurchase from Pharmacia the
distribution rights to IMED products currently distributed by Pharmacia in the
territory. In addition, Pharmacia has the right to terminate the Amended
Distribution Agreement at any time on 12 months
F-26
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 11--RELATED PARTY ARRANGEMENTS AND COMMITMENTS (CONTINUED)
notice, in which event Pharmacia would be required to make a payment of $2.5
million to IMED and IMED would be required to make payments to Pharmacia based
on net sales of products currently distributed by Pharmacia for the 4 years
following termination.
During 1994, the Company sold its Irish manufacturing facility to Pharmacia
for $4,089, the net proceeds of which were used to repay a portion of the GECC
long-term debt. The Company entered into an agreement with Pharmacia for the
purchase, at fixed prices, of minimum quantities of disposable administration
sets ("Sets") and components used to assemble Sets through 1996. The Company is
obligated to purchase approximately $1,200 from Pharmacia during 1996.
Certain patents, which protect technology integral to certain of the
Company's products, were acquired from Fisher by AM and are not included in the
accompanying balance sheet. AM paid Fisher $10,000 for these patents. AM is
amortizing the patents over estimated economic lives of 4 to 12 years resulting
in amortization charges of $1,100 annually. Pursuant to an agreement, AM charged
the Company a royalty of $1,100 during 1993, 1994 and 1995, related to such
patents. For 1996 and future years, the royalty fee will aggregate $1,100
annually. Additionally, AM charged the Company a management fee of $100 and $62
during 1993 and 1994, respectively. The management fees ceased during 1994.
On April 2, 1990, the Company entered into an agreement with Deka Products
Limited Partnership ("Deka") whereby Deka granted the Company an exclusive,
royalty-free license of certain intravenous infusion pump technology developed
by Deka, in exchange for 10.79% of the Company's common stock and 13% of its
preferred stock (each on a fully-diluted basis). The Company also began
providing funding to AM Development Limited Partnership ("AMD"), a partnership
owned 85% by AM and 15% by Deka, for certain research related to the development
of hospital infusion pumps and related disposables based on Deka's fluid
management technology.
During 1993, the Company paid AMD $3,595 for certain research expenses
performed by Deka on the Company's behalf. In October 1993, the Company
discontinued its funding of AMD to develop hospital infusion pumps and related
disposables based on AMD's fluid management technology and AM acquired all the
interests of the Company held by Deka.
During 1993, the Company discontinued its funding of AMD and Deka. Other
expense for the year ended December 31, 1993 includes a loss of $1,649,
consisting of the write-off of unamortized technology licenses of $3,649 less a
non-refundable product development fee of $2,000. The product development fee
was received in 1991 from Pharmacia, as part of a $10,000 arrangement to develop
products using Deka's fluids management technology. The fees were to be earned
upon the attainment of certain development milestones. Since the Company
discontinued funding Deka, the deferred revenue of $2,000 was released to income
and the Company will not receive any of the remaining $8,000 of product
development fees.
F-27
<PAGE>
IMED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT SHARE DATA)
NOTE 12--GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1993 1994 1995
---------- ---------- ----------
NET SALES TO UNAFFILIATED CUSTOMERS:
United States.............................................................. $ 107,875 $ 99,228 $ 102,830
Foreign.................................................................... 11,983 12,894 9,721
---------- ---------- ----------
Net sales as reported in the accompanying statement of income............ $ 119,858 $ 112,122 $ 112,551
---------- ---------- ----------
---------- ---------- ----------
INTERGEOGRAPHIC SALES:
United States.............................................................. $ 5,014 $ 7,668 $ 6,973
Foreign.................................................................... 11,948 6,565 --
---------- ---------- ----------
Total intergeographic sales.............................................. $ 16,962 $ 14,233 $ 6,973
---------- ---------- ----------
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES:
United States.............................................................. $ 4,561 $ 12,976 $ 15,506
Foreign.................................................................... 676 1,584 929
---------- ---------- ----------
Income from operations..................................................... 5,237 14,560 16,435
---------- ---------- ----------
Interest expense........................................................... (4,159) (2,805) (2,052)
Interest income............................................................ 2,660 2,461 2,361
Other, net................................................................. (4,115) (261) (379)
---------- ---------- ----------
Income (loss) before income taxes and cumulative effect of a change in
accounting principle................................................... $ (377) $ 13,955 $ 16,365
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1994 1995
---------- ----------
IDENTIFIABLE ASSETS:
United States........................................................................... $ 116,108 $ 115,494
Foreign................................................................................. 6,875 7,103
---------- ----------
Total assets as reported in the accompanying balance sheet............................ $ 122,983 $ 122,597
---------- ----------
---------- ----------
</TABLE>
Earnings of foreign subsidiaries not repatriated as of December 31, 1993,
1994 and 1995 are $4,207, $1,870 and $2,940, respectively.
NOTE 13--SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
Federal, state and foreign income taxes paid during 1993, 1994 and 1995
totaled $730, $1,325 and $1,487, respectively. Interest paid during 1993, 1994
and 1995 totaled $3,420, $2,365 and $1,765, respectively.
F-28
<PAGE>
IVAC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ --------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 18,308 $ 10,447
Accounts receivable, net......................................................... 54,133 46,435
Current portion of contract receivables, net..................................... 5,414 6,034
Inventories, net................................................................. 34,625 39,646
Prepaid expenses and other assets................................................ 3,143 2,490
------------ --------------
Total current assets....................................................... 115,623 105,052
Long-term contract receivables, net................................................ 19,957 18,232
Property, plant and equipment, net................................................. 48,277 44,966
Intangible assets, net............................................................. 30,893 21,105
Other long-term assets............................................................. 1,245 1,626
------------ --------------
$ 215,995 $ 190,981
------------ --------------
------------ --------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued warranty............................................ $ 21,355 $ 20,565
Accrued employee liabilities..................................................... 9,528 8,182
Current portion of long-term debt................................................ 8,091 17,534
Other current liabilities........................................................ 34,799 34,599
------------ --------------
Total current liabilities.................................................. 73,773 80,880
Long-term debt..................................................................... 157,694 142,955
Other non-current liabilities...................................................... 5,043 2,737
Shareholders' equity (deficit):
Common stock:
Class A, $.01 par value; 60,000,000 shares authorized; 20,000,938 and 20,017,627
issued and outstanding at December 31, 1995 and September 30, 1996,
respectively................................................................... 200 200
Class B, $.01 par value; 20,000,000 shares authorized; 19,532,630 and 19,654,744
issued and outstanding at December 31, 1995 and September 30, 1996,
respectively................................................................... 195 197
Additional paid-in capital....................................................... 33,308 33,458
Note receivable from stockholder................................................. (8) (6)
Deferred compensation............................................................ -- (64)
Accumulated deficit.............................................................. (56,057) (70,166)
Foreign currency translation adjustment.......................................... 1,847 790
------------ --------------
Total shareholders' equity (deficit)....................................... (20,515) (35,591)
------------ --------------
$ 215,995 $ 190,981
------------ --------------
------------ --------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-29
<PAGE>
IVAC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Net sales.................................................................... $ 174,663 $ 170,155
Cost of sales................................................................ 118,255 98,836
---------- ----------
Gross profit......................................................... 56,408 71,319
Sales and marketing.......................................................... 32,470 28,872
General and administrative................................................... 18,529 17,479
Research and development..................................................... 10,111 7,663
Restructuring and special items.............................................. 4,460 17,396
Purchased research and development........................................... 19,883 --
---------- ----------
Loss from operations................................................. (29,045) (91)
Interest income (expense):
Contract interest income................................................... 2,130 1,812
Interest expense, net...................................................... (19,686) (13,396)
---------- ----------
Loss before income taxes............................................. (46,601) (11,675)
Provision for (benefit from) income taxes.................................... (3,270) 2,434
---------- ----------
Net loss............................................................. $ (43,331) $ (14,109)
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-30
<PAGE>
IVAC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1996
----------- ----------
<S> <C> <C>
Net cash provided by operating activities................................... $ 28,544 $ 15,485
Cash flows from investing activities:
Acquisitions, net of cash and cash equivalents acquired................... (185,955) --
Capital expenditures, net................................................. (7,738) (12,957)
----------- ----------
Net cash used by investing activities....................................... (193,693) (12,957)
----------- ----------
Cash flows from financing activities:
Capital contributions..................................................... 20,000 --
Borrowings under term loan and revolving credit arrangements.............. 68,500 3,000
Exercise of stock options................................................. -- 37
Payment on note receivable from stockholder............................... -- 2
Proceeds from bridge notes................................................ 80,000 --
Proceeds from junior notes................................................ 30,000 --
Repayment of term loan and revolving debt................................. (10,500) (7,500)
Payment of other debt obligations......................................... -- (4,533)
Debt issue costs.......................................................... (6,566) (39)
Capital lease payments.................................................... (260) (299)
----------- ----------
Net cash (used) provided by financing activities............................ 181,674 (9,332)
----------- ----------
Effect of exchange rate changes on cash..................................... 1,401 (1,057)
----------- ----------
Net (decrease) increase in cash and cash equivalents........................ 17,926 (7,861)
Cash and cash equivalents at the beginning of the period.................... 0 18,308
----------- ----------
Cash and cash equivalents at the end of the period.......................... $ 17,926 $ 10,447
Supplemental disclosure of non-cash financing activities:
Contribution of River capital stock....................................... $ 13,333 --
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-31
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1--BUSINESS
IVAC Holdings, Inc. ("Holdings" or the "Company"), through its wholly owned
subsidiaries, designs, manufactures, distributes and services intravenous
infusion therapy and vital signs measurement instruments and related disposables
and accessories. The Company sells a full range of products to hospitals and
alternate site facilities in the United States, Canada and Europe.
In management's opinion, the accompanying unaudited condensed consolidated
financial statements of the Company for the nine months ended September 30, 1996
and 1995 have been prepared in accordance with generally accepted accounting
principles for interim financial statements and include all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial position, results of operations and cash flows for all periods
presented. All such financial statements are unaudited except for the December
31, 1995 balance sheet. The unaudited condensed consolidated financial
statements include the accounts and results of operations of the Company and its
subsidiaries, all of which are wholly owned. All significant intercompany
balances and transactions have been eliminated. Interim operating results are
not necessarily indicative of operating results for the full year. These
financial statements should be read in conjunction with the financial statements
and notes thereto for the year ended December 31, 1995.
NOTE 2--INVENTORIES
Inventories at December 31, 1995 and September 30, 1996 consisted of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Finished products............................................... $ 14,998 $ 16,464
Work-in-process................................................. 3,472 7,237
Raw materials................................................... 17,867 19,254
------------ -------------
36,337 42,955
Less reserves................................................... (1,712) (3,309)
------------ -------------
$ 34,625 $ 39,646
------------ -------------
------------ -------------
</TABLE>
NOTE 3--LONG-TERM DEBT
On March 29, 1996, the Company amended and restated its Bank Credit
Facility. The amended and restated senior credit facility (the "Facility") is
available through March 29, 1999, provides for borrowings of up to $40,000 and
is secured by substantially all of the Company's domestic assets. Borrowings
under the Facility bear interest at a rate equal to the Alternate Base Rate (as
defined in the Facility) plus 0.25% or Adjusted LIBOR plus 1.50%, at the option
of the Company. The interest rate is also subject to change quarterly based upon
certain debt and interest coverage ratios.
NOTE 4--LITIGATION
The Company is a party to various other legal actions which have occurred in
the normal course of business. Management believes the Company has meritorious
defenses and intends to defend vigorously against these allegations and claims.
In management's opinion, liabilities arising from the above matters, if
F-32
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 4--LITIGATION (CONTINUED)
any, will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
NOTE 5--RIVER MEDICAL, INC. DIVESTITURE
The Company has closed River and is divesting the subsidiary's assets.
River's primary assets include patents, technologies, trade secrets, inventories
and manufacturing equipment. The Company has recorded a restructuring charge of
$17,396 during the three months ended June 30, 1996, including an accrual of
$7,808. At September 30, 1996, the related accrual balance was $6,159.
NOTE 6--MERGER AGREEMENT
On August 23, 1996, the Company entered into an Agreement and Plan of Merger
among the Company; IVAC Medical Systems, Inc.; IMED Corporation ("IMED"), a
subsidiary of Advanced Medical, Inc.; a wholly owned subsidary of IMED and the
holders of Common Stock of Holdings named therein, pursuant to which IMED will
acquire, directly or indirectly through a wholly owned subsidiary, 100% of the
capital stock of Holdings for approximately $400,000 less certain
indebtedness.The proposed transaction received regulatory approval in October
1996 and is subject to certain other closing conditions, including the
completion of the financing necessary to consummate the merger (the "Merger").
NOTE 7--GUARANTOR SUBSIDIARY
Following the consummation of the Merger, the operations of IMED and IVAC
Medical Systems, Inc. will be transferred to Holdings and Holdings will become
the successor obligor under the Senior Subordinated Notes due 2006 of IMED (the
"IMED Notes") that will be issued in connection with the Merger. In addition,
certain subsidiaries of Holdings will guarantee the IMED Notes. Accordingly,
condensed combining financial information for Holdings and its guarantor, IVAC
Overseas Holdings, Inc., and non-guarantor subsidiaries at September 30, 1996
and for the nine months ended September 30, 1996 is as follows:
<TABLE>
<CAPTION>
NON
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED BALANCE SHEET
SEPTEMBER 30, 1996
- ----------------------------------------------------
Current assets...................................... $ 64,367 $ 41,178 -- $ (493) $ 105,052
Non-current assets.................................. 101,102 9,146 $ 13,741 (38,060) 85,929
---------- ----------- ----------- ------------ ------------
$ 165,469 $ 50,324 $ 13,741 $ (38,553) $ 190,981
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
Current liabilities................................. $ 60,431 $ 29,486 $ 5,465 $ (14,502) $ 80,880
Long-term debt and other liabilities................ 145,692 -- -- -- 145,692
---------- ----------- ----------- ------------ ------------
206,123 29,486 5,465 (14,502) 226,572
Total shareholders' equity (deficit)................ (40,654) 20,838 8,276 (24,051) (35,591)
---------- ----------- ----------- ------------ ------------
$ 165,469 $ 50,324 $ 13,741 $ (38,553) $ 190,981
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-33
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 7--GUARANTOR SUBSIDIARY (CONTINUED)
<TABLE>
<CAPTION>
NON
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
---------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- ----------------------------------------------------
Net sales........................................... $ 141,066 $ 63,703 -- $ (34,614) $ 170,155
Cost of sales....................................... 88,494 45,561 -- (35,219) 98,836
---------- ----------- ----- ------------ ------------
52,572 18,142 -- 605 71,319
Operating expenses.................................. 38,275 33,894 -- (759) 71,410
Interest (income) expense, net...................... 10,097 1,487 -- 11,584
---------- ----------- ----- ------------ ------------
Income (loss) before income taxes and equity
interest in subsidiary income...................... 4,200 (17,239) -- 1,364 (11,675)
Equity interest in subsidiary income................ -- -- $ 166 (166) --
Provision for (benefit from) income taxes........... 3,230 (796) 58 (58) 2,434
---------- ----------- ----- ------------ ------------
Net income (loss)................................... $ 970 $ (16,443) $ 108 $ 1,256 $ (14,109)
---------- ----------- ----- ------------ ------------
---------- ----------- ----- ------------ ------------
</TABLE>
F-34
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 7--GUARANTOR SUBSIDIARY (CONTINUED)
<TABLE>
<CAPTION>
NON
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- ----------------------------------------------------
Net cash (used) provided by operating activities.... $ 30,818 $ (14,896) -- $ (437) $ 15,485
Cash flows from investing activities:
Intercompany advances to River Medical............ (9,165) -- 9,165 --
Intercompany advances from Parent................. 9,165 (9,165) --
Capital expenditures, net......................... (9,493) (4,480) 1,016 (12,957)
---------- ----------- ----------- ------------ ------------
Net cash (used) provided by investing activities.... (18,658) 4,685 -- 1,016 (12,957)
---------- ----------- ----------- ------------ ------------
Cash flows from financing activities:
Borrowings under term loan and revolving credit
arrangements.................................... 3,000 -- 3,000
Exercise of stock options......................... 37 -- 37
Payment on note receivable from stockholder....... 2 -- 2
Repayment of term loan and revolving debt......... (7,500) -- (7,500)
Payment of other debt obligations................. (4,533) -- (4,533)
Debt issue costs.................................. (39) -- (39)
Capital lease payments............................ -- (299) (299)
---------- ----------- ----------- ------------ ------------
Net cash (used) provided by financing activities.... (9,033) (299) -- -- (9,332)
---------- ----------- ----------- ------------ ------------
Effect of exchange rate changes on cash............. (478) (579) (1,057)
---------- ----------- ----------- ------------ ------------
Net (decrease) increase in cash and cash
equivalents........................................ 3,127 (10,988) -- -- (7,861)
Cash and cash equivalents at the beginning of the
period............................................. 2,203 16,105 -- -- 18,308
---------- ----------- ----------- ------------ ------------
Cash and cash equivalents at the end of the
period............................................. $ 5,330 $ 5,117 -- -- $ 10,447
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
IVAC Holdings, Inc.
In our opinion, the, accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of shareholders' equity
(deficit) present fairly, in all material respects, the financial position of
IVAC Holdings, Inc. and its subsidiaries at December 31, 1995, and the results
of their operations and their cash flows for the year in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Diego, California
March 29, 1996
F-36
<PAGE>
IVAC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 18,308
Accounts receivable, net.......................................................................... 54,133
Current portion of contract receivables, net...................................................... 5,414
Inventories....................................................................................... 34,625
Prepaid expenses and other assets................................................................. 3,143
------------
Total current assets.......................................................................... 115,623
Long-term contract receivables, net................................................................. 19,957
Property, plant and equipment, net.................................................................. 48,277
Intangible assets, net.............................................................................. 30,893
Other long-term assets.............................................................................. 1,245
------------
$ 215,995
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................................................. $ 14,407
Accrued warranty.................................................................................. 6,948
Accrued employee liabilities...................................................................... 9,528
Current portion of long-term debt................................................................. 8,091
Other current liabilities......................................................................... 34,799
------------
Total current liabilities..................................................................... 73,773
Long-term debt...................................................................................... 157,694
Other non-current liabilities....................................................................... 5,043
Commitments and contingencies (Note 11)
Shareholders' equity (deficit):
Common stock:
Class A, $.01 par value; 60,000,000 shares authorized; 20,000,938 issued and outstanding.......... 200
Class B, $.01 par value; 20,000,000 shares authorized; 19,532,630 issued and outstanding.......... 195
Additional paid-in capital.......................................................................... 33,308
Note receivable from shareholder.................................................................... (8)
Accumulated deficit................................................................................. (56,057)
Foreign currency translation adjustment............................................................. 1,847
------------
Total shareholders' equity (deficit).......................................................... (20,515)
------------
$ 215,995
------------
------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-37
<PAGE>
IVAC HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Net sales........................................................................................... $ 240,971
Cost of sales................................................................................... 157,869
------------
Gross profit........................................................................................ 83,102
Sales and marketing................................................................................. 43,994
General and administrative.......................................................................... 28,381
Research and development............................................................................ 12,083
Purchased research and development.................................................................. 22,883
Restructuring and special items..................................................................... 5,944
Other expense, net.................................................................................. 1,497
------------
Loss from operations............................................................................ (31,680)
Interest income (expense):
Contract interest income.......................................................................... 3,013
Interest expense, net............................................................................. (27,476)
------------
Loss before income taxes........................................................................ (56,143)
Benefit from income taxes........................................................................... 378
------------
Net loss........................................................................................ $ (55,765)
------------
------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
IVAC HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Cash flows from operating activities:
Net loss....................................................................................... $ (55,765)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................................ 23,736
Debt issuance cost amortization.............................................................. 5,902
Purchased research and development........................................................... 22,883
Deferred income taxes........................................................................ (1,898)
Gain on disposal of property, plant and equipment............................................ (55)
Accretion of discount........................................................................ 4,664
Changes in assets and liabilities:
Receivables................................................................................ (11,837)
Inventories................................................................................ 23,176
Prepaid expenses and other assets.......................................................... 223
Accounts payable........................................................................... 4,975
Accrued warranty........................................................................... (557)
Accrued employee liabilities............................................................... (900)
Other current liabilities.................................................................. 9,265
Other non-current liabilities.............................................................. (829)
Payables to and receivables from Lilly, net................................................ 15,160
--------
Net cash provided by operating activities.............................................. 38,143
--------
Cash flows from investing activities:
Acquisitions, net of cash and cash equivalents acquired...................................... (190,793)
Capital expenditures, net.................................................................... (13,752)
Proceeds from sale of facility, net.......................................................... 25,258
--------
Net cash used by investing activities.................................................. (179,287)
--------
Cash flows from financing activities:
Capital contributions........................................................................ 20,000
Exercise of stock options.................................................................... 70
Borrowings under term loan and revolving credit arrangements................................. 68,500
Proceeds from bridge notes................................................................... 80,000
Proceeds from senior notes................................................................... 100,000
Proceeds from junior subordinated notes...................................................... 30,000
Repayment of term loan and revolving debt.................................................... (49,000)
Repayment of bridge notes.................................................................... (80,000)
Debt issue costs............................................................................. (11,486)
Capital lease payments....................................................................... (479)
--------
Net cash provided by financing activities.............................................. 157,605
--------
Effect of exchange rate changes on cash........................................................ 1,847
--------
Net increase in cash and cash equivalents...................................................... 18,308
Cash and cash equivalents at the beginning of the year......................................... 0
--------
Cash and cash equivalents at the end of the year............................................... $ 18,308
--------
--------
Supplemental disclosure of cash flow information:
Cash paid for interest....................................................................... $ 15,380
Cash paid for income taxes................................................................... $ 12
Supplemental disclosure of non-cash financing activities:
Contribution of River capital stock.......................................................... $ 13,333
Stock dividend (3 for 1)..................................................................... $ 292
Capital lease financing...................................................................... $ 1,200
</TABLE>
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
IVAC HOLDINGS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------------------------------
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL SHAREHOLDER
------------------------ ------------------------ PAID-IN NOTE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT
----------- ----------- ----------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contribution of capital:
Cash.................... $ 20,000
River capital stock..... 5,000,000 $ 50 4,740,388 $ 47 13,236
Foreign currency
translation adjustment..
Stock dividend (3 for 1).. 15,000,000 150 14,221,164 142 $ (292)
Exercise of stock
options................. 938 571,078 6 72 $ (8)
Net loss.................. (55,765)
--
----------- ----- ----------- ----- ----------- ------------
Balance at December 31,
1995.................... 20,000,938 $ 200 19,532,630 $ 195 $ 33,308 $ (8) $ (56,057)
--
--
----------- ----- ----------- ----- ----------- ------------
----------- ----- ----------- ----- ----------- ------------
<CAPTION>
FOREIGN TOTAL
CURRENCY SHAREHOLDERS'
TRANSLATION EQUITY
ADJUSTMENT (DEFICIT)
----------- --------------
<S> <C> <C>
Contribution of capital:
Cash.................... $ 20,000
River capital stock..... 13,333
Foreign currency
translation adjustment.. $ 1,847 1,847
Stock dividend (3 for 1)..
Exercise of stock
options................. 70
Net loss.................. (55,765)
----------- --------------
Balance at December 31,
1995.................... $ 1,847 $ (20,515)
----------- --------------
----------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1--DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
IVAC Holdings, Inc. ("Holdings" or the "Company"), through its wholly owned
subsidiaries, designs, manufactures, distributes and services intravenous
infusion therapy and vital signs measurement instruments and related disposables
and accessories. The Company sells a full range of products to hospitals and
alternate site facilities in the United States, Canada and Europe.
All outstanding common stock of IVAC Medical Systems, Inc. ("IVAC") is owned
by Holdings. Holdings was formed through the contribution of $20,000 cash from
an investor group, including DLJ Merchant Banking Partners, L.P. ("DLJMB") and
investors in River ("the River Group"), and other investors in exchange for
20,000,000 shares of Class A Common Stock, and the issuance of 18,961,552 shares
of Class B Common Stock in exchange for the outstanding capital stock of River
Medical, Inc. (the "River Transaction"). In connection with the formation of
Holdings, after the close of business on December 31, 1994, the Company acquired
the outstanding capital stock of IVAC from Eli Lilly and Company ("Lilly") for
approximately $195,000, including transaction costs (the "Acquisition"). Through
a series of subsequent transactions, River became a wholly owned subsidiary of
IVAC. The proceeds received from the investor group were contributed as capital
to IVAC Medical Systems, Inc.
In connection with the Acquisition, Holdings issued Junior Subordinated
Notes due 2006 (the "Subordinated Notes") to DLJMB, the River Group and others
for an aggregate of $30,000. Interest accrues to principal annually at an
effective fixed rate of 13.2%. IVAC does not guarantee repayment of the notes on
behalf of Holdings nor are these notes secured by IVAC's assets. The proceeds
from the Subordinated Notes were contributed as capital to IVAC Medical Systems,
Inc.
The consolidated financial statements includes the accounts of the Company
and its subsidiaries, all of which are wholly owned. All significant
intercompany balances and transactions have been eliminated.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with maturities of 90
days or less at date purchased.
REVENUE RECOGNITION
Revenue is recorded upon product shipment, net of an allowance for estimated
returns, or service delivery. The Company also sells instruments via long-term
financing arrangements to a number of hospitals under No Capital Agreements
("NCA's"). These agreements allow hospitals to acquire instruments with no
initial payment. The sales price for the instruments is recovered via surcharges
applied to minimum purchase commitments of related disposables. The term of the
financing is generally three to five years, with interest at rates of 9% to 15%.
The related contract receivables at December 31, 1995 are presented net of
unearned finance revenue of $6,813 which reflects the remaining interest to be
earned on unshipped disposables. Unearned finance revenue is calculated using
the inherent rate of interest on each NCA, the expected disposable shipment
period and the principal balance financed. Finance revenue is recognized as
disposables are shipped using a reducing principal balance method which
approximates the interest method. Contract provisions include liquidated damage
clauses which are sufficient to recover the sales price of the instruments in
the event of customer cancellation.
F-41
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. Credit
risk associated with this concentration is limited due to the large number and
geographic dispersion of the accounts and the overall stability of the hospital
industry. Management believes that adequate provision has been made for such
credit risk.
INVENTORIES
Inventories are stated at the lower of cost, determined by the first-in,
first-out (FIFO) method, or market. Cost of inventories at the beginning of the
year was determined based on an allocation of the purchase price to all assets
and liabilities including inventory, as determined by an independent appraisal,
at the date of acquisition.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost. Cost of
acquired assets (see Note 3) was determined based on an allocation of the
purchase price to all assets and liabilities, as determined by an independent
appraisal, at the date of acquisition. Additions to property, plant and
equipment, including significant betterments and renewals, are capitalized.
Maintenance and repair costs are charged to expense as incurred. Depreciation is
computed using the straight-line method over estimated useful lives of 3 to 20
years. Depreciation expense amounted to $15,076 for the year ended December 31,
1995.
INCOME TAXES
Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred tax asset or liability is computed for
the expected future impact of differences between the financial reporting and
tax basis of assets and liabilities as well as the expected future tax benefit
to be derived from tax loss and tax credit carryforwards. Deferred income tax
expense (benefit) is determined as the net change during the year in the
deferred income tax asset or liability. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount "more likely than
not" to be realized in future tax returns. Tax rate changes are reflected in
income during the period such changes are enacted.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries are
translated into U.S. dollars using period-end exchange rates for assets and
liabilities and weighted average exchange rates during the period for revenues
and expenses. Gains and losses from translation are excluded from results of
operations and accumulated as a separate component of shareholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-42
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, including cash
and cash equivalents, trade receivables and payables, approximates their fair
value due to their short term maturities. The fair values of the Company's
long-term contract receivables are estimated by discounting future cash flows
using discount rates that reflect the risk associated with similar types of
loans. The fair value of the Company's long-term debt is estimated based on
comparison with similar issues or current rates offered to the Company for debt
of the same remaining maturities. The estimated fair values of both the
Company's long-term contract receivables and long-term debt approximate their
carrying values.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," which establishes a fair value based method of
accounting for compensation costs related to stock option plans and other forms
of stock based compensation plans as an alternative to the intrinsic value based
method of accounting defined under Accounting Principles Board Opinion No. 25.
Companies that do not elect the new method of accounting beginning in 1996 will
be required to provide pro forma disclosures as if the fair value based method
had been applied. The Company anticipates that it will not elect the fair value
based method of accounting and will provide pro forma disclosure as required.
INTANGIBLE ASSETS
Intangible assets are amortized as follows:
<TABLE>
<S> <C> <C>
Supply agreements............................. Straight-line 3 years
Trademarks.................................... Straight-line 10 years
Patents....................................... Straight-line 10 years
Interest Terms of related
Debt acquisition costs........................ method debt
Excess purchase price......................... Straight-line 10 years
</TABLE>
Intangibles are presented net of accumulated amortization of $11,776. In
connection with the acquisition of IVAC, Lilly agreed to continue providing
certain administrative services on behalf of IVAC for a period of six months.
The amount capitalized as service support agreement ($2,786) has been fully
amortized as of December 31, 1995.
IMPAIRMENT OF LONG-LIVED ASSETS
During 1995, the FASB issued Statement of Financial Accounting Standards No.
121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles and excess
purchase price related to those assets to be held and used and for long-lived
assets and certain intangible assets to be disposed of. In the fourth quarter of
1995, the Company elected to early
F-43
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adopt the new accounting pronouncement. Based upon an analysis performed in
accordance with SFAS 121, the Company believes that no material impairments
exist at December 31, 1995.
NOTE 3--THE ACQUISITION AND THE RIVER TRANSACTION
The Acquisition and the River Transaction have been accounted for under the
purchase method; accordingly, the purchased assets and liabilities have been
recorded at their estimated fair value at the date of acquisition. The purchase
price of River of $13,333 was determined based on the fair value of the River
assets contributed to Holdings relative to the purchase price paid by the DLJMB
led investor group for their initial equity in Holdings. The application of the
purchase method to the Acquisition and the River Transaction resulted in an
excess of cost over net assets acquired of approximately $90,804. The excess
purchase price has been allocated to property, plant and equipment ($20,315),
inventory ($14,774), intangibles ($23,356) and in-process research and
development ($22,883) with a remaining excess purchase price over net assets
acquired of $9,476. The in-process research and development of River and IVAC
were charged to earnings in 1995. The purchase price allocations reflect the
resolution of certain purchase contingencies including the arbitration
settlement of a dispute with Lilly over the final IVAC purchase price subsequent
to December 31, 1995, the resolution of certain contingent liabilities, and the
ultimate realization of certain acquired receivables and property, plant and
equipment. Additionally, the Company and Lilly jointly elected to make an
Internal Revenue Code Section 338(h)(10) election for Federal and state tax
purposes in the third quarter of 1995. This election resulted in treatment of
the acquisition as if Lilly sold assets in a taxable transaction and resulted in
adjustments to reflect the fair value of the acquired tax assets and liabilities
as of the date of purchase.
In conjunction with purchase accounting, the Company recorded a severance
liability in the amount of $5,659 pursuant to a plan in place as of the purchase
date to subsequently terminate employees. The liability was determined based on
the expected employee resources to be terminated at an estimated cost of
severance benefits as provided for in the purchase agreement at the time of the
Acquisition to include separation payments based on years of service, continued
medical benefits and outplacement assistance for a specified time. These costs
were paid to employees terminated during the six month period following the
Acquisition and did not materially differ from the amount initially accrued.
In connection with the Acquisition and the River Transaction, certain
stockholders of Holdings received approximately $3,650 in connection with the
exchange of their capital stock or services rendered. These amounts have been
capitalized as a component of the purchase price.
F-44
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4--COMPOSITION OF CERTAIN CONSOLIDATED FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Accounts receivable:
Trade......................................................................... $ 58,677
Less allowance for doubtful accounts.......................................... (4,544)
------------
$ 54,133
------------
------------
Inventories:
Finished products............................................................. $ 14,998
Work-in-process............................................................... 3,472
Raw materials................................................................. 17,867
------------
36,337
Less reserves................................................................. (1,712)
------------
$ 34,625
------------
------------
Property, plant and equipment:
Land.......................................................................... $ 640
Buildings..................................................................... 4,554
Equipment..................................................................... 50,179
Construction in process....................................................... 6,341
------------
61,714
Less accumulated depreciation................................................. (13,437)
------------
$ 48,277
------------
------------
Intangibles:
Excess purchase price......................................................... $ 9,476
Supply agreements............................................................. 10,296
Trademarks.................................................................... 5,140
Patents....................................................................... 5,186
Debt acquisition costs........................................................ 11,486
Other......................................................................... 1,085
------------
42,669
Less accumulated amortization................................................. (11,776)
------------
$ 30,893
------------
------------
Other current liabilities:
Accrued expense reimbursement to former parent................................ $ 12,212
Other......................................................................... 22,587
------------
$ 34,799
------------
------------
</TABLE>
F-45
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 5--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Senior notes.................................................................... $ 100,000
Term loan borrowings under the Bank Credit Facility............................. 19,500
Junior subordinated notes....................................................... 33,961
Other........................................................................... 12,324
------------
165,785
Less current portion............................................................ (8,091)
------------
Long-term debt.................................................................. $ 157,694
------------
------------
</TABLE>
In connection with the acquisition of IVAC, the Company entered into an
$80,000 credit facility (the "Bank Credit Facility") with a syndicate of
financial institutions which consists of $60,000 of term loans and a $20,000
revolving credit facility, each of which matures on December 30, 1999. Available
funds under the revolving credit facility are limited to the difference between
$20,000 and the amount of letters of credit issued under the Bank Credit
Facility, which cannot exceed $15,000. Borrowings under the Bank Credit Facility
bear interest at a rate equal to the Alternate Base Rate plus 1.75% or Adjusted
LIBOR plus 3.00%, at the option of the Company, payable quarterly (10.25% and
8.69%, respectively, at December 31, 1995). The Bank Credit Facility is secured
by the stock of IVAC and all of its subsidiaries and substantially all of the
assets of Holdings, IVAC and IVAC's domestic subsidiaries. The Bank Credit
Facility is guaranteed by Holdings and substantially all of the Company's
subsidiaries. As more fully discussed in Note 13, subsequent to December 31,
1995, the Company amended and restated certain terms of the Bank Credit
Facility.
Immediately following the Acquisition, the Company entered into an interest
rate swap agreement to fix the rate of interest payable on a portion of the term
loan principal borrowed under the Bank Credit Facility. The swap has a three
year term and an initial notional amount of $30,000, which amortizes at a rate
equal to 50% of the original term loan principal paydown schedule, with
quarterly payments at a fixed rate of 11.05% of the outstanding notional amount
and quarterly receipts at a LlBOR-based floating rate plus 3.00%.
The Bank Credit Facility contains covenants which, among other matters,
restrict or limit the ability of the Company to pay dividends, incur
indebtedness, and make capital expenditures. The Company must also maintain
certain ratios regarding interest coverage and leverage, among other
restrictions.
On November 8, 1995, the Company issued $100,000 of senior unsecured public
notes (the "Notes") due December 1, 2002. The Notes bear interest at the rate of
9.25% annually, which is payable semi-annually in arrears on June 1 and December
1 of each year, commencing June 1, 1996. The Company is not required to make any
mandatory redemption or sinking fund payments with respect to the Notes prior to
maturity. The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after December 1, 1998 at the redemption prices set
forth in the indenture plus accrued and unpaid interest to the date of
redemption. In addition, at any time prior to December 1, 1998, the Company may
redeem the Notes with the proceeds of one or more public offerings of common
stock at a redemption price equal to 108.25% of the principal amount plus
accrued and unpaid interest; provided that at least
F-46
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 5--LONG-TERM DEBT (CONTINUED)
$65,000 in aggregate principal amount of the Notes remain outstanding
immediately after the occurrence of each such redemption. In the event of a
Change of Control (as defined in the indenture), holders of the Notes will have
the right to require the Company to purchase their Notes, in whole or in part,
at a price equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest to the date of purchase. The Notes are senior unsecured
obligations of the Company and rank senior in right of payment to all
subordinated indebtedness of the Company.
The indenture contains covenants which, among other matters, restrict or
limit the ability of the Company to pay dividends, incur indebtedness, make
asset sales, create liens and restrict the ability of the Company to enter into
mergers, consolidations or sales of all or substantially all of its assets.
The Company also issued $30,000 of Junior Subordinated Notes due 2006. The
notes accrue interest at 13.2% per annum, compounded annually.
The net proceeds from the bridge notes, Junior Subordinated Notes, and term
loan were used to pay the cash purchase price in connection with the Acquisition
and to pay fees and expenses related to the Acquisition. The proceeds of the
revolving loan will be used for general corporate purposes in the ordinary
course of the business.
Other debt consists of consideration owed to Siemens Infusion Systems, Ltd.
("SIS") resulting from IVAC's acquisition of the MiniMed product line from SIS
in 1993. In accordance with the acquisition agreement, IVAC is obligated to pay
SIS $1,571 in 1996 based on 1994 product sales and the greater of $3,000 per
year or 8% of the prior year's product sales in 1996 through 1999. The minimum
$12,000 liability was discounted at an imputed interest rate of 7% and recorded
as debt. The unamortized discount, which is amortized using the interest method
over the term of the payments, is $1,247 at December 31, 1995.
The aggregate minimum annual maturities on long-term debt are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 8,091
1997.............................................................. 7,375
1998.............................................................. 7,901
1999.............................................................. 8,457
2000.............................................................. --
Thereafter........................................................ 133,961
---------
$ 165,785
---------
---------
</TABLE>
NOTE 6--LEASES
Leases are generally for buildings, computers and office equipment. The
leases for the Company's San Diego corporate headquarters and manufacturing
facilities provide for scheduled rent increases. Total rent expense amounted to
approximately $2,035 for the year ended December 31, 1995.
The Company maintains a lease line of credit with a leasing company for
acquisitions of equipment under capital lease arrangements.
F-47
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6--LEASES (CONTINUED)
Future minimum payments are as follows:
<TABLE>
<CAPTION>
NONCANCELLABLE
CAPITAL OPERATING
LEASES LEASES
--------- --------------
<S> <C> <C>
1996........................................................................ $ 770 $ 3,413
1997........................................................................ 722 2,931
1998........................................................................ 425 2,990
1999........................................................................ 241 2,916
2000........................................................................ -- 2,803
Thereafter.................................................................. -- 11,298
--------- -------
2,158 $ 26,351
-------
-------
Less amounts representing interest.......................................... (304)
---------
Capital lease obligations................................................... 1,854
Less current portion........................................................ (595)
---------
$ 1,259
---------
---------
</TABLE>
NOTE 7--INCOME TAXES
The benefit from income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
-------------
<S> <C>
Current:
Federal....................................................................... $ --
Foreign....................................................................... 3,307
State......................................................................... 5
------
3,312
------
Deferred:
Federal....................................................................... (3,192)
Foreign....................................................................... 142
State......................................................................... (640)
------
(3,690)
------
Total........................................................................... $ (378)
------
------
</TABLE>
F-48
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Deferred tax assets:
Net operating loss and research and development credit carryforwards.......... $ 5,742
Intangibles................................................................... 3,666
State income taxes............................................................ 2,987
Product return/warranty reserves.............................................. 1,895
Rebate reserve................................................................ 1,479
Other......................................................................... 5,430
------------
Total deferred tax assets....................................................... 21,199
Valuation allowance........................................................... (21,199)
------------
Net deferred tax assets......................................................... 0
------------
Deferred tax liabilities:
Foreign taxes................................................................. (142)
------------
Total deferred tax liabilities.................................................. (142)
------------
Net deferred taxes.............................................................. $ (142)
------------
------------
</TABLE>
The Company has recorded a valuation allowance against deferred tax assets
since it is more likely than not that the deferred tax assets will not be
realized.
As of December 31, 1994, River net operating loss carryforwards for Federal
and state tax purposes totaled approximately $4,156 and $1,513, respectively. As
specified in the Internal Revenue Code, a more than 50% ownership change by a
combination of significant shareholders during any three year period would
result in certain limitations on the Company's ability to utilize net operating
loss carryforwards and research and development credit carryforwards. Such a
change is likely to have occurred in connection with the acquisition transaction
discussed in Note 3. These net operating loss and research and development
credit carryforwards expire from 2008 to 2009 for Federal tax purposes and from
1998 and 1999 for state tax purposes.
During 1995, net operating loss carryforwards for Federal and state tax
purposes totaling approximately $4,245 and $236, respectively, were generated by
the consolidated group. These net operating loss carryforwards expire in 2010
for Federal tax purposes and in 2000 for state tax purposes.
F-49
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
Following is a reconciliation of the effective income tax rate:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
---------------
<S> <C>
Tax benefit at statutory rate................................................... (35.0)%
Add (deduct):
Foreign taxes................................................................. 6.2
State taxes................................................................... (5.8)
Other......................................................................... (.2)
-----
(34.8)
Valuation allowance........................................................... 34.1
-----
(.7)%
-----
-----
</TABLE>
NOTE 8--BENEFITS
Effective December 30, 1994, in connection with the purchase of IVAC
discussed in Note 1, the Company's U.S. noncontributory defined benefit plan was
terminated and the assets and liabilities of the IVAC Retirement Plan were
merged into The Lilly Retirement Plan. All eligible participants in the IVAC
Retirement Plan became participants in The Lilly Retirement Plan, and all
benefits previously earned will be paid by The Lilly Retirement Plan.
In connection with the River Transaction, all outstanding stock options
issued under the River Medical Stock Option Plan were assumed by Holdings
subject to the same terms, vesting, duration and cancellation existing prior to
the acquisition. On a converted basis, there were 467,370 options exercisable
into Holdings Class B common stock outstanding at December 31, 1995 at exercise
prices ranging from $.13 to $.52. The options expire not more than ten years
from the date of grant and were fully vested at December 31, 1995.
A summary of Class B stock option transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
OPTIONS OUTSTANDING
-----------------------------------
<S> <C> <C> <C>
NUMBER OF NUMBER OF
SHARES SHARES
AT $.52 AT $.13
PER SHARE PER SHARE TOTAL
----------- ---------- ----------
Converted from River Plan................................................... 24,611 1,013,837 1,038,448
Options exercised........................................................... (8,204) (562,874) (571,078)
----------- ---------- ----------
Balance at December 31, 1995................................................ 16,407 450,963 467,370
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
The 1995 Stock Option/Stock Issuance Plan (the "Plan") of Holdings
authorizes up to 4,000,000 shares of Holdings Class A common stock to be granted
no later than February 2005. Under the Plan, the Board of Directors of Holdings
may grant options to selected key employees, directors and consultants to the
Company to purchase shares of Holdings common stock, at a price not less than
85% of the fair market
F-50
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8--BENEFITS (CONTINUED)
value of the stock at the date of grant. The Plan provides for the grant of both
incentive stock options and non-qualified stock options. Generally, options
outstanding vest over a four to eight year period and are exercisable for up to
ten years from the grant date. At December 31, 1995, 633,343 options were
exercisable at $1.00 for an aggregate exercise price of $633.
A summary of Class A stock option transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
OPTIONS OUTSTANDING
OPTIONS -----------------------
AVAILABLE NUMBER OF PRICE PER
FOR GRANT SHARES SHARE
----------- ---------- -----------
<S> <C> <C> <C>
Options authorized.......................................................... 4,000,000 -- --
Options granted............................................................. (3,668,656) 3,668,656 $ 1.00
Options exercised........................................................... -- (938) --
Options forfeited on termination of employment.............................. 360,516 (360,516) --
----------- ---------- -----
Balance at December 31, 1995................................................ 691,860 3,307,202 $ 1.00
----------- ---------- -----
----------- ---------- -----
</TABLE>
During 1995, the Company issued a 3 for 1 stock dividend to all holders of
record of Class A and Class B common stock held at the close of business on
February 1, 1995.
The Company maintains a defined contribution savings plan which covers
substantially all of its U.S. employees. Contributions under the plan amounted
to $757 for the year ended December 31, 1995.
The Company was self-insured for medical benefits through June 30, 1995.
Effective July 1, 1995, the Company transitioned its medical and dental
insurance to coverage under a health maintenance organization.
F-51
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 9--GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Net sales to unaffiliated customers:
United States................................................................. $ 163,323
United Kingdom................................................................ 18,217
Germany....................................................................... 18,516
Spain......................................................................... 10,248
Other......................................................................... 30,667
------------
$ 240,971
------------
------------
Income (loss) before income taxes:
United States................................................................. $ (61,462)
United Kingdom................................................................ 3,869
Germany....................................................................... 127
Spain......................................................................... 587
Other......................................................................... 1,398
Eliminations and adjustments.................................................. (662)
------------
$ (56,143)
------------
------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Total assets:
United States................................................................. $ 190,640
United Kingdom................................................................ 17,384
Germany....................................................................... 7,230
Spain......................................................................... 11,860
Other......................................................................... 17,216
Eliminations and adjustments.................................................. (28,335)
------------
$ 215,995
------------
------------
</TABLE>
Transfers between geographic areas are made at prices calculated to reflect
a profit attributable to manufacturing operations.
Remittances to the United States are subject to various regulations of the
respective governments as well as to fluctuations in exchange rates.
NOTE 10--LITIGATION
River is a defendant in an action alleging misappropriation of trade secrets
and other proprietary information of the plaintiff. The Company believes the
allegations to be without merit and has filed a countersuit with respect to this
matter. In addition, the Company is a party to various other legal actions which
have occurred in the normal course of business. Management believes the Company
has meritorious
F-52
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 10--LITIGATION (CONTINUED)
defenses and intends to defend vigorously against these allegations and claims.
In management's opinion, liabilities arising from the above matters, if any,
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
NOTE 11--COMMITMENTS AND CONTINGENCIES
In connection with the Acquisition, Lilly agreed to perform certain
administrative functions for the Company's foreign subsidiaries including the
collection of receivables and the payment of certain direct expenses incurred by
Lilly on behalf of the Company. The Company agreed to reimburse Lilly for such
direct expenses and anticipates that a payment of less than $8,000 will be made
to Lilly in 1996. The Company is currently waiting for notification from Lilly
of the amount owed under this arrangement. Management does not believe that this
amount will be materially different from the amount accrued at December 31,
1995.
The Company is obligated to pay additional purchase consideration related to
previous acquisitions. As discussed in Note 5, the Company is obligated to pay
additional consideration to SIS. In connection with another acquisition, the
Company is contingently liable to certain prior shareholders of the acquiree for
up to approximately $1,850 for additional purchase consideration through 1996,
based upon the acquired entity achieving certain sales and pre-tax performance
in each year subsequent to such acquisition. Any additional consideration paid
will be treated as additional cost of the acquired entity.
NOTE 12--RESTRUCTURING
In 1995, management approved and committed the Company to a non-voluntary
termination plan in compliance with the terms of the Acquisition purchase
agreement in an effort to reduce operating expenses. The terminations were not
concentrated in one particular area of the Company's operations and the plan
does not contemplate any significant changes to the operations or product lines
that the Company offers. In connection with these terminations the Company
charged severance and related costs of $5,319 to earnings. As of December 31,
1995, the remaining accrual related to these terminations totaled $1,510.
NOTE 13--SUBSEQUENT EVENT
On March 29, 1996, the Company amended and restated its Bank Credit
Facility. The amended and restated senior credit facility (the "Facility")
matures on March 29, 1999 and provides for borrowings of up to $40,000, secured
by substantially all U.S. domestic assets. Borrowings under the Facility bear
interest at a rate equal to the Alternate Base Rate ("ABR") plus 0.25% or
Adjusted LIBOR plus 1.50%, at the option of the Company. The pricing is subject
to change quarterly based upon certain debt and interest coverage ratios.
NOTE 14--GUARANTOR SUBSIDIARY
On August 23, 1996, the Company entered into an Agreement and Plan of Merger
among the Company; IVAC Medical Systems, Inc.; IMED Corporation ("IMED"), a
subsidiary of Advanced Medical, Inc.; a wholly owned subsidary of IMED and the
holders of Common Stock of Holdings named therein, pursuant to which IMED will
acquire, directly or indirectly through a wholly owned subsidiary, 100% of
F-53
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 14--GUARANTOR SUBSIDIARY (CONTINUED)
the capital stock of Holdings for approximately $400,000 less certain
indebtedness. The proposed transaction received regulatory approval in October
1996 and is subject to certain other closing conditions, including the
completion of the financing necessary to consummate the merger (the "Merger").
Following the consummation of the Merger, the operations of IMED and IVAC
Medical Systems, Inc. will be transferred to Holdings and Holdings will become
the successor obligor under the Senior Subordinated Notes due 2006 of IMED (the
"IMED Notes") that will be issued in connection with the Merger. In addition,
certain subsidiaries of Holdings will guarantee the IMED Notes. Accordingly,
condensed combining financial information for Holdings and its guarantor, IVAC
Overseas Holdings, Inc., and non-guarantor subsidiaries at December 31, 1995 and
for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
NON
CONDENSED BALANCE SHEET PARENT GUARANTOR GUARANTOR
DECEMBER 31, 1995 COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
- ----------------------------------------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets................................. $ 71,181 $ 45,683 -- $ (1,241) $ 115,623
Non-current assets............................. 120,431 20,368 $ 16,027 (56,454) 100,372
----------- ----------- ----------- ------------ ------------
$ 191,612 $ 66,051 $ 16,027 $ (57,695) $ 215,995
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
Current liabilities............................ $ 44,327 $ 38,872 $ 7,859 $ (17,285) $ 73,773
Long-term debt and other liabilities........... 161,052 1,685 -- -- 162,737
----------- ----------- ----------- ------------ ------------
205,379 40,557 7,859 (17,285) 236,510
Common stock and other shareholders' equity.... (13,767) 25,494 8,168 (40,410) (20,515)
----------- ----------- ----------- ------------ ------------
$ 191,612 $ 66,051 $ 16,027 $ (57,695) $ 215,995
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
NON
CONDENSED STATEMENT OF OPERATIONS PARENT GUARANTOR GUARANTOR
FOR THE YEAR ENDED DECEMBER 31, 1995 COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
- ------------------------------------------------ ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 203,767 $ 78,442 -- $ (41,238) $ 240,971
Cost of sales................................... 144,089 55,350 -- (41,570) 157,869
---------- ----------- ----------- ------------ ------------
59,678 23,092 -- 332 83,102
Operating expenses.............................. 73,114 40,674 -- 994 114,782
Interest (income) expense, net.................. 23,168 1,295 -- -- 24,463
---------- ----------- ----------- ------------ ------------
Income (loss) before income taxes and equity
interest in subsidiary income................. (36,604) (18,877) -- (662) (56,143)
Equity interest in subsidiary income............ -- -- $ 730 (730) --
Provision for (benefit from) income taxes....... 4 (382) 256 (256) (378)
---------- ----------- ----------- ------------ ------------
Net income (loss)............................... $ (36,608) $ (18,495) $ 474 $ (1,136) $ (55,765)
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-54
<PAGE>
IVAC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 14--GUARANTOR SUBSIDIARY (CONTINUED)
<TABLE>
<CAPTION>
NON
CONDENSED STATEMENT OF CASH FLOWS PARENT GUARANTOR GUARANTOR
FOR THE YEAR ENDED DECEMBER 31, 1995 COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
- ------------------------------------------------ ---------- ----------- ----------- ------------ ------------
Net cash (used) provided by operating
activities.................................... $ 31,580 $ 7,625 -- $ (1,062) $ 38,143
<S> <C> <C> <C> <C> <C>
Cash flows from investing activities:
Acquisitons, net of cash and cash equivalents
acquired.................................... (192,652) 1,859 $ (15,297) 15,297 (190,793)
Intercompany advances to River Medical........ (12,389) -- -- 12,389 --
Intercompany advances from Parent............. 12,389 15,297 (27,686) --
Capital expenditures, net..................... (7,678) (6,342) -- 268 (13,752)
Proceeds from sale of facility, net........... 25,258 -- -- -- 25,258
---------- ----------- ----------- ------------ ------------
Net cash (used) provided by investing
activities.................................... (187,461) 7,906 -- 268 (179,287)
---------- ----------- ----------- ------------ ------------
Cash flows from financing activities:
Capital contributions......................... 20,000 -- -- -- 20,000
Exercise of stock options..................... 70 -- -- -- 70
Borrowings under term loan and revolving
credit arrangements......................... 68,500 -- -- -- 68,500
Proceeds from bridge notes.................... 80,000 -- -- -- 80,000
Proceeds from senior notes.................... 100,000 -- -- -- 100,000
Proceeds from junior subordinated notes....... 30,000 -- -- -- 30,000
Repayment of term loan and revolving debt..... (49,000) -- -- -- (49,000)
Repayment of bridge notes..................... (80,000) -- -- -- (80,000)
Debt issue costs.............................. (11,486) -- -- -- (11,486)
Capital lease payments........................ -- (479) -- -- (479)
---------- ----------- ----------- ------------ ------------
Net cash (used) provided by financing
activities.................................... 158,084 (479) -- -- 157,605
---------- ----------- ----------- ------------ ------------
Effect of exchange rate changes on cash......... -- 1,053 -- 794 1,847
---------- ----------- ----------- ------------ ------------
Net increase in cash and cash equivalents....... 2,203 16,105 -- -- 18,308
Cash and cash equivalents at the beginning of
the period.................................... -- -- -- -- --
---------- ----------- ----------- ------------ ------------
Cash and cash equivalents at the end of the
period........................................ $ 2,203 $ 16,105 -- -- $ 18,308
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
IVAC Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of shareholder's equity
present fairly, in all material respects, the financial position of IVAC
Corporation and its subsidiaries at December 31, 1994, and the results of their
operations and their cash flows for the year in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Diego, California
June 29, 1995
F-56
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
IVAC Corporation
We have audited the accompanying consolidated balance sheet of IVAC
Corporation and subsidiaries and certain IVAC related entities as of December
31, 1993 and the related consolidated statements of operations, shareholder's
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of IVAC
Corporation and subsidiaries and certain IVAC related entities at December 31,
1993 and the consolidated results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/_Ernst & Young LLP____
ERNST & YOUNG LLP
San Diego, California
February 28, 1994
F-57
<PAGE>
IVAC CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
<S> <C> <C>
1993 1994
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 4,683 $ 3,226
Accounts receivable, net................................................................ 45,516 43,324
Receivable from Lilly................................................................... 43,963 1,581
Current portion of contract receivables, net............................................ 6,753 7,014
Inventories............................................................................. 49,696 43,828
Prepaid expenses and other current assets............................................... 7,874 3,333
---------- ----------
Total current assets................................................................ 158,485 102,306
Long-term contract receivables, net....................................................... 15,965 18,164
Property, plant and equipment, net........................................................ 54,087 50,095
Intangible assets, net.................................................................... 20,372 3,579
---------- ----------
$ 248,909 $ 174,144
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable........................................................................ $ 9,330 $ 7,950
Accrued warranty........................................................................ 6,502 7,339
Accrued employee liabilities............................................................ 7,354 4,715
Current portion of long-term debt....................................................... -- 1,571
Other current liabilities............................................................... 15,842 6,607
---------- ----------
Total current liabilities........................................................... 39,028 28,182
Long-term debt............................................................................ 12,000 10,050
Other non-current liabilities............................................................. 5,370 5,931
Commitments and contingencies (Note 14)
Shareholder's equity:
Common stock, no par value; 100 shares authorized, issued and outstanding............... 162 --
Additional paid-in capital.............................................................. 37,200 58,343
Retained earnings....................................................................... 158,126 73,574
Foreign currency translation adjustment................................................. (2,977) (1,936)
---------- ----------
Total shareholder's equity.......................................................... 192,511 129,981
---------- ----------
$ 248,909 $ 174,144
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-58
<PAGE>
IVAC CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
<S> <C> <C>
1993 1994
---------- ----------
Net Sales................................................................................. $ 214,244 $ 223,227
Cost of sales............................................................................. 125,542 146,659
---------- ----------
Gross profit.......................................................................... 88,702 76,568
Sales and marketing....................................................................... 40,190 45,055
General and administrative................................................................ 16,032 21,586
Research and development.................................................................. 18,742 18,504
Excess purchase price write-down.......................................................... -- 13,143
Expense allocation from Lilly............................................................. 6,416 7,480
Restructuring and special items........................................................... 3,967 --
Other expense, net........................................................................ 269 3,560
---------- ----------
Income (loss) from operations......................................................... 3,086 (32,760)
Interest income (expense):
Contract interest income................................................................ 2,724 2,927
Interest income (expense), net.......................................................... 1,316 (2,227)
---------- ----------
Income (loss) before income taxes..................................................... 7,126 (32,060)
Provision for income taxes................................................................ 1,710 3,793
---------- ----------
Net income (loss)..................................................................... $ 5,416 $ (35,853)
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-59
<PAGE>
IVAC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
<S> <C> <C>
1993 1994
--------- ----------
Cash flows from operating activities:
Net income (loss)......................................................................... $ 5,416 $ (35,853)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization........................................................... 10,249 15,119
Excess purchase price write-down........................................................ -- 13,143
Lilly allocated expenses contributed as paid-in-capital................................. 4,300 7,480
Loss on disposal of fixed assets........................................................ 181 1,363
Changes in assets and liabilities:
Receivables........................................................................... (1,828) 766
Inventories........................................................................... (2,548) 5,481
Prepaid expenses and other assets..................................................... 112 3,864
Accounts payable...................................................................... 3,383 (1,744)
Accrued warranty...................................................................... 100 1,584
Accrued employee liabilities.......................................................... (589) (2,514)
Other liabilities..................................................................... 2,398 2,523
Payables to and receivables from Lilly, net........................................... (13,059) (4,710)
--------- ----------
Net cash provided by operating activities........................................... 8,115 6,502
Cash flows from investing activities:
Capital expenditures, net................................................................. (9,920) (9,000)
Acquisitions.............................................................................. (26,801) --
--------- ----------
Net cash used by investing activities............................................... (36,721) (9,000)
--------- ----------
Cash flows from financing activities:
Acquisition funding borrowed from Lilly................................................... 26,469 --
Line of credit advances................................................................... 3,748 --
--------- ----------
Net cash provided by financing activities........................................... 30,217 --
--------- ----------
Effect of exchange rate changes on cash..................................................... (2,328) 1,041
--------- ----------
Net decrease in cash and cash equivalents................................................... (717) (1,457)
Cash and cash equivalents at the beginning of the year...................................... 5,400 4,683
--------- ----------
Cash and cash equivalents at the end of the year............................................ $ 4,683 $ 3,226
--------- ----------
--------- ----------
Supplemental disclosure of cash flow information:
Cash paid for income taxes................................................................ $ 10,000 $ 1,854
Supplemental non-cash financing activities:
Dividends paid through forgiveness of intercompany receivable from Lilly.................. -- $ 48,699
Net liabilities assumed by Lilly credited to paid-in-capital.............................. -- $ 13,663
Supplemental non-cash investing activities:
Acquisition financed through forgiveness of intercompany receivable from Lilly............ $ 1,071 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-60
<PAGE>
IVAC CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN TOTAL
COMMON STOCK ADDITIONAL CURRENCY SHARE-
-------------------- PAID-IN ACCUMULATED TRANSLATION HOLDERS'
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
--------- --------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...................... 100 $ 162 $ 32,900 $ 152,710 $ (646) $ 185,126
Transactions with Lilly:
Lilly corporate expense allocation............ -- -- 4,300 -- -- 4,300
Foreign currency translation adjustment......... -- -- -- -- (2,331) (2,331)
Net income...................................... -- -- -- 5,416 -- 5,416
--------- --------- ----------- ------------ ----------- ----------
Balance at December 31, 1993...................... 100 162 37,200 158,126 (2,977) 192,511
Transactions with Lilly:
Lilly corporate expense allocation............ -- -- 7,480 -- -- 7,480
Assumption of net liabilities................. -- -- 13,663 -- -- 13,663
Non-cash dividend............................. -- -- -- (48,699) -- (48,699)
Other......................................... -- (162) -- -- -- (162)
Foreign currency translation adjustment......... -- -- -- -- 1,041 1,041
Net income...................................... -- -- -- (35,853) -- (35,853)
--------- --------- ----------- ------------ ----------- ----------
Balance at December 31, 1994...................... 100 $ -- $ 58,343 $ 73,574 $ (1,936) $ 129,981
--------- --------- ----------- ------------ ----------- ----------
--------- --------- ----------- ------------ ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-61
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1--DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
IVAC Corporation ("IVAC" or the "Company") designs, manufactures,
distributes and services intravenous infusion therapy and vital signs
measurement instruments and related disposables and accessories. Prior to and
during fiscal 1994, the Company operated as a wholly owned subsidiary of Eli
Lilly and Company ("Lilly"). As more fully discussed in Note 15, after the close
of business on December 31, 1994, the outstanding capital stock of IVAC was
acquired by IVAC Holdings, Inc. ("Holdings"). The accompanying consolidated
financial statements do not reflect adjustments resulting from this subsequent
purchase transaction.
The consolidated financial statements include the accounts and results of
operations of the Company, its wholly owned subsidiary MIS Scandinavia A.B., and
affiliate activities conducted through subsidiaries or divisions of Lilly. Where
activities were conducted through a subsidiary or division of Lilly or related
to the joint venture in Spain, productive assets such as accounts receivable,
inventory and equipment specifically related to IVAC operations are included in
the accompanying consolidated balance sheets. With respect to the operations of
Germany, there are certain assets and liabilities included in the accompanying
consolidated balance sheets prior to 1994 which related to affiliated companies.
Management believes the value of these net assets is not material. All
significant intercompany accounts and transactions have been eliminated in
consolidation. These statements reflect the financial position, results of
operations, and cash flows of the Company as a component of Lilly and may not be
indicative of the actual results of operations and financial position of the
Company under new ownership.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with maturities of 90
days or less at date purchased.
REVENUE RECOGNITION
Revenue is recorded upon product shipment, net of an allowance for estimated
returns, or service delivery. The Company also sells instruments via long-term
financing arrangements to a number of hospitals under No Capital Agreements
("NCA's"). These agreements allow hospitals to acquire instruments with no
initial payment. The sales price for the instruments is recovered via surcharges
applied to minimum purchase commitments of related disposables. The term of the
financing is generally three to five years, with interest at rates of 9% to 15%.
The related contract receivables at December 31, 1994 and 1993 are presented net
of unearned finance revenue of $6,468 and $5,315, respectively which reflects
the remaining interest to be earned on unshipped disposable. Unearned finance
revenue is calculated using the inherent rate of interest on each NCA, the
expected disposable shipment period and the principal balance financed. Finance
revenue is recognized as disposables are shipped using a reducing principal
balance method which approximates the interest method. Contract provisions
include liquidated damage clauses which are sufficient to recover the sales
price of the instruments in the event of customer cancellation.
F-62
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. Credit
risk associated with this concentration is limited due to the large number and
geographic dispersion of the accounts and the overall stability of the hospital
industry. Management believes that adequate provision has been made for such
credit risk.
INVENTORIES
Inventories are stated at the lower of cost, determined by the first-in,
first-out (FIFO) method, or market.
EXCESS PURCHASE PRICE
Excess purchase price arising from acquisitions is amortized over estimated
useful lives, ranging from 5 to 7 years, using the straight-line method. At
December 31, 1994 and 1993, excess purchase price is presented net of
accumulated amortization of $1,186 and $1,562, respectively.
At each balance sheet date, the Company evaluates the realizability of
excess purchase price based upon management's best estimations of future
discounted cash flows. If future discounted cash flows are less than the
carrying amount of the excess purchase price, an adjustment is recorded to
reduce the excess purchase price to its fair value. Based on its most recent
analysis, the Company believes that no material impairment existed at December
31, 1994 (Notes 3 and 4).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost. Additions to
property, plant and equipment, including significant betterments and renewals
are capitalized. Maintenance and repair costs are charged to expense as
incurred. Depreciation is computed using the straight-line method over estimated
useful lives of 3 to 50 years. Depreciation expense amounted to $12,274 and
$9,257 during fiscal 1994 and 1993, respectively.
INCOME TAXES
The Company's operations have historically been included in consolidated
income tax returns filed by Lilly. Income tax expense in the accompanying
consolidated financial statements has been determined on a separate return
basis, in accordance with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Differences between income tax expense computed on a separate return basis
and the amount actually charged to IVAC by Lilly has been reflected on the
consolidated balance sheet as an adjustment to paid-in capital.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiary and affiliates
are translated into U.S. dollars using period-end exchange rates for assets and
liabilities and weighted average exchange rates
F-63
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during the period for revenues and expenses. Gains and losses from translation
are excluded from results of operations and accumulated as a separate component
of shareholder's equity.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1994 and 1993, the carrying amount of the Company's
financial instruments including cash and cash equivalents, trade receivables and
payables, approximated their fair value due to their short term maturities. The
fair value of the Company's long-term contract receivables are estimated by
discounting future cash flows using discount rates that reflect the risk
associated with similar types of loans. At December 31, 1994 and 1993, the
estimated fair values of both the Company's long-term contract receivables and
long-term debt approximate their carrying values.
EARNINGS PER SHARE
The ownership change of IVAC Corporation that occurred after the close of
business on December 31, 1994 (Note 15) has resulted in the historical earnings
per share calculations becoming irrelevant for purposes of comparability with
future periods. As such, historical earnings per share calculations have not
been presented.
NOTE 3--ACQUISITIONS
In September 1993, IVAC completed the acquisitions of certain of the assets
of the MiniMed product line, a three-channel infusion pump system, from Siemens
Infusion Systems, Ltd. ("SIS"). The acquisition was accounted for as a purchase.
The purchase price was $38,206 and included guaranteed minimum royalties payable
annually from 1996 through 1999. The purchase price was allocated to assets and
liabilities as follows; inventory ($19,173); property and equipment ($2,675);
other assets ($314); accounts payable ($154); accrued minimum royalty liability
($12,000) and accrued warranty ($1,802), with the remaining excess purchase
price over net assets acquired of ($18,000). Under provisions of the acquisition
agreement, the Company is required to pay royalties to SIS in 1995 based on 1994
product sales and will pay in 1996 through 1999 based on the greater of 8% of
the prior year product sales or a guaranteed minimum of $3,000 per year. Excess
purchase price and other intangibles associated with this acquisition are being
amortized on a straight-line basis over 7 years (Note 4).
The following unaudited pro forma summary reflects IVAC's consolidated
results of operations as if the MiniMed product line had been acquired from SIS
as of the beginning of 1993. This summary includes the impact of adjustments for
related income tax effects and the amortization of intangibles associated with
the acquisition.
<TABLE>
<CAPTION>
1993
(UNAUDITED)
-----------
<S> <C>
Sales............................................................................ $ 239,700
Net loss......................................................................... (13,500)
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire year, nor are
they intended to be a projection of future results.
F-64
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4--EXCESS PURCHASE PRICE ADJUSTMENT
Since the Company's acquisition of the MiniMed product line from SIS in
September 1993, the Company discovered design and other defects of the product
line and evaluated market conditions. Upon the discontinuance of production in
the fourth quarter of 1994, the Company determined that sales and earnings of
the product line acquired from SIS were significantly below that projected at
the time of acquisition. Accordingly, the Company recorded a write-down of
excess purchase price of $13,143 to reduce the carrying value of the excess
purchase price to its estimated fair value.
The methodology used to assess the recoverability of the excess purchase
price recorded in connection with the acquisition was to discount future
projected cash flows over the remaining estimated useful life of the product
line. The projected cash flows represent management's best estimate of the
Company's future results of operations related to this product line. The Company
discounted the resulting projected cash flows using a discount rate of 12% which
is considered a reasonable approximation of the Company's cost of capital at the
time of impairment. Based on the estimated discounted cash flows, the Company
determined that approximately $1,100 of the remaining unamortized excess
purchase price would be recoverable.
NOTE 5--RESTRUCTURING AND SPECIAL ITEMS
In 1993, Lilly took actions designed to enhance its competitiveness in the
health care markets, to reduce expenses and improve efficiencies. As a result of
these actions, IVAC recognized restructuring and special charges amounting to
$4,000 in 1993. Restructuring costs include those amounts that arose as a direct
result of management's commitment to revise strategic actions. Special charges
represent unusual, nonrecurring expense items.
The 1993 restructuring actions relate to decisions by the Company to
reorganize certain of its operations outside the U.S. ($3,700) and to realign
its U.S. field sales force ($300).
F-65
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6--COMPOSITION OF CERTAIN CONSOLIDATED FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
<S> <C> <C>
1993 1994
--------- ---------
Accounts Receivable:
Trade................................................................. $ 47,667 $ 47,064
Less allowance for doubtful accounts.................................. (2,151) (3,740)
--------- ---------
$ 45,516 $ 43,324
--------- ---------
--------- ---------
Inventories:
Finished products..................................................... $ 19,863 $ 18,974
Work-in-process....................................................... 10,665 5,985
Raw materials......................................................... 22,827 22,129
--------- ---------
53,355 47,088
Less reserve.......................................................... (3,659) (3,260)
--------- ---------
$ 49,696 $ 43,828
--------- ---------
--------- ---------
Property, plant and equipment:
Land.................................................................. $ 1,788 $ 1,788
Buildings............................................................. 38,970 42,421
Equipment............................................................. 75,902 68,031
Construction in process............................................... 7,210 5,112
--------- ---------
123,870 117,352
Less accumulated depreciation......................................... (69,783) (67,257)
--------- ---------
$ 54,087 $ 50,095
--------- ---------
--------- ---------
Other current liabilities:
Line of credit........................................................ $ 3,700 $ --
Restructuring charges................................................. 3,720 --
Accrued contract termination costs.................................... -- 1,500
Deferred revenue...................................................... 1,300 1,057
Other miscellaneous accruals.......................................... 7,122 4,050
--------- ---------
$ 15,842 $ 6,607
--------- ---------
--------- ---------
Other non-current liabilities:
Minority interest..................................................... $ 2,767 $ 3,625
Other................................................................. 2,603 2,306
--------- ---------
$ 5,370 $ 5,931
--------- ---------
--------- ---------
</TABLE>
NOTE 7--DEBT
In 1993, the Company obtained a line of credit with Hypo Bank in Germany to
fund the working capital needs of Lilly's medical device companies located
there. Borrowings under the line of credit, which
F-66
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7--DEBT (CONTINUED)
amounted to $3,700 at December 31, 1993 and were guaranteed by Lilly, became due
August 1994. The borrowings were repaid at maturity.
In connection with the acquisition of the MiniMed product line, the Company
is obligated to pay additional consideration to SIS of $1,571 based on 1994
product sales and the greater of $3,000 per year or 8% of the prior year's
product sales in 1996 through 1999. In 1994, the minimum $12,000 liability was
discounted at an imputed interest rate of 7% with a corresponding reduction in
excess purchase price. The unamortized discount, which is amortized using the
interest method over the term of the payments, is $1,950 at December 31, 1994.
NOTE 8--TRANSACTIONS WITH LILLY
Operating expenses include certain services performed by Lilly or its
affiliates and billed directly to IVAC and certain corporate expenses which have
been allocated to the Company based on established allocation methods which in
the opinion of management reflect IVAC's proportionate share of such expenses.
Other transactions include intercompany purchases and sales, service fees and
interest.
A summary of significant actual expenditures charged by or (billed to) Lilly
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1993 1994
--------- ---------
Personnel and benefits..................................................... $ 8,193 $ 8,321
Insurance.................................................................. 1,455 1,265
Information systems........................................................ (2,808) (2,589)
Interest................................................................... (1,666) 1,088
Service charges from Physio-Control Corporation............................ 1,275 --
Miscellaneous.............................................................. (540) (3,099)
--------- ---------
$ 5,909 $ 4,986
--------- ---------
--------- ---------
</TABLE>
A summary of corporate expense allocations follows:
<TABLE>
<S> <C> <C>
Business planning........................................... $ 1,614 $ 1,902
Corporate expenses.......................................... 3,690 3,676
International expenses...................................... 1,093 1,103
Other....................................................... 19 799
--------- ---------
$ 6,416 $ 7,480
--------- ---------
--------- ---------
</TABLE>
Lilly did not require the intercompany payable resulting from corporate
expense allocations to be paid. Accordingly, these amounts have been reflected
as an increase to additional paid-in capital.
In addition, other intercompany balances due to and from Lilly during 1994
were settled in contemplation of and pursuant to the sale of IVAC. In May 1994,
IVAC forgave a net receivable due from Lilly in the amount of $48,699. This
transaction has been reflected as a dividend to Lilly in the accompanying
F-67
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8--TRANSACTIONS WITH LILLY (CONTINUED)
financial statements. In December 1994, Lilly forgave a net intercompany
receivable from IVAC amounting to $19,689. This transaction has been reflected
as an increase to additional paid-in capital in the accompanying financial
statements.
In accordance with the terms of the sale of IVAC, Lilly also assumed
responsibility for employee-related and certain other liabilities existing prior
to December 31, 1994 and IVAC forgave certain additional intercompany balances
due from Lilly. The net effect of this transaction was a reduction in additional
paid-in capital of $6,026.
NOTE 9--LEASES
Total rental expense amounted to approximately $2,368 and $2,403 for the
years ended December 31, 1994 and 1993, respectively. Leases are generally for
computer and office equipment. Future minimum rental commitments as of December
31, 1994 for noncancellable leases are not material.
NOTE 10--INCOME TAXES
The Company accounts for income taxes on the liability method under SFAS
109. The following is the composition of income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1993 1994
--------- ---------
Current:
Federal................................................................. $ (228) $ (1,208)
Foreign................................................................. 1,830 748
State................................................................... 245 495
--------- ---------
1,847 35
Deferred:
Federal................................................................. (137) (8,369)
State................................................................... -- (1,937)
--------- ---------
Total before valuation allowance.......................................... 1,710 (10,271)
Valuation allowance....................................................... -- 14,064
--------- ---------
Total..................................................................... $ 1,710 $ 3,793
--------- ---------
--------- ---------
</TABLE>
F-68
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 10--INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
<S> <C> <C>
1993 1994
--------- ----------
Deferred tax assets:
Excess purchase price write-down...................................... $ -- $ 5,187
Restructuring and other related charges............................... 2,778 --
Inventory............................................................. 3,082 2,484
Product return/warranty reserves...................................... -- 2,937
State income tax...................................................... 655 2,017
Rebate reserve........................................................ -- 1,649
Allowance for doubtful accounts....................................... -- 1,311
Other................................................................. 2,367 1,794
--------- ----------
Total deferred tax assets............................................... 8,882 17,379
--------- ----------
Deferred tax liabilities:
Property and equipment................................................ (3,881) (3,315)
Prepaid employer benefits............................................. (1,545) --
--------- ----------
Total deferred tax liabilities.......................................... (5,426) (3,315)
--------- ----------
Net deferred tax assets................................................. 3,456 14,064
--------- ----------
Valuation allowance..................................................... -- (14,064)
--------- ----------
Net deferred taxes...................................................... $ 3,456 $ 0
--------- ----------
--------- ----------
</TABLE>
SFAS 109 specifies that deferred tax assets are to be reduced by a valuation
allowance if it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Based on uncertainty as to whether IVAC will
generate adequate future income to recover its deferred tax assets at December
31, 1994, management recorded a valuation allowance against such net deferred
tax assets.
F-69
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 10--INCOME TAXES (CONTINUED)
Following is a reconciliation of the effective income tax rate:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1993 1994
--------- ---------
Tax benefit at statutory rate.......................................... 35.0% (34.0)%
Add (deduct):
State taxes, net of federal tax benefit.............................. 1.7 (1.7)
Benefit from foreign sales corporation............................... (8.5) (.5)
Research tax credit.................................................. (4.4) (1.1)
Effect of international operations................................... (.5) 3.6
Revisions of prior year estimates.................................... .6 (2.2)
Lilly's assumption of net liabilities................................ -- 3.9
--------- ---------
23.9 (32.0)
Valuation allowance.................................................. -- 43.9
--------- ---------
23.9% 11.9%
--------- ---------
--------- ---------
</TABLE>
NOTE 11--BENEFITS
Effective December 30, 1994, in connection with the subsequent sale of IVAC
discussed in Note 15, the Company's U.S. noncontributory defined benefit
retirement plan was terminated and the assets and liabilities of the IVAC
Retirement Plan were merged into The Lilly Retirement Plan. All eligible
participants in the IVAC Retirement Plan became participants in The Lilly
Retirement Plan, and all benefits previously earned will be paid by The Lilly
Retirement Plan.
The Company's U.S. noncontributory defined benefit retirement plan covered
substantially all United States employees. Benefits under the domestic plan were
calculated by using one of several formulas. These formulas were based on a
combination of the following: (1) years of service; (2) final average earnings;
(3) primary social security benefit; and (4) age.
The Company's funding policy was consistent with local governmental and tax
funding regulations. Generally, pension costs accrued were funded. Plan assets,
which were maintained in a trust with Lilly and other Lilly affiliate plan
assets, consisted primarily of equity and fixed income instruments.
F-70
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 11--BENEFITS (CONTINUED)
Net pension expense for the Company's U.S. noncontributory defined benefit
retirement plan included the following components:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1993 1994
--------- ---------
Service cost--benefits earned during the year........................... $ 1,290 $ 1,743
Interest cost on projected benefit obligations.......................... 1,172 1,394
Actual return on assets (gain).......................................... (1,595) (1,492)
Net amortization and deferral........................................... 973 466
--------- ---------
$ 1,840 $ 2,111
--------- ---------
--------- ---------
</TABLE>
The funded status and amounts recognized in the consolidated balance sheets
for the Company's U.S. defined benefit retirement plan at December 31 were as
follows:
<TABLE>
<CAPTION>
1993
---------
<S> <C>
Plan assets at fair value.......................................................... $ 13,189
Actuarial present value of benefit obligations:
Vested benefits.................................................................. 7,993
Nonvested benefits............................................................... 1,901
---------
Accumulated benefit obligation..................................................... 9,894
Effect of projected future salary increase....................................... 8,792
---------
Projected benefit obligation....................................................... 18,686
---------
Funded status...................................................................... (5,497)
Unrecognized net gain.............................................................. 683
Unrecognized prior service cost.................................................... 7,057
---------
Prepaid pension cost............................................................... $ 2,243
---------
---------
</TABLE>
The assumptions used to develop net periodic pension expense and the
actuarial present value of projected benefit obligations are shown below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1993 1994
--------- ---------
Discount rate.......................................................... 7.5% 7.5%
Rate of increase in future compensation levels......................... 4.5-8.0% 4.5-8.0%
Expected long-term return on assets.................................... 11.0% 11.0%
</TABLE>
The reduction of the discount rate at December 31, 1993, increased the
projected benefit obligation approximately $3,934.
In addition to employees covered by the above U.S. noncontributory defined
benefit retirement plan, the Company also had employees outside the U.S. who
were covered by retirement plans maintained by
F-71
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 11--BENEFITS (CONTINUED)
Lilly or its affiliates. No allocation of expenses for the Company's employees
participating in these plans has been included in the above information.
However, expenses attributable to the Company's employees at these locations are
included in the consolidated statements of operations.
The Company was self-insured for medical and dental benefits. Medical and
dental expense recorded in 1994 and 1993 was $6,884 and $4,216.
Lilly has assumed responsibility for all employee benefit related
liabilities as of December 31, 1994.
The Company's employees are eligible to contribute to the Company's defined
contribution savings plan, which may be matched by the Company. The Company's
expense under the plan totaled $1,215 and $1,800 for the years ended December
31, 1994 and 1993.
NOTE 12--GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
<S> <C> <C>
1993 1994
---------- ----------
Net sales to unaffiliated customers:
United States....................................................... $ 151,728 $ 153,383
United Kingdom...................................................... 14,308 17,332
Germany............................................................. 14,001 14,960
Spain............................................................... 8,715 9,146
Other............................................................... 25,492 28,406
---------- ----------
$ 214,244 $ 223,227
---------- ----------
---------- ----------
Income (loss) before income taxes:
United States....................................................... $ 9,208 $ (35,218)
United Kingdom...................................................... 1,418 3,576
Germany............................................................. (1,103) 423
Spain............................................................... 2,597 983
Other............................................................... (2,276) (500)
Eliminations and adjustments........................................ (2,718) (1,324)
---------- ----------
$ 7,126 $ (32,060)
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
<S> <C> <C>
1993 1994
---------- ----------
Total assets:
United States....................................................... $ 203,186 $ 140,706
United Kingdom...................................................... 16,266 9,345
Germany............................................................. 7,940 3,827
Spain............................................................... 7,526 7,766
Other............................................................... 15,402 14,949
Eliminations and adjustments........................................ (1,411) (2,449)
---------- ----------
$ 248,909 $ 174,144
---------- ----------
---------- ----------
</TABLE>
F-72
<PAGE>
IVAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 12--GEOGRAPHIC INFORMATION (CONTINUED)
Transfers between geographic areas are made at prices calculated to reflect
a profit attributable to manufacturing operations.
Remittances to the United States are subject to various regulations of the
respective governments as well as to fluctuations in exchange rates.
NOTE 13--LITIGATION
Prior to and in connection with the sale of IVAC, Lilly assumed
responsibility for the anticipated cost of resolution of certain legal claims
existing at December 31, 1994. Consequently, the related accrual is not
reflected within the accompanying financial statements. In addition, the Company
is a party to various other legal actions which have occurred in the normal
course of business. Management believes the Company has meritorious defenses and
intends to defend vigorously against these allegations and claims. As the
ultimate outcome of the matters is uncertain, no loss provisions have been
recorded in the accompanying financial statements. In management's opinion,
liabilities arising from these matters, if any, will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
NOTE 14--COMMITMENTS AND CONTINGENCIES
The Company is obligated to pay additional purchase consideration related to
two previous acquisitions. As discussed in Note 7, the Company is obligated to
pay additional consideration to SIS. In connection with another acquisition, the
Company is contingently liable for up to approximately $3,050 for additional
purchase consideration through 1996 based upon the acquired entity achieving
certain sales and pre-tax performance in each year.
NOTE 15--SUBSEQUENT EVENTS
After the close of business on December 31, 1994, Lilly sold the outstanding
stock of lVAC to Holdings, which was formed through the contribution of the
outstanding capital stock of River Medical, Inc. and cash from an investor group
including DLJ Merchant Banking Partners, L.P. and related investors, and other
investors. Through a series of subsequent transactions, River Medical, Inc.
became a wholly owned subsidiary of IVAC.
F-73
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL IN CONNECTION WITH THE
OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE
GUARANTEEING SUBSIDIARIES OR ANY OTHER PERSON. THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 17
The Exchange Offer........................................................ 26
The Merger................................................................ 35
Use of Proceeds........................................................... 36
Pro Forma Capitalization.................................................. 37
Pro Forma Condensed Consolidated Financial Statements..................... 38
Pro Forma Liquidity....................................................... 48
Selected Historical Consolidated Financial Data of IMED................... 50
Management's Discussion and Analysis of Financial Condition and Results of
Operations of IMED....................................................... 52
Selected Historical Consolidated Financial Data of IVAC................... 59
Management's Discussion and Analysis of Financial Condition and Results of
Operations of IVAC....................................................... 61
Business.................................................................. 71
Management................................................................ 93
Principal Stockholders.................................................... 100
Certain Relationships and Related Transactions............................ 101
Description of Notes...................................................... 102
Description of New Credit Facility........................................ 132
Plan of Distribution...................................................... 134
Legal Matters............................................................. 134
Experts................................................................... 135
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1997 ( DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THE UNSOLD ALLOTMENTS AND SUBSCRIPTIONS.
$200,000,000
IVAC HOLDINGS, INC.
OFFER TO EXCHANGE ITS
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2006, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, FOR ANY AND
ALL OF ITS OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2006
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Each of IVAC Holdings, Inc. (the "Company"), IVAC Overseas Holdings, Inc.
("IVAC Overseas") and IMED International Trading Corp. ("IMED Trading") is
incorporated under the laws of the State of Delaware. Each of (i) Section 145 of
the Delaware General Corporate Law, as amended, (ii) Articles SIXTH and SEVENTH
of the Company's Amended and Restated Certificate of Incorporation, (iii)
Article NINTH of IVAC Overseas' Certificate of Incorporation, (iv) Articles
SEVENTH and EIGHTH of IMED Trading's Certificate of Incorporation and (v)
ARTICLE IX of each of the Company's, IVAC Overseas' and IMED Trading's Amended
and Restated By-Laws contain indemnification provisions.
Set forth below is the text of Articles SIXTH and SEVENTH of the Company's
Amended and Restated Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director except: (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived
an improper personal benefit. No amendment to or repeal of this Article
Sixth shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment.
SEVENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said Section from and against any and
all of the expenses, liabilities or other matters referred to or covered by
said Section, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his official capacity and as
to action in another capacity while holding office, and shall continue as to
a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
Set forth below is the text of Article NINTH of IVAC Overseas' Certificate
of Incorporation:
NINTH: 1. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by Delaware Law.
2. (a) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that such person is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by Delaware Law. The right to indemnification
conferred in this ARTICLE NINTH shall also include the right to be paid by
the Corporation the expenses incurred in connection with any such proceeding
in advance of its final disposition to the fullest extent authorized by
Delaware Law. The right to indemnification conferred in this ARTICLE NINTH
shall be a contract right.
II-1
<PAGE>
(b) The Corporation may, by action of its Board of Directors, provide
indemnification to such of the officers, employees and agents of the
Corporation to such extent and to such effect as the Board of Directors
shall determine to be appropriate and authorized by Delaware Law.
3. The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss incurred by such person in any such capacity or arising
out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under Delaware Law.
4. The rights and authority conferred in this ARTICLE NINTH shall not be
exclusive of any other right which any person may otherwise have or
hereafter acquire.
5. Neither the amendment nor repeal of this ARTICLE NINTH, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws
of the Corporation, nor, to the fullest extent permitted by Delaware Law,
any modification of law, shall eliminate or reduce the effect of this
ARTICLE NINTH in respect of any acts or omissions occurring prior to such
amendment, repeal, adoption or modification.
Set forth below is the text of Articles SEVENTH and EIGHTH of IMED Trading's
Certificate of Incorporation:
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by
such director as a director except: (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived
an improper personal benefit. No amendment to or repeal of this Article
Sixth shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment.
EIGHTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said Section from and against any and
all of the expenses, liabilities or other matters referred to or covered by
said Section, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his official capacity and as
to action in another capacity while holding office, and shall continue as to
a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
Set forth below is the text of ARTICLE IX of each of the Company's, IVAC
Overseas' and IMED Trading's Amended and Restated By-Laws:
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
II-2
<PAGE>
he or she is or was a director or an officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered by such indemnitee in connection therewith; provided,
however, that, except as provided in Section 3 of this ARTICLE IX with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section 1 of this ARTICLE IX shall include the
right to be paid by the Corporation the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section 2 or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Sections 1 and 2 of this ARTICLE IX shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1
or 2 of this ARTICLE IX is not paid in full by the Corporation within sixty
(60) days after a written claim has been received by the Corporation, except
in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to
be paid also the expense of prosecuting or defending such suit. In (i) any
suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to
an advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met
the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) that
the indemnitee has not met such applicable standard of conduct, shall create
a presumption that
II-3
<PAGE>
the indemnitee has not meet the applicable standard of conduct or, in the
case of such a suit brought by the indemnitee, be a defense to such suit. In
any suit brought by the indemnitee to enforce a right to indemnification or
to an advancement of expenses hereunder, or brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking,
the burden of proving that the indemnitee is not entitled to be indemnified,
or to such advancement of expenses, under this ARTICLE IX or otherwise shall
be on the Corporation.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
to the advancement of expenses conferred in this ARTICLE IX shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent
of the provisions of this ARTICLE IX with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
The Company has entered into indemnification agreements with certain of its
directors, officers and employees providing each such person with
indemnification (and advancement of expenses) to the fullest extent permitted by
Delaware law.
The Company maintains officers' and directors' liability insurance which
insures against liabilities that officers and directors of the Company may incur
in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated November 19, 1996 among IMED Corporation, IMED International Trading Corp.,
Donaldson, Lufkin & Jenrette Securities Corporation, BT Securities Corporation, Bear, Stearns & Co.,
Inc. and Paribas Corporation.
1.2 Purchase Agreement Assumption Agreement dated as of November 26, 1996 between IVAC Holdings, Inc. and
IVAC Overseas Holdings, Inc.
2.1 Agreement and Plan of Merger dated August 23, 1996 among the Participating Stockholders, IMED
Corporation, IMED Merger Sub, Inc., IVAC Holdings, Inc. and IVAC Medical Systems, Inc. (Incorporated
by reference to Exhibit 2 to Advanced Medical Inc.'s report on Form 8-K dated August 23, 1996 (the
"AM August 8-K")).
2.2 Agreement of Stock Purchase and Plan of Recapitalization dated November 26, 1996 among Advanced
Medical, Inc., Decisions Incorporated and Jeffry M. Picower (Incorporated by reference to Exhibit
10.3 to Advanced Medical's report on Form 8-K dated December 11, 1996 (the "AM December 8-K")).
3.1 Amended and Restated Certificate of Incorporation of IVAC Holdings, Inc.
3.2 Amended and Restated By-Laws of IVAC Holdings, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.3 Certificate of Incorporation of IVAC Overseas Holdings, Inc.
3.4 Amended and Restated By-Laws of IVAC Overseas Holdings, Inc.
3.5 Certificate of Incorporation of IMED International Trading Corp.
3.6 Amended and Restated By-Laws of IMED International Trading Corp.
4.1 Indenture dated as of November 26, 1996 among IMED Corporation, IMED International Trading Corp. and
United States Trust Company of New York, as trustee (including form of Notes) (Incorporated by
reference to Exhibit 10.2 to the AM December 8-K).
4.2 Indenture Assumption Agreement dated as of November 26, 1996 between IVAC Holdings, Inc. and United
States Trust Company of New York, as trustee.
4.3 Supplemental Indenture dated as of November 26, 1996 between IVAC Overseas Holdings, Inc. and United
States Trust Company of New York, as trustee.
4.4 Registration Rights Agreement dated as of November 26, 1996 among IMED Corporation, IMED
International Trading Corp., Donaldson, Lufkin and Jenrette Securities Corporation, BT Securities
Corporation, Bear, Stearns & Co. Inc. and Paribas Corporation.
4.5 Registration Rights Assumption Agreement dated as of November 26, 1996 between IVAC Holdings, Inc.
and IVAC Overseas Holdings, Inc.
5 Opinion of Gordon Altman Butowsky Weitzen Shalov & Wein.*
10.1 Credit Agreement dated as of November 26, 1996 among Advanced Medical, Inc., IMED Corporation,
Various Lending Institutions, Bankers Trust Company, Banque Paribas and Donaldson, Lufkin & Jenrette
Securities Corporation (Incorporated by reference to Exhibit 10.1 to the AM December 8-K).
10.2 Employment Agreement dated as of August 23, 1996 among William J. Mercer, IMED Corporation and
Advanced Medical, Inc. (Incorporated by reference to Exhibit 10.4 to the AM December 8-K).
10.3 Employment Agreement dated as of August 23, 1996 among Joseph W. Kuhn, IMED Corporation and Advanced
Medical, Inc. (Incorporated by reference to Exhibit 10.5 to the AM December 8-K).
10.4 Advanced Medical, Inc.'s Third Amended and Restated 1988 Stock Option Plan (Incorporated by reference
to Annex IV to Advanced Medical, Inc.'s Proxy Statement dated July 25, 1994 for its Special Meeting
of Stockholders held on August 11, 1994 (the "AM August 1994 Proxy Statement")).
10.5 Advanced Medical, Inc.'s Second Amended and Restated 1990 Non-Qualified Stock Option Plan for
Non-Employee Directors (Incorporated by reference to Annex V to the AM August 1994 Proxy Statement).
10.6 Form of Indemnification Agreements between IVAC Holdings, Inc. and certain of its directors and
officers (Incorporated by reference to Exhibit 10.2 to IVAC Medical System, Inc.'s Report on Form
10-Q for the quarter ended June 30, 1996).
10.7 Wateridge Plaza Office Building Lease Agreement dated as of December 1, 1995 between California
Public Employees' Retirement System and IVAC Corporation (Incorporated by reference to Exhibit 10.12
to IVAC Medical Systems, Inc.'s Report on Form 10-K for the year ended December 31, 1995 (the "IVAC
1995 Form 10-K")).
10.8 Activity Road Lease Agreement dated as of October 25, 1995 between Rancho Bernardo Corporate Center
Ltd. and IVAC Corporation (Incorporated by reference to Exhibit 10.13 to the IVAC 1995 Form 10-K).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.9 Kenamar Court Lease Agreement dated as of January 24, 1996 between Brentcrest Properties, Inc. and
IVAC Corporation (Incorporated by reference to Exhibit 10.14 of the IVAC 1995 Form 10-K).
10.10 Development and Exclusive Distribution Agreement dated May 8, 1995 between Debiotech SA and IMED
Corporation (Incorporated by reference to Exhibit 10.7 of Amendment No. 2 dated January 31, 1996 to
Advanced Medical, Inc.'s Report on Form 10-Q for the quarter ended September 30, 1995).
10.11 Asset Transfer Agreement dated June 26, 1996 among IMED Ltd., IMED Corporation, Pharmacia AB and
Pharmacia & Upjohn Limited with respect to the acquisition of certain European assets (Incorporated
by reference to Exhibit 10.28 to Advanced Medical, Inc.'s Report on Form 10-Q for the quarter ended
June 30, 1996 (the "AM June 1996 Form 10-Q")).
10.12 Assignment Agreement dated June 26, 1996 among IMED Corporation, IMED International Trading Corp.,
Advanced Medical, Inc. and Pharmacia, AB with respect to the acquisition of European distribution
rights (Incorporated by reference to Exhibit 10.29 to the AM June 1996 Form 10-Q).
12 Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Ernst & Young LLP, independent auditors.
23.3 Consent of Gordon Altman Butowsky Weitzen Shalov & Wein (included in Exhibit 5.1).*
24 Power of Attorney (included on the IVAC Holdings, Inc. signature page of the Registration Statement).
25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of United
States Trust Company of New York, as trustee.
27.1 Financial Data Schedule, 12 months.
27.2 Financial Data Schedule, 9 months.
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedule
Report of Independent Accountants on Financial Statement Schedule.
Schedule II--Valuation and Qualifying Accounts and Reserves.
All other schedules are omitted because they are not applicable or not
required, or because the information required therein is included in the
financial statements or the notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
II-6
<PAGE>
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on December 24, 1996.
IVAC HOLDINGS, INC.
By: /s/ WILLIAM J. MERCER
-----------------------------------------
Name: William J. Mercer
Title: President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph W. Kuhn and William J. Mercer, or either
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement filed herewith and any and all
amendments to said Registration Statement (including post-effective amendments
and registration statements filed pursuant to Rule 462 and otherwise), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE(S) DATE
- ------------------------------ -------------------------- -------------------
/s/ JEFFRY M. PICOWER
- ------------------------------ Director, Chairman of the December 24, 1996
Jeffry M. Picower Board
/s/ WILLIAM J. MERCER
- ------------------------------ Director, President and December 24, 1996
William J. Mercer Chief Executive Officer
Executive Vice President,
/s/ JOSEPH W. KUHN Chief Financial Officer,
- ------------------------------ Chief Accounting December 24, 1996
Joseph W. Kuhn Officer, Treasurer and
Secretary
/s/ NORMAN M. DEAN
- ------------------------------ Director December 24, 1996
Norman M. Dean
/s/ HENRY GREEN
- ------------------------------ Director December 24, 1996
Henry Green
/s/ FREDERIC GREENBERG
- ------------------------------ Director December 24, 1996
Frederic Greenberg
/s/ RICHARD B. KELSKY
- ------------------------------ Director December 24, 1996
Richard B. Kelsky
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act , the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on December 24, 1996.
IVAC OVERSEAS HOLDINGS, INC.
By: /s/ WILLIAM J. MERCER
-----------------------------------------
Name: William J. Mercer
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE(S) DATE
- ------------------------------ -------------------------- -------------------
/s/ JOHN A. DE GROOT
- ------------------------------ Director December 24, 1996
John A. de Groot
/s/ WILLIAM J. MERCER
- ------------------------------ Director, President and December 24, 1996
William J. Mercer Chief Executive Officer
Director, Executive Vice
/s/ JOSEPH W. KUHN President, Chief
- ------------------------------ Financial Officer and December 24, 1996
Joseph W. Kuhn Chief Accounting Officer
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on December 24, 1996.
IMED INTERNATIONAL TRADING CORP.
By: /s/ JOSEPH W. KUHN
-----------------------------------------
Name: Joseph W. Kuhn
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE(S) DATE
- ------------------------------ -------------------------- -------------------
/s/ GRANTLAND E. BRYCE
- ------------------------------ Director, Vice President December 24, 1996
Grantland E. Bryce and Secretary
/s/ WILLIAM J. MERCER
- ------------------------------ Director December 24, 1996
William J. Mercer
Director, President, Chief
/s/ JOSEPH W. KUHN Executive Officer, Chief
- ------------------------------ Financial Officer, Chief December 24, 1996
Joseph W. Kuhn Accounting Officer,
Treasurer and Secretary
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------- ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Purchase Agreement dated November 19, 1996 among IMED Corporation, IMED International
Trading Corp., Donaldson, Lufkin & Jenrette Securities Corporation, BT Securities
Corporation, Bear, Stearns & Co., Inc. and Paribas Corporation.
1.2 Purchase Agreement Assumption Agreement dated as of November 26, 1996 between IVAC
Holdings, Inc. and IVAC Overseas Holdings, Inc.
2.1 Agreement and Plan of Merger dated August 23, 1996 among the Participating Stockholders,
IMED Corporation, IMED Merger Sub, Inc., IVAC Holdings, Inc. and IVAC Medical Systems,
Inc. (Incorporated by reference to Exhibit 2 to Advanced Medical Inc.'s report on Form
8-K dated August 23, 1996 (the "AM August 8-K")).
2.2 Agreement of Stock Purchase and Plan of Recapitalization dated November 26, 1996 among
Advanced Medical, Inc., Decisions Incorporated and Jeffry M. Picower (Incorporated by
reference to Exhibit 10.3 to Advanced Medical's report on Form 8-K dated December 11,
1996 (the "AM December 8-K")).
3.1 Amended and Restated Certificate of Incorporation of IVAC Holdings, Inc.
3.2 Amended and Restated By-Laws of IVAC Holdings, Inc.
3.3 Certificate of Incorporation of IVAC Overseas Holdings, Inc.
3.4 Amended and Restated By-Laws of IVAC Overseas Holdings, Inc.
3.5 Certificate of Incorporation of IMED International Trading Corp.
3.6 Amended and Restated By-Laws of IMED International Trading Corp.
4.1 Indenture dated as of November 26, 1996 among IMED Corporation, IMED International
Trading Corp. and United States Trust Company of New York, as trustee (including form
of Notes) (Incorporated by reference to
Exhibit 10.2 to the AM December 8-K).
4.2 Indenture Assumption Agreement dated as of November 26, 1996 between IVAC Holdings, Inc.
and United States Trust Company of New York, as trustee.
4.3 Supplemental Indenture dated as of November 26, 1996 between IVAC Overseas Holdings,
Inc. and United States Trust Company of New York, as trustee.
4.4 Registration Rights Agreement dated as of November 26, 1996 among IMED Corporation, IMED
International Trading Corp., Donaldson, Lufkin and Jenrette Securities Corporation, BT
Securities Corporation, Bear, Stearns & Co. Inc. and Paribas Corporation.
4.5 Registration Rights Assumption Agreement dated as of November 26, 1996 between IVAC
Holdings, Inc. and IVAC Overseas Holdings, Inc.
5 Opinion of Gordon Altman Butowsky Weitzen Shalov & Wein.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------- ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
10.1 Credit Agreement dated as of November 26, 1996 among Advanced Medical, Inc., IMED
Corporation, Various Lending Institutions, Bankers Trust Company, Banque Paribas and
Donaldson, Lufkin & Jenrette Securities Corporation (Incorporated by reference to
Exhibit 10.1 to the AM December 8-K).
10.2 Employment Agreement dated as of August 23, 1996 among William J. Mercer, IMED
Corporation and Advanced Medical, Inc. (Incorporated by reference to Exhibit 10.4 to
the AM December 8-K).
10.3 Employment Agreement dated as of August 23, 1996 among Joseph W. Kuhn, IMED Corporation
and Advanced Medical, Inc. (Incorporated by reference to Exhibit 10.5 to the AM
December 8-K).
10.4 Advanced Medical, Inc.'s Third Amended and Restated 1988 Stock Option Plan (Incorporated
by reference to Annex IV to Advanced Medical, Inc.'s Proxy Statement dated July 25,
1994 for its Special Meeting of Stockholders held on August 11, 1994 (the "AM August
1994 Proxy Statement")).
10.5 Advanced Medical, Inc.'s Second Amended and Restated 1990 Non-Qualified Stock Option
Plan for Non-Employee Directors (Incorporated by reference to Annex V to the AM August
1994 Proxy Statement).
10.6 Form of Indemnification Agreements between IVAC Holdings, Inc. and certain of its
directors and officers (Incorporated by reference to Exhibit 10.2 to IVAC Medical
System, Inc.'s Report on Form 10-Q for the quarter ended June 30, 1996).
10.7 Wateridge Plaza Office Building Lease Agreement dated as of December 1, 1995 between
California Public Employees' Retirement System and IVAC Corporation (Incorporated by
reference to Exhibit 10.12 to IVAC Medical Systems, Inc.'s Report on Form 10-K for the
year ended December 31, 1995 (the "IVAC 1995 Form 10-K")).
10.8 Activity Road Lease Agreement dated as of October 25, 1995 between Rancho Bernardo
Corporate Center Ltd. and IVAC Corporation (Incorporated by reference to Exhibit 10.13
to the IVAC 1995 Form 10-K).
10.9 Kenamar Court Lease Agreement dated as of January 24, 1996 between Brentcrest
Properties, Inc. and IVAC Corporation (Incorporated by reference to Exhibit 10.14 of
the IVAC 1995 Form 10-K).
10.10 Development and Exclusive Distribution Agreement dated May 8, 1995 between Debiotech SA
and IMED Corporation (Incorporated by reference to Exhibit 10.7 of Amendment No. 2
dated January 31, 1996 to Advanced Medical, Inc.'s Report on Form 10-Q for the quarter
ended September 30, 1995).
10.11 Asset Transfer Agreement dated June 26, 1996 among IMED Ltd., IMED Corporation,
Pharmacia AB and Pharmacia & Upjohn Limited with respect to the acquisition of certain
European assets (Incorporated by reference to Exhibit 10.28 to Advanced Medical,
Inc.'s Report on Form 10-Q for the quarter ended June 30, 1996 (the "AM June 1996 Form
10-Q")).
10.12 Assignment Agreement dated June 26, 1996 among IMED Corporation, IMED International
Trading Corp., Advanced Medical, Inc. and Pharmacia, AB with respect to the
acquisition of European distribution rights (Incorporated by reference to Exhibit
10.29 to the AM June 1996 Form 10-Q).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------- ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
12 Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Ernst & Young LLP, independent auditors.
23.3 Consent of Gordon Altman Butowsky Weitzen Shalov & Wein (included in Exhibit 5.1).*
24 Power of Attorney (included on the IVAC Holdings, Inc. signature page of the
Registration Statement).
25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of
1939 of United States Trust Company of New York, as trustee.
27.1 Financial Data Schedule, 12 months.
27.2 Financial Data Schedule, 9 months.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
================================================================================
EXECUTION COPY
IMED CORPORATION
IMED INTERNATIONAL TRADING CORP.
$200,000,000
9 3/4% Series A Senior Subordinated Notes due 2006
Purchase Agreement
November 19, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
PARIBAS CORPORATION
================================================================================
<PAGE>
IMED CORPORATION
IMED INTERNATIONAL TRADING CORP.
$200,000,000
9 3/4% Series A Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
November 19, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
PARIBAS CORPORATION
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10005
Ladies and Gentlemen:
IMED Corporation, a Delaware corporation ("IMED"), proposes to issue and
sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), BT
Securities Corporation, Bear, Stearns & Co. Inc. and Paribas Corporation (each,
an "Initial Purchaser" and collectively the "Initial Purchasers") an aggregate
of $200,000,000 in principal amount of its 9 3/4% Series A Senior Subordinated
Notes due 2006 (the "Series A Notes"), subject to the terms and conditions set
forth herein. The Series A Notes are to be issued pursuant to the provisions of
an indenture (the "Indenture") to be dated as of November 26, 1996 among IMED,
the Initial Guarantor (as defined below) and United States Trust Company of New
York, as trustee (the "Trustee"). The Series A Notes and the Series B Notes (as
defined below) issuable in exchange therefor are collectively referred to herein
as the "Notes." Prior to the Merger (as defined below), the Notes will be
guaranteed on a senior subordinated basis by IMED International Trading Corp.
(the "Initial Guarantor"), being IMED's only domestic subsidiary (other than
IMED Merger Sub (as defined below)) as of the Closing Date (as defined below).
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
The Series A Notes are being issued and sold in connection with an
Agreement and Plan of Merger (the "Merger Agreement") dated as of August 23,
1996, by and among IMED, IMED Merger Sub, Inc. ("IMED Merger Sub"), IVAC
Holdings, Inc. ("IVAC Holdings"), IVAC Medical Systems, Inc. ("IVAC Medical
Systems") and certain stockholders of IVAC Holdings. Pursuant to the Merger
Agreement, IMED Merger Sub will be merged with and into IVAC Holdings (the
"Initial Merger") and IVAC Holdings will continue as the surviving corporation
of the Initial Merger. Immediately following the Initial Merger, IMED will be
merged with and into IVAC Holdings and IVAC Medical Systems will be merged with
and into IVAC Holdings (the "Secondary Mergers" and together with the Initial
Merger, the "Merger") and IVAC Holdings will continue as the surviving
corporation of the Second Merger. As used herein, the "Surviving Company" shall
refer to IVAC Holdings after the Merger.
<PAGE>
Immediately subsequent to the Merger, the Surviving Company will execute
and deliver (i) an assumption agreement pursuant to which the Surviving Company
will assume all of the obligations of IMED under the Series A Notes and the
Indenture (the "Note Assumption"), (ii) an assumption agreement pursuant to
which the Surviving Company will assume all of the obligations of IMED under the
Registration Rights Agreement (as defined herein) (the "Registration Rights
Assumption") and (iii) an assumption agreement pursuant to which the Surviving
Company will assume the obligations of IMED hereunder (the "Purchase
Assumption"). In addition, immediately subsequent to the Merger, IVAC Overseas
Holdings, Inc. (the "Second Guarantor") will execute and deliver (i) a
supplemental indenture (the "Supplemental Indenture") pursuant to which the
Second Guarantor will guarantee the Notes on a senior subordinated basis, (ii)
the Registration Rights Assumption pursuant to which the Second Guarantor will
become a party to the Registration Rights Agreement and (iii) the Purchase
Assumption pursuant to which the Second Guarantor will become a party hereunder.
As used herein, the "Company" shall refer to IMED prior to the Merger and to the
Surviving Company following the Merger, the "Guaranteeing Subsidiaries" shall
refer to the Initial Guarantor and the Second Guarantor and the "Subsidiary
Guarantees" shall refer to the guarantees of the Notes by either or both of the
Guaranteeing Subsidiaries.
IMED will use (i) the proceeds from the sale to the Initial Purchasers of
the Series A Notes, (ii) borrowings under a credit agreement (the "New Credit
Facility") by and among IMED, Advanced Medical, Inc., IMED's corporate parent
("Advanced Medical"), Donaldson, Lufkin & Jenrette Securities Corporation,
Bankers Trust Company, Banque Paribas and the other lenders party thereto, (iii)
the proceeds of a capital contribution (the "Capital Contribution") of
approximately $20.0 million from Advanced Medical and (iv) existing cash
balances to: (a) pay the aggregate cash consideration to be paid in connection
with the Initial Merger, (b) repay the indebtedness outstanding under the
existing revolving credit facility, dated as of April 2, 1990 (as amended on
August 12, 1994), between IMED and General Electric Capital Corporation (the
"IMED Credit Facility"), (c) repay the indebtedness outstanding under the
existing revolving credit facility, dated as of March 29, 1996, by and among
IVAC Holdings, IVAC Medical Systems, Chemical Bank and the lenders party thereto
(the "IVAC Credit Facility"), (d) repay the 13.2% Junior Subordinated Notes due
2006 of IVAC Holdings (the "Junior Subordinated Notes"), (e) repurchase the
Senior Notes due 2002 of IVAC Medical Systems (the "Existing Senior Notes") in
connection with the tender offer and consent solicitation pursuant to the Offer
to Purchase and Consent Solicitation Statement of IVAC Medical Systems, dated as
of October 16, 1996 as amended and supplemented (the "Tender Offer and Consent
Solicitation") and (f) pay transaction fees and expenses.
1. Offering Memorandum. The Series A Notes will be offered and sold to the
Initial Purchasers pursuant to an exemption from the registration requirements
under the Securities Act of 1933, as amended (the "Act"). IMED has prepared a
preliminary offering memorandum, dated October 31, 1996 (the "Preliminary
Offering Memorandum") and a final offering memorandum, dated November 19, 1996
(the "Offering Memorandum"), relating to the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A Notes
(and all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING
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ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF
THE SECURITIES ACT, (d) TO AN INSTITUTIONAL `ACCREDITED INVESTOR' (AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF THE SECURITIES ACT (AN
`INSTITUTIONAL ACCREDITED INVESTOR') THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES
LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER WILL BE REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, IMED agrees to issue and sell to the Initial
Purchasers, and the Initial Purchasers agree to purchase from IMED, the
principal amounts of Series A Notes set forth opposite the name of such Initial
Purchaser on Schedule A hereto at a purchase price equal to 97% of the principal
amount thereof (the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised IMED that the
Initial Purchasers will make offers (the "Exempt Resales") of the Series A Notes
purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs") and (ii) a limited number of other institutional
"accredited investors," as defined in Rule 501(a) (1), (2), (3) or (7) under the
Act, that make certain representations and agreements to the Company (each, an
"Accredited Institution") (such persons specified in clauses (i) and (ii) being
referred to herein as the "Eligible Purchasers"). The Initial Purchasers will
offer the Series A Notes to Eligible Purchasers initially at a price equal to
100% of the principal amount thereof. Such price may be changed at any time
without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the
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Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission") under the circumstances
set forth therein, (i) a registration statement under the Act (the "Exchange
Offer Registration Statement") relating to the Company's 9 3/4% Series B Senior
Subordinated Notes due 2006 (the "Series B Notes"), to be offered in exchange
for the Series A Notes (such offer to exchange being referred to as the
"Exchange Offer") and (ii) a shelf registration statement pursuant to Rule 415
under the Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Notes and to use its best
efforts to cause such Registration Statements to be declared effective and
consummate the Exchange Offer. This Agreement, the Indenture, the Notes, the
Subsidiary Guarantees, the Registration Rights Agreement, the Purchase
Assumption, the Note Assumption, the Supplemental Indenture and the Registration
Rights Assumption are hereinafter sometimes referred to collectively as the
"Operative Documents."
4. Delivery and Payment. (a) Delivery of, and payment of the Purchase
Price for, the Series A Notes shall be made at the offices of Gordon Altman
Butowsky Weitzen Shalov & Wein at 114 West 47th Street, New York, New York
10036, or such other location as may be mutually acceptable. Such delivery and
payment shall be made at 9:00 a.m. New York City time, on November 26, 1996 or
at such other time as shall be agreed upon by the Initial Purchasers and IMED.
The time and date of such delivery and the payment are herein called the
"Closing Date."
(b) One or more of the Series A Notes in definitive form, registered in
the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Series A Notes (collectively, the "Master Note"), shall be
delivered by IMED to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by IMED against
payment by the Initial Purchasers of the Purchase Price thereof by wire transfer
in same day funds to the order of IMED. The Master Note shall be made available
to the Initial Purchasers for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.
5. Agreements of the Company and the Guaranteeing Subsidiaries. Each of
the Company and the Guaranteeing Subsidiaries hereby agrees with the Initial
Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by
the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any Series A Notes
for offering or sale in any jurisdiction designated by the Initial
Purchasers pursuant to Section 5(e) hereof, or the initiation of any
proceeding by any state securities commission or any other regulatory
authority and (ii) of the happening of any event that makes any statement
of a material fact made in the Preliminary Offering Memorandum or the
Offering Memorandum untrue or that requires the making of any additions to
or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Company shall
use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series A Notes under any
state securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any Series A Notes under any state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time.
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(b) To furnish the Initial Purchasers and those persons identified
by the Initial Purchasers to the Company, without charge as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may
reasonably request. Subject to the Initial Purchasers' compliance with
applicable state and federal securities laws, the Company consents to the
use of the Preliminary Offering Memorandum and the Offering Memorandum,
and any amendments and supplements thereto required pursuant hereto, by
the Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum during the period set forth in Section 5(j),
unless the Initial Purchasers shall previously have been advised thereof
and shall not have objected thereto within seven business days of being
furnished a copy thereof (or such shorter period as is reasonably required
to comply with Section 5(d)). The Company shall promptly prepare upon the
Initial Purchasers' request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that the
Initial Purchasers believe necessary or advisable in connection with
Exempt Resales.
(d) If, after the date hereof and during the period set forth in
Section 5(j), any event shall occur as a result of which, in the judgment
of the Company or in the reasonable opinion of counsel to the Initial
Purchasers, it becomes necessary to amend or supplement the Preliminary
Offering Memorandum or Offering Memorandum in order to make the statements
therein, in the light of the circumstances when such Preliminary Offering
Memorandum or Offering Memorandum is delivered to an Eligible Purchaser,
not misleading, or if it is necessary to amend or supplement the
Preliminary Offering Memorandum or Offering Memorandum to comply with any
law, statute, rule or regulation, to forthwith prepare an appropriate
amendment or supplement to such Preliminary Offering Memorandum or
Offering Memorandum so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Preliminary Offering Memorandum
or Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and the counsel to the
Initial Purchasers in connection with the registration or qualification of
the Series A Notes under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may reasonably request in writing
at least five business days prior to any proposed transfer and to continue
such qualification in effect so long as required for the Exempt Resales;
provided, however, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action
that would subject it to general consent to service of process or taxation
other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated to
pay and be responsible for all costs, expenses, fees and taxes in
connection with or incident to (i) the preparation, printing, processing,
duplicating, filing and distribution of the Preliminary Offering
Memorandum and the Offering Memorandum (including, without limitation,
financial statements required pursuant hereto), and all amendments or
supplements thereto required pursuant hereto, (ii) the preparation,
printing, processing, execution, distribution and delivery of this
Agreement, the other Operative Documents, all preliminary and final Blue
Sky memorandum printed,
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distributed and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery of the Notes and the
Subsidiary Guarantees to the Initial Purchasers, (iv) the registration or
qualification of the Notes and the Subsidiary Guarantees for offer and
sale under the securities or Blue Sky laws of the jurisdictions referred
to in Section 5(e) (including, in each case, the fees and disbursements of
counsel to the Initial Purchasers relating to such registration or
qualification and memoranda relating thereto), (v) furnishing such copies
of the Preliminary Offering Memorandum and the Offering Memorandum, and
all amendments and supplements thereto, as may be requested for use in
connection with Exempt Resales, (vi) the preparation of certificates for
the Notes (including, without limitation, printing and engraving thereof),
(vii) the fees, disbursements and expenses of the Company's counsel and
accountants, (viii) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL"), (ix) all fees and expenses (including fees and
expenses of counsel to the Company) of the Company in connection with the
approval of the Notes by DTC for "book-entry" transfer, (x) the rating of
the Notes by investment rating agencies, (xi) the fees and expenses of the
Trustee and the Trustee's counsel in connection with the Indenture and the
Notes and (xii) the performance by the Company of its other obligations
under this Agreement and the other Operative Documents.
(g) To use the proceeds from the sale of the Series A Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes in a manner
that would require the registration under the Act of the sale to the
Initial Purchasers, the QIBs or the Accredited Investors of the Series A
Notes.
(j) For so long as any of the Notes remain outstanding and during
any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
make available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such
holder, the information ("Rule 144A Information") required by Rule
144A(d)(4) under the Act.
(k) To cause the Exchange Offer to be made in the appropriate form
to permit registered Series B Notes to be offered in exchange for the
Series A Notes and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(l) To comply with all of its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the
representation letters of the Company to DTC relating to the approval of
the Notes by DTC for "book-entry" transfer.
(m) To use its best efforts to effect the inclusion of the Series A
Notes in PORTAL and to obtain approval of the Notes by DTC for
"book-entry" transfer.
(n) During a period of five years following the Closing Date, to
deliver without charge to the Initial Purchasers promptly upon their
becoming available (i) all reports or other
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publicly available information that the Company shall mail or otherwise
make available to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company or its
subsidiaries with the Commission or any national securities exchange and
such other publicly available information concerning the Company or its
subsidiaries, including without limitation, press releases, as the Initial
Purchaser may reasonably request.
(o) Not to, and to cause its affiliates not to, offer, sell,
contract to sell or grant any option to purchase or otherwise transfer or
dispose of any Notes or any other debt security issued by the Company or
any of its subsidiaries (other than a private loan, credit or financing
agreement with a bank or similar financing institution) or any security
convertible into or exchangeable or exercisable for any such debt
security, for a period of 120 days after the Closing Date, without the
Initial Purchasers' prior written consent, except for (i) sales or
transfers between affiliates of the Company and the Company or any of its
subsidiaries, (ii) the issue and exchange of Series B Notes for Series A
Notes in the Exchange Offer, (iii) the purchase of the Existing Senior
Notes in connection with the Tender Offer and Consent Solicitation and
(iv) the repayment of the indebtedness outstanding under the Junior
Subordinated Notes.
(p) During the period set forth in Section 5(j), to furnish to the
Initial Purchasers, as soon as they have been prepared by the Company a
copy of any consolidated financial statements of the Company for any
period subsequent to the period covered by the financial statements
appearing in the Offering Memorandum.
(q) As soon as practicable following the Merger, the Surviving
Company will take all actions and make all filings necessary to qualify as
a foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification.
(r) To do and perform all things required to be done and performed
under this Agreement by it that are within its control prior to the
Closing Date and to use its best efforts to satisfy all conditions
precedent on its part to the delivery of the Series A Notes that are
within its control.
6. Representations and Warranties of the Company and the Guaranteeing
Subsidiaries. As of the date hereof, each of the Company and the Guaranteeing
Subsidiaries represents and warrants to each of the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
have been prepared in connection with the Exempt Resales. The Preliminary
Offering Memorandum and the Offering Memorandum do not, and any supplement
or amendment to them will not, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein in the light of the circumstances
under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not
apply to statements in or omissions from the Preliminary Offering
Memorandum or the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to the Initial Purchasers furnished to IMED in writing by the Initial
Purchasers expressly for use therein. IMED acknowledges for all purposes
under this Agreement that the statements set forth in the last paragraph
on the cover page and in the first and second sentences of the third
paragraph and the fourth sentence of the fourth paragraph under the
caption "Plan of Distribution" in the Offering Memorandum
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constitute the only written information furnished to IMED by the Initial
Purchasers expressly for use in the Preliminary Offering Memorandum and
the Offering Memorandum (or any amendment or supplement thereto). No stop
order preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been issued.
(b) When the Series A Notes are issued and delivered pursuant to
this Agreement, no Series A Note will be of the same class (within the
meaning of Rule 144A under the Act) as securities of IMED that are listed
on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated inter-dealer
quotation system.
(c) Immediately prior to the Initial Merger, the entities listed on
Schedule B hereto will be the only subsidiaries, direct or indirect, of
IMED. All of the issued and outstanding shares of capital stock of, or
other ownership interests in, each such subsidiary has been duly and
validly authorized and issued, and all of the shares of capital stock of,
or other ownership interests in, each such subsidiary are owned, directly
or indirectly, by IMED. All such shares of capital stock are fully paid
and non-assessable and have not been issued in violation of any preemptive
or similar rights and are owned free and clear of any security interest,
mortgage, pledge, claim, lien, limitation on voting rights or encumbrance
(each, a "Lien"), except for Liens granted pursuant to the IMED Credit
Facility and the New Credit Facility. There are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or Liens related to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of, or
other ownership interest in, any such subsidiary.
(d) After giving effect to the Merger, the entities listed on
Schedule C hereto will be the only subsidiaries, direct or indirect, of
the Surviving Company. After giving effect to the Merger, the Surviving
Company will own, directly or indirectly, all of the issued and
outstanding capital stock of, or other ownership interests in, each such
subsidiary and all of the issued and outstanding shares of capital stock
of, or other ownership interests in, each such subsidiary will have been
duly and validly authorized and issued all such shares of capital stock
will have been fully paid and non-assessable and have not been issued in
violation of any preemptive or similar rights and will be owned free and
clear of any Lien, except for Liens granted pursuant to the New Credit
Facility. There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or Liens
related to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock of, or other ownership interest in, any such
subsidiary.
(e) IMED and each of its subsidiaries is a duly organized and
validly existing corporation in good standing under the laws of its
jurisdiction of incorporation, has the requisite corporate power and
authority to own, lease and operate its properties and to conduct its
business as it is currently being conducted and as described in the
Offering Memorandum, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction where the ownership, leasing or
operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
singly or in the aggregate, have a Material Adverse Effect (as defined
below) on IMED. Immediately following the Merger, the Surviving Company
and each of its subsidiaries will be a duly organized and validly existing
corporation in good standing under the laws of its jurisdiction of
incorporation, will have the corporate power and authority to own, lease
and operate its properties and to
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conduct its business as it is currently being conducted and as described
in the Offering Memorandum, and the subsidiaries of the Surviving Company
will be duly qualified and will be in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
have a Material Adverse Effect on the Surviving Company. As used herein,
"Material Adverse Effect" shall mean, with respect to any Person, any
effect or group of related or unrelated effects that (i) would be
reasonably expected, individually or in the aggregate, to result in a
material adverse effect on the assets, properties, business, results of
operations, condition (financial or otherwise) or prospects of such Person
and its subsidiaries, taken as a whole or (ii) would interfere with,
adversely affect or question the validity of (A) the execution, delivery
and performance of any of the Operative Documents, the issuance of the
Notes and the Subsidiary Guarantees or the consummation of this Agreement,
(B) the performance by each Person and each of its subsidiaries of its
respective agreements and obligations under this Agreement or the
consummation of the transaction contemplated thereby or (C) the
consummation of the Merger.
(f) IMED has full corporate power and authority to execute, deliver
and perform its obligations under the Merger Agreement, the New Credit
Facility, this Agreement, the Indenture, the Registration Rights Agreement
and the other Operative Documents to which it is a party and to consummate
the transactions contemplated by the Merger Agreement, the New Credit
Facility this Agreement and the other Operative Documents to which it is a
party, and to issue, sell and deliver the Series A Notes pursuant to this
Agreement. IMED Merger Sub has full corporate power and authority to
execute, deliver and perform its obligations under the Merger Agreement.
The Initial Guarantor has full corporate power and authority to execute,
deliver and perform its obligations under this Agreement, the Indenture,
the New Credit Facility, the Registration Rights Agreement and the other
Operative Documents to which it is a party and to consummate the
transactions contemplated by this Agreement and the other Operative
Documents to which it is a party, and to issue, sell and deliver its
Subsidiary Guarantee pursuant to this Agreement. The Merger Agreement has
been duly authorized and validly executed and delivered by IMED and IMED
Merger Sub and constitutes a valid and legally binding agreement of IMED
and IMED Merger Sub, enforceable against IMED and IMED Merger Sub in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(g) Immediately subsequent to the Initial Merger, IVAC Holdings will
have full corporate authority to execute, deliver and perform its
obligations under the Note Assumption, the Registration Rights Assumption,
the Purchase Assumption and to consummate the transactions contemplated by
the Note Assumption, the Registration Rights Assumption, the Purchase
Assumption and the Secondary Mergers. Immediately subsequent to the
Initial Merger, the Second Guarantor will have full corporate authority to
execute, deliver and perform its obligations under its Subsidiary
Guarantee, the Supplemental Indenture, the Registration Rights Assumption,
the Purchase Assumption and to consummate the transactions contemplated by
the Supplemental Indenture, the Registration Rights Assumption, the
Purchase Assumption. Upon consummation of the Secondary Mergers, IVAC
Medical Systems will be merged with and into IVAC Holdings, and IMED will
be merged with and into IVAC Holdings, with IVAC Holdings surviving the
Secondary Mergers.
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(h) This Agreement has been duly authorized and validly executed and
delivered by IMED and the Initial Guarantor and constitutes a valid and
legally binding agreement of IMED and the Initial Guarantor, enforceable
against IMED and the Initial Guarantor in accordance with its terms
(assuming the due execution and delivery hereof by the Initial
Purchasers), except as (i) rights to indemnity and contribution hereunder
may be limited by applicable law, (ii) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (iii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(i) Immediately subsequent to the Merger, this Agreement and the
Purchase Assumption will be duly authorized by the Surviving Company and
the Second Guarantor and the Purchase Assumption will be validly executed
and delivered by the Surviving Company and the Second Guarantor. When the
Purchase Assumption is executed and delivered, this Agreement will be a
valid and legally binding agreement of the Surviving Company and each of
the Guaranteeing Subsidiaries, enforceable against the Surviving Company
and each of the Guaranteeing Subsidiaries in accordance with its terms,
except as (i) rights to indemnity and contribution hereunder may be
limited by applicable law, (ii) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (iii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(j) The Indenture has been duly authorized by IMED and the Initial
Guarantor and, on the Closing Date, will have been validly executed and
delivered by IMED and the Initial Guarantor and will conform to the
description thereof in the Offering Memorandum. When the Indenture has
been duly executed and delivered by IMED and the Initial Guarantor, the
Indenture will be a valid and legally binding agreement of IMED and the
Initial Guarantor, enforceable against IMED and the Initial Guarantor in
accordance with its terms (assuming the due execution and delivery of the
Indenture by the Trustee), except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(k) Immediately subsequent to the Merger, the Note Assumption will
be duly authorized and validly executed and delivered by the Surviving
Company and the Supplemental Indenture will be duly authorized and validly
executed and delivered. Immediately subsequent to the Merger, the
Indenture will be duly authorized by the Surviving Company and the Second
Guarantor and, when the Note Assumption and the Supplemental Indenture are
executed and delivered, the Indenture will be a valid and legally binding
agreement of the Surviving Company and each of the Guaranteeing
Subsidiaries, enforceable against the Surviving Company and each of the
Guaranteeing Subsidiaries in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(l) The Series A Notes have been duly authorized by IMED and, on the
Closing Date, will have been validly executed and delivered by IMED and
will conform to the description thereof in the Offering Memorandum. When
the Series A Notes are issued, authenticated and delivered in accordance
with the Indenture and paid for by the Initial Purchasers in accordance
with the terms of this Agreement, the Series A Notes will constitute valid
and legally binding obligations of IMED, enforceable against IMED in
accordance with
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their terms, and will be entitled to the benefits of the Indenture
(assuming the due execution and delivery of the Indenture by the Trustee),
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(m) Immediately subsequent to the Merger, the Series A Notes will be
duly authorized by the Surviving Company. When the Note Assumption is
executed and delivered, the Series A Notes will be the valid and legally
binding obligations of the Surviving Company, enforceable against the
Surviving Company in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(n) Immediately subsequent to the Merger, the Series B Notes will be
duly authorized by the Surviving Company. When the Note Assumption is
executed and delivered and when the Series B Notes are issued and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be the valid and legally binding
obligations of the Surviving Company, enforceable against the Surviving
Company in accordance with their terms and entitled to the benefits of the
Indenture (assuming the due execution and delivery of the Indenture by the
Trustee), except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(o) The Subsidiary Guarantee to be endorsed on the Series A Notes by
the Initial Guarantor has been duly authorized by the Initial Guarantor
and, on the Closing Date, will have been duly executed and delivered by
the Initial Guarantor and will conform to the description thereof in the
Offering Memorandum. When the Series A Notes are issued and authenticated
in accordance with the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the
Subsidiary Guarantee will be the valid and legally binding obligation of
the Initial Guarantor, enforceable against the Initial Guarantor in
accordance with its terms and entitled to the benefits of the Indenture
(assuming the due execution and delivery of the Indenture by the Trustee),
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(p) Immediately subsequent to the Merger, the Subsidiary Guarantee
to be endorsed by the Second Guarantor on the Series A Notes will be duly
authorized by the Second Guarantor and, when the Supplemental Indenture is
executed and delivered, the Subsidiary Guarantees will be the valid and
legally binding obligation of each of the Guaranteeing Subsidiaries,
enforceable against each Guaranteeing Subsidiary in accordance with its
terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(q) The Subsidiary Guarantees to be endorsed on the Series B Notes
have been duly authorized by the Initial Guarantor and, immediately
subsequent to the Merger, will be duly authorized by the Second Guarantor.
When the Supplemental Indenture has been executed and
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delivered in accordance with the terms of the Indenture and when the
Series B Notes have been issued, authenticated and delivered in accordance
with the terms of the Exchange Offer and the Indenture, the Subsidiary
Guarantees to be endorsed on the Series B Notes will be the valid and
legally binding obligations of the Guaranteeing Subsidiaries, enforceable
against each Guaranteeing Subsidiary in accordance with their terms and
entitled to the benefits of the Indenture (assuming the due execution and
delivery of the Indenture by the Trustee), except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. When the Series B Notes are issued,
authenticated and delivered, the Subsidiary Guarantees to be endorsed on
the Series B Notes will conform to the description thereof in the Offering
Memorandum.
(r) The Registration Rights Agreement has been duly authorized by
IMED and the Initial Guarantor and, on the Closing Date, will have been
duly executed and delivered by IMED and the Initial Guarantor and will
conform to the description thereof in the Offering Memorandum. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and legally binding
agreement of IMED and the Initial Guarantor, enforceable against IMED and
the Initial Guarantor in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(s) Immediately subsequent to the Merger, the Registration Rights
Agreement and the Registration Rights Assumption will be duly authorized
by the Surviving Company and the Second Guarantor and the Registration
Rights Assumption will be validly executed and delivered by the Surviving
Company and the Second Guarantor. When the Registration Rights Assumption
has been executed and delivered, the Registration Rights Agreement will be
a valid and legally binding agreement of the Surviving Company and each of
the Guaranteeing Subsidiaries, enforceable against the Surviving Company
and each of the Guaranteeing Subsidiaries in accordance with its terms,
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(t) Neither IMED nor any of its subsidiaries is and, immediately
following the Merger, neither the Surviving Company or any of its
subsidiaries will be, in violation of its respective charter or bylaws.
(u) Neither IMED nor any of its subsidiaries is in default in the
performance of any term, provision, obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or other contract,
lease or other instrument to which IMED or any of its subsidiaries is a
party or by which any of them is bound, or to which any of the property or
assets of IMED or any of its subsidiaries is subject, except for such
defaults as would not, individually or in the aggregate, have a Material
Adverse Effect on IMED. There exists no condition that, with notice, the
passage of time or otherwise, would constitute a default under any such
document or instrument.
(v) Immediately subsequent to the Merger, neither the Surviving
Company nor any of its subsidiaries will be in default in the performance
of any term, provision, obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of
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indebtedness or any indenture, mortgage, deed of trust or other contract,
lease or other instrument to which the Surviving Company or any of its
subsidiaries will be a party or by which any of them will be bound, or to
which any of the property or assets of the Surviving Company or any of its
subsidiaries will be subject, except for such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Surviving Company. Immediately subsequent to the Merger, there will exist
no condition that, with notice, the passage of time or otherwise, would
constitute a default under any such agreement.
(w) The execution, delivery and performance of the Merger Agreement,
the New Credit Facility, this Agreement and the other Operative Documents
and compliance by IMED and its subsidiaries with the provisions hereof and
thereof and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the Merger) will not (i) require
any consent, approval, authorization or order of, or filing or
registration with, any regulatory body, administrative agency or other
governmental agency, other than (1) as may be required under state
securities or "blue sky" laws, (2) those that have been obtained or made
and (3) the filing of the merger certificates with the Secretary of State
of the State of Delaware, (ii) conflict with any of the respective
charters or bylaws of IMED or any of its subsidiaries, (iii) conflict with
or result in a breach or violation of any of the terms or provisions of,
or constitute a default or cause an acceleration of any obligation under,
or result in the imposition or creation of (or the obligation to create or
impose) a Lien with respect to, any agreement or instrument to which IMED
or any of its subsidiaries is a party or by which it or any of them is
bound, or to which any properties of IMED or any of its subsidiaries is or
may be subject, except for (A) Liens granted pursuant to the New Credit
Facility and (B) such conflicts, breaches, violations, defaults,
accelerations, impositions and creations as would not, individually or in
the aggregate, have a Material Adverse Effect on IMED, (iv) contravene any
order of any court or governmental agency or body having jurisdiction over
IMED or any of its subsidiaries or any of their properties, (v) violate or
conflict with any law, statute, rule or regulation or administrative or
court decree applicable to IMED or any of its subsidiaries, or any of
their respective properties or (vi) result in the termination or
revocation of any Authorization (as defined below) of IMED or any of its
subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.
(x) The execution, delivery and performance of the Merger Agreement,
the Purchase Assumption, the Registration Rights Assumption, the Note
Assumption, the Supplemental Indenture and compliance by the Surviving
Company and its subsidiaries with the provisions thereof and the
consummation of the transactions contemplated thereby (including, without
limitation, the Merger) will not (i) require any consent, approval,
authorization or order of, or filing or registration with, any regulatory
body, administrative agency or other governmental agency, other than (1)
as may be required under state securities or "blue sky" laws, (2) those
that have been obtained or made and (3) the filing of the merger
certificates with the Secretary of State of the State of Delaware, (ii)
conflict with any of the respective charters or bylaws of the Surviving
Company or any of its subsidiaries, (iii) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default or cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose) a Lien
with respect to, any agreement or instrument to which the Surviving
Company or any of its subsidiaries is a party or by which it or any of
them is bound, or to which any properties of the Surviving Company or any
of its subsidiaries is or may be subject immediately subsequent to the
Merger, except for (A) Liens granted pursuant to the New Credit Facility
and (B) such conflicts, breaches, violations, defaults, accelerations,
impositions and creations as would not, individually or in the aggregate,
have a Material Adverse Effect on the
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Surviving Company, (iv) contravene any order of any court or governmental
agency or body having jurisdiction over the Surviving Company or any of
its subsidiaries or any of their properties, (v) violate or conflict with
any law, statute, rule or regulation or administrative or court decree
applicable to the Surviving Company or any of its subsidiaries, or any of
their respective properties or (vi) result in the termination or
revocation of any Authorization (as defined below) of the Surviving
Corporation or any of its subsidiaries or result in any other impairment
of the rights of the holder of any such Authorization.
(y) Except to the extent described in the Offering Memorandum, there
is no action, suit, proceeding or investigation before or by any court or
governmental agency or body, domestic or foreign, pending against or
affecting IMED or any of its subsidiaries or any of their respective
properties which might result, singly or in the aggregate, in a Material
Adverse Effect on IMED and, to the best knowledge of IMED, no such
proceedings are contemplated or threatened.
(z) Immediately subsequent to the Merger, except as disclosed in the
Offering Memorandum there will be no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending against or affecting the Surviving Company or
any of its subsidiaries or any of their respective properties which might
result, singly or in the aggregate, in a Material Adverse Effect on the
Surviving Company and, to the best of the knowledge of IMED and the
Surviving Company, immediately following the Merger, no such proceeding
will be threatened or contemplated.
(aa) No action has been taken and no law, statute, rule or
regulation or order has been enacted, adopted or issued by any
governmental agency or body which prevents the execution, delivery and
performance of any of the Operative Documents, the issuance of the Series
A Notes, or suspends the sale of the Series A Notes in any jurisdiction
referred to in Section 5(e); and no injunction, restraining order or other
order or relief of any nature by a federal or state court or other
tribunal of competent jurisdiction has been issued with respect to IMED,
IVAC Holdings or any of their respective subsidiaries which would prevent
or suspend the issuance or sale of the Series A Notes in any jurisdiction
referred to in Section 5(e).
(ab) IMED and its subsidiaries have not and, immediately subsequent
to the Merger, neither the Surviving Company nor any of its subsidiaries
will have, violated any applicable existing federal, state, local or
foreign laws or regulations ("Laws") including, but not limited to (i)
Laws relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws") (ii) Laws relating to discrimination
in the hiring, promotion or pay of employees, (iii) wage and hour Laws and
(iv) provisions of the Employee Retirement Income Security Act of 1974,
which in each case would have a Material Adverse Effect on IMED, or
immediately subsequent to the Merger, the Surviving Company.
(ac) Except as set forth in the Offering Memorandum and except as
would not result, singly or in the aggregate, in a Material Adverse Effect
on IMED, IMED and each of its subsidiaries has good and marketable title,
free and clear of all Liens (except (i) Liens for taxes not yet due and
payable and (ii) Liens granted pursuant to the IMED Credit Facility and
the New Credit Facility), to all property and assets described in the
Offering Memorandum as being owned by it. All leases to which any of IMED
or any of its subsidiaries is a party are valid and binding and no default
has occurred or is continuing thereunder which would have a Material
Adverse Effect on IMED, and IMED and its subsidiaries enjoy peaceful and
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undisturbed possession under all such leases to which any of IMED and its
subsidiaries is a party as lessee with such exceptions as do not
materially interfere with the use currently made by IMED or such
subsidiary, as the case may be.
(ad) Except as set forth in the Offering Memorandum and except as
would not result, singly or in the aggregate, in a Material Adverse Effect
on the Surviving Company, immediately subsequent to the Merger, the
Surviving Company and its subsidiaries will have good and marketable
title, free and clear of all Liens (except (i) Liens for taxes not yet due
and payable and (ii) Liens granted pursuant to the New Credit Facility) to
all property and assets described in the Offering Memorandum as property
and assets that will be owned by it immediately subsequent to the Merger.
All leases to which the Surviving Company or any of its subsidiaries will
be a party immediately subsequent to the Merger will be valid and binding
and no default shall have occurred, be continuing thereunder which would
have a Material Adverse Effect on the Surviving Company; and the Surviving
Company and its subsidiaries, immediately subsequent to the Merger, will
enjoy peaceful and undisturbed possession under all such leases to which
it or its subsidiaries is a party as lessee with such exceptions as do not
materially interfere with the use currently made by the Surviving Company
or its subsidiaries, as the case may be.
(ae) The accountants, Price Waterhouse L.L.P. and Ernst & Young
L.L.P., that have certified the financial statements and supporting
schedules included in the Offering Memorandum are independent public
accountants, as required by the Act and the Exchange Act. The historical
financial statements, together with related schedules and notes, set forth
in the Offering Memorandum comply as to form in all material respects with
the requirements applicable to registration statements on Form S-1 under
the Act.
(af) The historical financial statements of IMED and its
subsidiaries set forth in the Offering Memorandum fairly present the
combined financial position at the respective dates indicated and the
results of operations and cash flows for the respective periods indicated,
in accordance with generally accepted accounting principles in the United
States ("GAAP") consistently applied throughout such periods. The other
historical financial and statistical information and data included in the
Offering Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the
books and records of IMED.
(ag) The historical financial statements of IVAC Holdings and its
subsidiaries and of the predecessor to IVAC Holdings and its subsidiaries
set forth in the Offering Memorandum fairly present the combined financial
position at the respective dates indicated and the results of operations
and cash flows for the respective periods indicated, in accordance with
GAAP consistently applied throughout such periods. The other historical
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the
books and records of IVAC Holdings (including its predecessor entities),
as the case may be.
(ah) The pro forma financial statements have been prepared on a
basis consistent with the historical financial statements of IMED and its
subsidiaries and IVAC Holdings and its subsidiaries and give effect to
assumptions made on a reasonable basis and in good faith and present
fairly the historical and proposed transactions contemplated by the
Offering Memorandum; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro
forma financial statements included in
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registration statements on Form S-1 under the Act. The other pro forma
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with the pro forma financial statements.
(ai) All tax returns required to be filed by IMED or any of its
subsidiaries in any jurisdiction have been filed, other than those filings
being contested in good faith, and all material taxes, including, without
limitation, withholding taxes, penalties and interest, assessments, fees
and other charges due or claimed to be due from such entities have been
paid, other than those being contested in good faith and for which
adequate reserves have been provided.
(aj) Immediately subsequent to the Merger, all tax returns required
to be filed by the Surviving Company and its subsidiaries in any
jurisdiction will have been filed, other than those filings being
contested in good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due
pursuant to such returns or pursuant to any assessment received by the
Surviving Company or any of its subsidiaries will have been paid, other
than those being contested in good faith and for which adequate reserves
have been provided.
(ak) IMED and its subsidiaries have complied and, immediately
subsequent to the Merger, the Surviving Company and its respective
subsidiaries will have complied, with all of the provisions of Florida
H.B. 1771, codified as Section 517.075 of the Florida statutes, and all
regulations promulgated thereunder relating to issuers doing business with
the Government of Cuba or with any person or any affiliate located in
Cuba.
(al) IMED and its subsidiaries have all certificates, consents,
exemptions, orders, permits, franchises, licenses, authorizations, or
other approvals (each, an "Authorization") of and from, and has made all
declarations and filings with and notices to, all federal, state, local
and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, necessary or required to own, lease,
license, operate and use its properties and assets and to conduct their
business in the manner described in the Offering Memorandum except for
such Authorizations the absence of which would not have a Material Adverse
Effect on IMED; all such Authorizations are valid and in full force and
effect; IMED and its subsidiaries are in compliance with the terms and
conditions of all such Authorizations and with the rules and regulations
of the regulatory authorities and governing bodies having jurisdiction
with respect thereto; and neither IMED nor any subsidiary has received any
notice, or has any knowledge or belief (or any basis therefor), that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization.
(am) Immediately subsequent to the Merger, the Surviving Company and
its subsidiaries will have such Authorizations, including without
limitation under any applicable Environmental Laws, as will be necessary
to own, lease and operate their respective properties and to conduct their
business in the manner described in the Offering Memorandum, except for
such Authorizations the absence of which would not have a Material Adverse
Effect on the Surviving Company immediately subsequent to the Merger;
immediately subsequent to the Merger, all such Authorizations will be
valid and in full force and effect; immediately subsequent to the Merger,
the Surviving Company and its subsidiaries will be in compliance with the
terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto; and immediately subsequent to the
Merger, neither the Surviving Company nor any subsidiary will
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have received any notice, or has any knowledge or belief (or any basis
therefor), that any governmental body or agency is considering limiting,
suspending or revoking any such Authorization.
(an) In connection with the Merger, IMED has reviewed the effect of
Environmental Laws and the disposal of hazardous or toxic substances or
wastes, pollutants or contaminants on (i) the business, assets, operation
and properties of IMED and its subsidiaries and (ii) the business, assets,
operations and properties of the Surviving Company and its subsidiaries
immediately following the Merger, and identified and evaluated associated
costs and liabilities (including, without limitation, all material capital
and operating expenditures required for clean-up, closure of properties
and compliance with Environmental Laws, all permits, licenses and
approvals, all related constraints on operating activities and all
potential liabilities to third parties). On the basis of such reviews,
IMED has reasonably concluded that such associated costs and liabilities
would not have a Material Adverse Effect on IMED and, immediately
subsequent to the Merger, have a Material Adverse Effect on the Surviving
Company.
(ao) Neither IMED nor its subsidiaries are and, immediately
subsequent to the Merger, neither the Surviving Company nor its
subsidiaries will be (a) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act
of 1940, as amended, or (b) a "holding company" or a "subsidiary company"
of a holding company or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act of 1935, as amended or (c) subject to
regulation under the Federal Power Act, the Interstate Commerce Act or any
federal or state statute or regulation limiting its respective ability to
incur indebtedness for borrowed money.
(ap) There are no holders of securities of IMED or any of its
subsidiaries who, by reason of the execution by IMED of the Merger
Agreement or the execution by IMED and the Initial Guarantor of this
Agreement or the consummation by IMED and the Initial Guarantor of the
transactions contemplated hereby and thereby, have the right to request or
demand that IMED or any of its subsidiaries register under the Act or
analogous foreign laws and regulations securities held by them.
(aq) Immediately subsequent to the Merger, there will be no holders
of securities of the Surviving Company or any of its subsidiaries who, by
reason of execution of the Merger Agreement, the execution by the
Surviving Company of the Note Assumption, the execution by the Second
Guarantor of the Supplemental Indenture or the consummation by the
Surviving Company and Second Guarantor of the transactions contemplated
hereby and thereby, have the right to request or demand that the Surviving
Company or any of its subsidiaries, register under the Act or analogous
foreign laws and regulations securities held by them.
(ar) Except for the fee to be paid to KPMG Peat Marwick LLP in
connection with the Merger, there are and, immediately subsequent to the
Merger, there will be no contracts, agreements or understandings between
IMED, the Surviving Company or any of their respective subsidiaries and
any person that would give rise to a valid claim against IMED, the
Surviving Company, their respective subsidiaries or any Initial Purchaser
for a brokerage commission, finder's fee or like payment in connection
with the issuance, purchase and sale of the Notes.
(as) IMED and its subsidiaries own free and clear of all Liens or
have the right to use free and clear of any rights of third parties that
adversely affect such use by IMED and its subsidiaries, all patents,
patent rights, licenses, inventions, copyrights, know-how (including
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trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks and trade names (collectively, "Intellectual Property") material to
the business of IMED and its subsidiaries, taken as a whole. The use of
such Intellectual Property in connection with the business and operations
of IMED and its subsidiaries do not to IMED's knowledge, infringe on the
rights or claimed rights of any person. No other person is, to IMED's
knowledge, infringing upon any of the Intellectual Property or has
notified IMED or any of its subsidiaries that it is claiming ownership of,
or the right to use any Intellectual Property owned by IMED or its
subsidiaries. IMED and its subsidiaries have taken all reasonable steps to
protect the Intellectual Property from infringement by any other person,
except where the failure to take such steps would not, individually or in
the aggregate, have a Material Adverse Effect on IMED. Other than in
connection with the use of so-called "off-the-shelf" software and except
as otherwise disclosed in the Offering Memorandum, IMED and its
subsidiaries are not obligated or under any liability whatsoever to make
any payment in excess of $150,000 per fiscal year, in the aggregate, by
way of royalties, fees or otherwise to any persons with respect to the use
of the Intellectual Property, except that subsidiaries of IMED may be so
obligated to IMED. Neither IMED nor any of its subsidiaries has received
(i) any notice of infringement of or conflict with assessed rights of
others with respect to any Intellectual Property or (ii) any notice of an
action or proceeding seeking to limit, cancel or question the validity of
any Intellectual Property, which singly or in the aggregate, if the
subject of any unfavorable decision, ruling or finding, might have a
Material Adverse Effect on IMED.
(at) Immediately subsequent to the Merger, the Surviving Company and
its subsidiaries will own or have the right to use free and clear of all
Liens or have the right to use free and clear of any rights of third
parties that adversely affect such use by the Surviving Company and its
subsidiaries, all Intellectual Property material to the business of the
Surviving Company and its subsidiaries, taken as a whole. Immediately
subsequent to the Merger, the use of such Intellectual Property in
connection with the business and operations of the Surviving Company and
its subsidiaries will not to the Surviving Company's knowledge, infringe
on the rights or claimed rights of any person. Immediately subsequent to
the Merger, no other person will be, to the Surviving Company's knowledge,
infringing upon any of the Intellectual Property or immediately subsequent
to the Merger, will have notified the Surviving Company and any of its
subsidiaries that it is claiming ownership of, or the right to use any
Intellectual Property owned by the Surviving Company or its subsidiaries.
Immediately subsequent to the Merger, the Surviving Company and its
subsidiaries will have taken all reasonable steps to protect the
Intellectual Property from infringement by any other person, except where
the failure to take such steps would not, individually or in the
aggregate, have a Material Adverse Effect on the Surviving Company. Other
than in connection with the use of so-called "off-the-shelf" software and
except as otherwise disclosed in the Offering Memorandum, immediately
subsequent to the Merger, the Surviving Company and its subsidiaries are
not obligated or under any liability whatsoever to make any payment in
excess of $150,000 per fiscal year, in the aggregate, by way of royalties,
fees or otherwise to any persons with respect to the use of the
Intellectual Property, except that subsidiaries of the Surviving Company
may be so obligated to the Surviving Company. Immediately subsequent to
the Merger, except as otherwise disclosed in the Offering Memorandum,
neither the Surviving Company nor any of its subsidiaries has received (i)
any notice of infringement of or conflict with assessed rights of others
with respect to any Intellectual Property or (ii) any notice of an action
or proceeding seeking to limit, cancel or question the validity of any
Intellectual Property, which singly or in the aggregate, if the subject of
any unfavorable decision, ruling or finding, might have a Material Adverse
Effect on the Surviving Company.
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(au) Immediately subsequent to the Merger, the present fair saleable
value of the assets of the Surviving Company will exceed the amount that
will be required to be paid on or in respect of the existing debts and
other liabilities (including, without limitation, contingent liabilities)
of the Surviving Company as they become absolute and matured. Immediately
subsequent to the Merger, the assets of the Surviving Company will not
constitute unreasonably small capital to carry out its businesses as
conducted or as proposed to be conducted. Immediately subsequent to the
Merger, the Surviving Company does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they mature.
The debt incurred in connection with the Merger, and the debt represented
by the Series A Notes is being incurred, for proper purposes and in good
faith. Immediately subsequent to the Merger, the present fair saleable
value of the assets of the Surviving Company will exceed the amount
required to be paid on or in respect of the existing debts and other
liabilities (including, without limitation, contingent liabilities) of the
Surviving Company as they became absolute and matured. Immediately
subsequent to the Merger, the assets of the Surviving Company, will not
constitute unreasonably small capital to carry out its businesses as it
will be conducted, including, without limitation, the capital needs of the
Surviving Company, taking into account the projected capital requirements
and capital availability of the Surviving Company.
(av) Neither IMED nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the
Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
Immediately subsequent to the Merger, neither the Surviving Company nor
any of its subsidiaries nor any agent thereof acting on the behalf of them
will have taken any action that might cause this Agreement or the issuance
or sale of the Notes to violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(aw) Except as would not otherwise be unlawful, IMED has not (i)
taken, directly or indirectly, any action designed to cause or to result
in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security
of IMED to facilitate the sale or resale of the Notes or (ii) since the
date of the Preliminary Offering Memorandum (A) sold, bid for, purchased,
or paid anyone other than the Initial Purchasers any compensation for
soliciting purchases of, the Series A Notes or (B) paid or agreed to pay
to any person any compensation for soliciting another to purchase any
other securities of IMED.
(ax) Except as would not otherwise be unlawful, immediately
subsequent to the Merger, the Surviving Company will not have (i) taken,
directly or indirectly, any action designed to cause or to result in, or
that has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the
Surviving Company to facilitate the sale or resale of the Notes or (ii)
since the date of the Preliminary Offering Memorandum (A) sold, bid for,
purchased, or paid anyone other than the Initial Purchasers any
compensation for soliciting purchases of, the Series A Notes or (B) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Surviving Corporation.
(ay) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
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(az) No registration under the Act of the Series A Notes are
required for the sale of the Series A Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series A Notes in the Exempt Resales are either
QIBs or Accredited Investors (up to a maximum of 10 such Accredited
Investors) and (ii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in
connection with the sale of Series A Notes to the Initial Purchasers and
the Exempt Resales contained herein. No form of general solicitation or
general advertising was used by IMED, IVAC Holdings or any of their
respective representatives in connection with the offer and sale of any of
the Series A Notes or in connection with Exempt Resales, including, but
not limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. No securities of the same
class as the Series A Notes have been issued and sold by IMED within the
six-month period immediately prior to the date hereof.
(aaa) Prior to the commencement of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, the Indenture is not
required to be qualified under the Trust Indenture Act of 1939, as amended
(the "TIA").
(aab) Immediately subsequent to the Merger, no subsidiary listed on
Schedule C hereto (i) will have contributed, in the last fiscal year or
for the nine months ended September 30, 1996, greater than 5% of the
Surviving Company's pro forma consolidated net revenue, Adjusted EBITDA
(as defined in the Offering Memorandum) or net earnings or (ii) at any of
September 30, 1996 or December 31, 1995 constituted greater than 5% of the
pro forma total assets of the Surviving Company.
(aac) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
The Company acknowledges that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company, counsel to the Guaranteeing Subsidiaries and
counsel to the Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represent and warrant to the Company and
agree that:
(a) Such Initial Purchaser is either a QIB or an Accredited
Investor, in either case with such knowledge and experience in financial
and business matters as is necessary in order to evaluate the merits and
risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (i) is not acquiring the Series A Notes
with a view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (ii) will be reoffering and reselling the Series A Notes
only to QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A and to up to a maximum of 10
Accredited Investors that execute and deliver a letter containing certain
representations and agreements in the form attached as Annex A to the
Offering Memorandum.
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(c) No form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) has been or will be used by
such Initial Purchaser or any of its representatives in connection with
the offer and sale of any of the Series A Notes, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Series A Notes only
from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Such Initial Purchaser further agrees that it will offer to
sell the Series A Notes only to, and will solicit offers to buy the Series
A Notes only from, persons who in purchasing such Series A Notes will be
deemed to have represented and agreed (i) if such Eligible Purchasers are
QIBs, that they are purchasing the Series A Notes for their own accounts
or accounts with respect to which they exercise sole investment discretion
and that they or such accounts are QIBs, (ii) that such Series A Notes
will not have been registered under the Act and may be resold, pledged or
otherwise transferred only (1)(a) to a person who the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A,
(b) in a transaction meeting the requirements of Rule 144 under the Act,
(c) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Act or (d) in accordance with
another exemption from the registration requirements of the Act (and
based, in the case of clauses (b), (c) and (d) above, upon an opinion of
counsel if the Company so requests), (2) to the Company or (3) pursuant to
an effective registration statement under the Act and, in each case, in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction and (iii) that the holder
will, and each subsequent holder is required to, notify any purchaser from
it of the security evidenced thereby of the resale restrictions set forth
in (ii) above.
(e) Such Initial Purchaser is not a pension or welfare plan (as
defined in Section 3 of ERISA) and is not acquiring the Series A Notes on
behalf of a pension or welfare plan.
(f) Such Initial Purchaser also understands that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 9 hereof, counsel to the Company and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and such Initial Purchaser hereby consents to such
reliance.
8. Indemnification.
(a) The Company and each of the Guaranteeing Subsidiaries agree,
jointly and severally, to indemnify and hold harmless (i) each Initial
Purchaser, (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any Initial
Purchaser (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person"), and (iii) the
respective officers, directors, partners, employees, representatives and
agents of the Initial Purchasers or any controlling person (any person
referred to in clause (i), (ii) or (iii) in such capacity may hereinafter
be referred to as an "Indemnified Person") to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including, without limitation and as
incurred, reimbursement of all reasonable costs of investigating,
preparing, pursuing or defending any claim or action, or any investigation
or proceeding by any governmental agency or body, commenced or threatened,
including the fees and expenses of counsel to any Indemnified Person)
directly or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue statement of
a material fact contained
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<PAGE>
in the Preliminary Offering Memorandum, the Offering Memorandum or any
Rule 144A Information provided by the Company or any Guaranteeing
Subsidiary to any holder or prospective purchaser of Series A Notes
pursuant to Section 5(j) (or any amendment or supplement thereto), or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the
light of the circumstances under which they were made) not misleading,
except insofar as such losses, claims, damages, liabilities or expenses
are caused by an untrue statement or omission or alleged untrue statement
or omission that is made in reliance upon and in conformity with
information relating to any of the Initial Purchasers furnished in writing
to the Company by any of the Initial Purchasers expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto). The Company and each Guaranteeing
Subsidiary also agree, jointly and severally, to reimburse each
Indemnified Person for any and all fees and expenses (including, without
limitation, the fees and expenses of counsel) as they are incurred in
connection with enforcing such Indemnified Person's rights under this
Agreement (including, without limitation, its rights under this Section
8). The Company shall notify the Initial Purchasers promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves the Company or an Indemnified
Person.
(b) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any of the Indemnified Persons with respect to which indemnity may
be sought against the Company or any Guaranteeing Subsidiary, such
Indemnified Person shall promptly notify the Company in writing (provided,
that the failure to give such notice shall not relieve the Issuers of its
obligations pursuant to this Agreement) and the Company shall assume the
defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person and payment of all fees and
expenses (regardless of whether it is ultimately determined that an
Indemnified Person is not entitled to indemnification hereunder). Such
Indemnified Person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the employment of such counsel shall have been
specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) the named
parties to any such action (including any impleaded parties) include both
such Indemnified Person and the Company and such Indemnified Person shall
have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company and the Guaranteeing Subsidiaries (in which case
the Company shall not have the right to assume the defense of such action
on behalf of such Indemnified Person, it being understood, however, that
the Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified Persons, which
firm shall be designated in writing by the Initial Purchasers and that all
such fees and expenses shall be reimbursed as they are incurred). Neither
the Company or any Guaranteeing Subsidiary shall be liable for any
settlement of any such action or proceeding effected without the prior
written consent of the Company, but if settled with the written consent of
the Company, which consent will not be unreasonably withheld, the Company
and each Guaranteeing Subsidiary agree, jointly and severally, to
indemnify and hold harmless any Indemnified Person from and against any
loss, claim, damage, liability or expense by reason of any such
settlement. Notwithstanding the foregoing sentence, if at any time an
Indemnified
22
<PAGE>
Person shall have requested the Company or any Guaranteeing Subsidiary to
reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, the Company and the
Guaranteeing Subsidiaries agree that they shall be liable for any
settlement of any proceeding effected without any of the Company's written
consent if (i) such settlement is entered into more than ten (10) business
days after receipt by the Company of the aforesaid request, and (ii) the
Company or any Guaranteeing Subsidiary shall not have reimbursed the
Indemnified Person in accordance with such request prior to the date of
such settlement. Neither the Company or any Guaranteeing Subsidiary shall,
without the prior written consent of each Indemnified Person, settle or
compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Person is a party
thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person from all
liability arising out of such action, claim, litigation or proceeding.
(c) Each of the Initial Purchasers agrees, severally and not
jointly, to indemnify and hold harmless the Company, any person
controlling (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company and the officers, directors, partners,
employees, representatives and agents of each such person to the same
extent as the foregoing indemnity from the Company to each of the
Indemnified Persons, but only with respect to claims and actions based on
information relating to such Initial Purchasers furnished in writing by
such Initial Purchasers expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum; provided however, that in no case
shall any Initial Purchaser be liable or responsible for any amount in
excess of the discounts and commissions received by such Initial
Purchaser, as set forth in the cover page of the Offering Memorandum.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party (or parties, as applicable) on the one
hand and the indemnified party (or parties, as applicable) on the other
hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
indemnifying party (or parties, as applicable) and the indemnified party,
(or parties, as applicable) as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guaranteeing Subsidiaries on the one hand, and the Initial Purchasers, on
the other hand, shall be deemed to be in the same proportion as the total
proceeds from the offering (net of Initial Purchasers' discounts and
commissions but before deducting expenses) received by the Company bear to
the total discounts and commissions received by the Initial Purchasers, in
each case, as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company and the Guaranteeing
Subsidiaries, on the one hand, and the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact related to information supplied
by the Company and the Guaranteeing Subsidiaries, on the one hand, or the
Initial Purchasers, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
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<PAGE>
The Company, the Guaranteeing Subsidiaries and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or by
any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities or expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Initial Purchasers (and the Initial Purchasers' related
Indemnified Persons) shall not be required to contribute, in the
aggregate, any amount in excess of the amount by which the total discount
applicable to the Series A Notes purchased by such Initial Purchaser
pursuant to this Agreement exceeds the amount equal to (i) the amount of
any damages which the Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission plus (ii) any amount paid or contributed by the Initial
Purchaser pursuant to the Registration Rights Agreement. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The indemnity and contribution agreements of the Company and the
Guaranteeing Subsidiaries contained in this Section 8 are in addition to
any liability or obligation which the Company and the Guaranteeing
Subsidiaries may otherwise have to the Indemnified Persons.
9. Conditions of Initial Purchaser's Obligations. The several obligations
of the Initial Purchasers to purchase and pay for the Series A Notes, as
provided herein, shall be subject to the satisfaction of each of the following
conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the date hereof and the Closing Date,
respectively. All of the representations and warranties of IVAC Holdings and
IVAC Medical Systems contained in the Merger Agreement shall be true and
correct, in all material respects, on the Closing Date with the same force and
effect as if made on and as of the Closing Date. The Company shall have
performed or complied in all material respects with all of their obligations and
agreements herein contained and required to be performed or complied with by
them at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies distributed
to the Initial Purchasers not later than 1:00 p.m., New York City time, on the
day following the date of this Agreement or at such later date and time as to
which the Initial Purchasers may agree in writing and no stop order suspending
the qualification or exemption from qualification of the Series A Notes in any
jurisdiction referred to in Section 5(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending,
threatened or, to the Company's knowledge, contemplated.
(c) (i) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
that would as of the Closing Date, prevent the issuance of the Series A Notes;
(ii) no injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction shall have been issued as of the Closing
Date that would prevent the issuance of the Series A Notes; and (iii) on the
Closing Date, no action, suit or proceeding shall be pending against or
affecting or threatened against IMED, IVAC Holdings or any of their respective
subsidiaries before any court or arbitrator or any governmental body, agency or
official
24
<PAGE>
that, if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on IMED or the Surviving Company, as the case may be.
(d) (i) Since the date of the latest balance sheet in the Offering
Memorandum, there shall not have been any material adverse change, or any
development involving a prospective material adverse change, in the assets,
properties, business, results of operations, condition (financial or otherwise)
or prospects, whether or not arising in the ordinary course of business, of IMED
and its subsidiaries, taken as a whole, or IVAC Holdings and its subsidiaries,
taken as a whole, (ii) since the date of the latest balance sheet included in
the Offering Memorandum, there shall not have been any material change, or any
development that is reasonably likely to result in a material change, in the
capital stock or in the long-term debt, or material increase in short-term debt,
of IMED and its subsidiaries, taken as a whole, or IVAC Holdings and its
subsidiaries, taken as a whole, after giving effect to the Merger from that set
forth in the Offering Memorandum and (iii) none of IMED, IVAC Holdings or any of
their respective subsidiaries shall have any liability or obligation, direct or
contingent, which is, or after giving effect to the Merger will be, material to
IMED or the Surviving Corporation.
(e) The Initial Purchasers shall have received a certificate, dated the
Closing Date, signed by (i) the President and (ii) the principal financial or
accounting officer of IMED confirming, as of the Closing Date, the matters set
forth in paragraphs (a), (b), (c) and (d) of this Section 9.
(f) On the Closing Date, the Initial Purchasers shall have received an
opinion (satisfactory to the Initial Purchasers and the Initial Purchasers'
counsel), dated the Closing Date, of Gordon Altman Butowsky Weitzen Shalov &
Wein, counsel for IMED and the Initial Guarantor, substantially to the effect
that:
1. IMED and each of its subsidiaries listed on Schedule D
hereto (the "IMED Domestic Subsidiaries") is a duly organized and
validly existing corporation in good standing under the laws of its
jurisdiction of incorporation, has the requisite corporate power and
authority to own, lease and operate its properties and to conduct
its business as it is currently being conducted and as described in
the Offering Memorandum, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction where the
ownership, leasing or operation of property or the conduct of its
business requires such qualification, except where the failure to be
so qualified would not, singly or in the aggregate, have a Material
Adverse Effect on IMED.
2. Immediately prior to the Initial Merger, the entities
listed on Schedule B hereto will be the only subsidiaries, direct or
indirect, of IMED. All of the issued and outstanding shares of
capital stock of, or other ownership interests in, each IMED
Domestic Subsidiary are owned of record, directly or indirectly, by
IMED; all such capital stock or other ownership interests have been
duly and validly authorized and issued and are fully paid and
non-assessable and, to the knowledge of such counsel, have not been
issued in violation of any preemptive rights arising as a matter of
law.
3. When the Series A Notes are issued and delivered pursuant
to this Agreement, no Series A Note will be of the same class
(within the meaning of Rule 144A under the Act) as securities of
IMED that are listed on a national securities exchange registered
under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
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4. IMED has full corporate power and authority to execute,
deliver and perform its obligations under the Merger Agreement, the
New Credit Facility, this Agreement, the Indenture, the Registration
Rights Agreement and the other Operative Documents to which it is a
party and to consummate the transactions contemplated by the Merger
Agreement, the New Credit Facility, this Agreement and the other
Operative Documents to which it is a party, and to issue, sell and
deliver the Series A Notes pursuant to this Agreement. IMED Merger
Sub has full corporate power and authority to execute, deliver and
perform its obligations under the Merger Agreement. The Initial
Guarantor has full corporate power and authority to execute, deliver
and perform its obligations under this Agreement, the Indenture, the
Registration Rights Agreement and the other Operative Documents to
which it is a party and to consummate the transactions contemplated
by this Agreement and the other Operative Documents to which it is a
party, and to issue, sell and deliver its Subsidiary Guarantee
pursuant to this Agreement. The Merger Agreement has been duly
authorized and validly executed and delivered by IMED and IMED
Merger Sub and constitutes a valid and legally binding agreement of
IMED and IMED Merger Sub, enforceable against IMED and IMED Merger
Sub in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights generally and to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought at law or in equity).
5. This Agreement has been duly authorized and validly
executed and delivered by IMED and the Initial Guarantor.
6. The Indenture has been duly authorized and validly executed
and delivered by IMED and the Initial Guarantor and, assuming due
authorization, execution and delivery thereof by the Trustee, the
Indenture constitutes the valid and legally binding agreement of
IMED and the Initial Guarantor, enforceable against IMED and the
Initial Guarantor in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought at law or in equity).
7. The Registration Rights Agreement has been duly authorized
and validly executed and delivered by IMED and the Initial Guarantor
and, assuming the due execution and delivery thereof by the Initial
Purchasers, the Registration Rights Agreement constitutes the valid
and legally binding agreement of IMED and the Initial Guarantor,
enforceable against IMED and the Initial Guarantor in accordance
with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of
equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought
at law or in equity).
8. The Series A Notes have been duly authorized and validly
executed by IMED and, when issued and authenticated in accordance
with the terms of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement,
the Series A Notes will be valid and legally binding obli-
26
<PAGE>
gations of IMED, enforceable against IMED in accordance with their
terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought at law or in equity).
9. The Subsidiary Guarantee endorsed on the Series A Notes has
been duly authorized and validly executed by the Initial Guarantor
and, when the Series A Notes have been issued and authenticated in
accordance with the terms of the Indenture and delivered to and paid
for by the Initial Purchasers in accordance with the terms of this
Agreement, the Subsidiary Guarantee will be the valid and legally
binding obligation of the Initial Guarantor, enforceable against the
Initial Guarantor in accordance with its terms and entitled to the
benefits of the Indenture, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights generally and to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought at law or in equity).
10. The Subsidiary Guarantee to be endorsed on the Series B
Notes has been duly authorized by the Initial Guarantor.
11. No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial
Purchasers as contemplated by this Agreement or for the Exempt
Resales assuming that (i) each Initial Purchaser is a QIB, (ii) the
purchasers who buy the Series A Notes in the Exempt Resales are
either QIBs or Accredited Investors (up to a maximum of 10 such
Accredited Investors), (iii) the accuracy of the Initial Purchaser's
representations regarding the absence of general solicitation in
connection with the sale of Series A Notes to the Initial Purchasers
and the Exempt Resales contained in this Agreement, (iv) the
accuracy of the representations in the second sentence of Section
6(az)) of this Agreement and (v) with respect to Accredited
Investors, the accuracy of the representations made by each
Accredited Investor as set forth in the letter of representation
executed by such Accredited Investor in the Form of Annex A to the
Offering Memorandum.
12. Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its date, complied with the requirements
of Rule 144A(d)(4) of the Act.
13. Neither IMED nor any of its subsidiaries is (a) an
"investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as
amended, (b) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or (c)
subject to regulation under the Federal Power Act, the Interstate
Commerce Act or any federal or state statute or regulation limiting
its respective ability to incur indebtedness for borrowed money.
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<PAGE>
14. The execution, delivery and performance of the Merger
Agreement, the New Credit Facility, this Agreement and the other
Operative Documents and compliance by IMED and its subsidiaries with
the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the Merger) will not (i) require any consent, approval,
authorization or order of, or filing or registration with, any
regulatory body, administrative agency or other governmental agency,
other than (1) as may be required under state securities or "blue
sky" laws, (2) those that have been obtained or made and (3) the
filing of the merger certificates with the Secretary of State of the
State of Delaware, (ii) conflict with any of the respective charters
or bylaws of IMED or any of its subsidiaries, (iii) conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) a Lien with respect to, any
agreement or instrument known to us to which IMED or any of its
subsidiaries is a party or by which it or any of them is bound, or
to which any properties of IMED or any of its subsidiaries is or may
be subject, except for (A) Liens granted pursuant to the New Credit
Facility and (B) such conflicts, breaches, violations, defaults,
accelerations, impositions and creations as would not, individually
or in the aggregate, have a Material Adverse Effect on IMED, (iv)
contravene any order known to us of any court or governmental agency
or body having jurisdiction over IMED or any of its subsidiaries or
any of their properties, (v) violate or conflict with any law,
statute, rule or regulation or administrative or court decree
applicable to IMED or any of its subsidiaries, or any of their
respective properties result in termination or revocation of any
material permits or licenses owned by the Company or any of its
subsidiaries or (vi) result in the termination or revocation of any
material Authorization of IMED or any of its subsidiaries or result
in any other material impairment of the rights of the holder of any
such Authorization. Notwithstanding the foregoing provisions of this
paragraph, in accordance with customary government practices certain
government contracts which are being transferred as part of the
transactions contemplated hereby will be novated after the
consummation of the Merger.
15. To the knowledge of such counsel, no action has been taken
and no law, statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency or body that prevents
the issuance of the Series A Notes or suspends the sale of the
Series A Notes in any jurisdiction referred to in Section 5(e) of
this Agreement; and no injunction, restraining order or order of any
nature by a federal or state court or other tribunal of competent
jurisdiction has been issued with respect to IMED or any of its
subsidiaries that would prevent or suspend the issuance or sale of
the Series A Notes in any jurisdiction referred to in Section 5(e)
of this Agreement.
16. The Indenture conforms as to form in all material respects
with the requirements of the TIA, and the rules and regulations of
the Commission applicable to an indenture which is qualified
thereunder. It is not necessary in connection with the offer, sale
and delivery of the Series A Notes to the Initial Purchasers in the
manner contemplated by this Agreement or in connection with the
Exempt Resales to qualify the Indenture under the TIA.
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17. The statements in the Offering Memorandum under the
captions "Risk Factors - Subordination," "Risk Factors - Fraudulent
Transfer Considerations," "Risk Factors - Enforceability of
Subsidiary Guarantees," "The Merger," "Description of Notes,"
"Description of New Credit Facility" and "Notice to Investors"
insofar as such statements constitute a summary of the legal
matters, documents or proceedings referenced therein, fairly and
accurately present in all material respects the information set
forth therein with respect to such legal matters, documents and
proceedings.
18. To the knowledge of such counsel, except to the extent
described in the Offering Memorandum, there is no action, suit,
proceeding or investigation before or by any court or governmental
agency or body, domestic or foreign, pending against or affecting
IMED or any of its subsidiaries or any of their respective
properties which might result, singly or in the aggregate, in a
Material Adverse Effect on IMED.
19. IVAC Holdings has full corporate authority to execute,
deliver and perform its obligations under the Note Assumption, the
Registration Rights Assumption, the Purchase Assumption and to
consummate the transactions contemplated by the Note Assumption, the
Registration Rights Assumption, the Purchase Assumption and the
Secondary Mergers. The Second Guarantor has full corporate authority
to execute, deliver and perform its obligations under its Subsidiary
Guarantee, the Supplemental Indenture, the Registration Rights
Assumption, the Purchase Assumption and to consummate the
transactions contemplated by the Supplemental Indenture, the
Registration Rights Assumption and the Purchase Assumption.
20. The execution, delivery and performance of the Merger
Agreement, the Purchase Assumption, the Registration Rights
Assumption, the Note Assumption, the Supplemental Indenture and
compliance by the Surviving Company and its subsidiaries with the
provisions thereof and the consummation of the transactions
contemplated thereby (including, without limitation, the Merger)
will not (i) require any consent, approval, authorization or order
of, or filing or registration with, any regulatory body,
administrative agency or other governmental agency, other than (1)
as may be required under state securities or "blue sky" laws, (2)
those that have been obtained or made and (3) the filing of the
merger certificates with the Secretary of State of the State of
Delaware, (ii) conflict with any of the respective charters or
bylaws of the Surviving Company or any of its subsidiaries, (iii)
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default or cause an acceleration
of any obligation under, or result in the imposition or creation of
(or the obligation to create or impose) a Lien with respect to, any
agreement or instrument known to us to which the Surviving Company
or any of its subsidiaries is a party or by which it or any of them
is bound, or to which any properties of the Surviving Company or any
of its subsidiaries is or may be subject immediately subsequent to
the Merger, except for (A) Liens granted pursuant to the New Credit
Facility and (B) such conflicts, breaches, violations, defaults,
accelerations, impositions and creations as would not, individually
or in the aggregate, have a Material Adverse Effect on the Surviving
Company, (iv) contravene any order known to us of any court or
governmental agency or body having jurisdiction over the Surviving
Company or any of its subsidiaries or any of their properties, (v)
violate or conflict with any law, statute, rule or regulation or
administrative or court decree applicable to the Surviving
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Company or any of its subsidiaries, or any of their respective
properties or (vi) result in the termination or revocation of any
Authorization (as defined below) of the Surviving Corporation or any
of its subsidiaries or result in any other impairment of the rights
of the holder of any such Authorization. Notwithstanding the
foregoing provisions of this paragraph, in accordance with customary
government practices certain government contracts which are being
transferred as part of the transactions contemplated hereby will be
novated after the consummation of the Merger.
21. After giving effect to the Merger, to the knowledge of
such counsel, the entities listed on Schedule C hereto will be the
only subsidiaries, direct or indirect, of the Surviving Company. All
of the issued and outstanding shares of capital stock of, or other
ownership interests in, each subsidiary of the Surviving Company
listed on Schedule E hereto (the "Surviving Company Domestic
Subsidiaries") are owned of record, directly or indirectly, by the
Surviving Company; all such capital stock or other ownership
interests have been duly and validly authorized and issued and are
fully paid and non-assessable and, to the knowledge of such counsel,
have not been issued in violation of any preemptive rights arising
as a matter of law.
22. The Surviving Company and each of the Surviving Company
Domestic Subsidiaries is a duly organized and validly existing
corporation in good standing under the laws of its jurisdiction of
incorporation, has the corporate power and authority to own, lease
and operate its properties and to conduct its business as it is
currently being conducted and as described in the Offering
Memorandum, and each of the Surviving Company Domestic Subsidiaries
is duly qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect on the Surviving Company.
23. Each of this Agreement, the Purchase Assumption, the
Registration Rights Agreement, the Registration Rights Assumption,
the Indenture and the Note Assumption has been duly authorized by
the Surviving Company, and each of the Purchase Assumption, the
Registration Rights Assumption and the Note Assumption has been
validly executed and delivered by the Surviving Company and are
valid and legally binding agreements of the Surviving Company. Each
of this Agreement, the Purchase Assumption, the Registration Rights
Agreement, the Registration Rights Assumption, the Indenture and the
Supplemental Indenture has been duly authorized by the Second
Guarantor, and each of the Purchase Assumption, the Registration
Rights Assumption and the Supplemental Indenture has been validly
executed and delivered by the Second Guarantor.
24. The Indenture, assuming due authorization, execution and
delivery thereof by the Trustee, is a valid and legally binding
agreement of the Surviving Company and each of the Guaranteeing
Subsidiaries, enforceable against the Surviving Company and each of
the Guaranteeing Subsidiaries in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought at law or in equity).
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25. The Registration Rights Agreement, assuming the due
execution and delivery thereof by the Initial Purchasers, is a valid
and legally binding agreement of the Surviving Company and each of
the Guaranteeing Subsidiaries, enforceable against the Surviving
Company and each of the Guaranteeing Subsidiaries in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought at law or
in equity).
26. The Series A Notes are valid and legally binding
obligations of the Surviving Company, enforceable against the
Surviving Company in accordance with their terms and entitled to the
benefits of the Indenture, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights generally and to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought at law or in equity).
27. The Subsidiary Guarantees endorsed on the Series A Notes
are the valid and legally binding obligations of the Guaranteeing
Subsidiaries, enforceable against the Guaranteeing Subsidiaries in
accordance with their respective terms and entitled to the benefits
of the Indenture, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of
equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought
at law or in equity).
28. When the Series B Notes are issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture,
the Series B Notes will be the valid and legally binding obligations
of the Surviving Company, enforceable against the Surviving Company
in accordance with their terms and entitled to the benefits of the
Indenture (assuming the due execution and delivery of the Indenture
by the Trustee), subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of
equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought
at law or in equity).
29. When the Series B Notes are issued, authenticated and
delivered in accordance with the terms of the Exchange Offer and the
Indenture, the Subsidiary Guarantees to be endorsed on the Series B
Notes will be the valid and legally binding obligations of the
Guaranteeing Subsidiaries, enforceable against the Guaranteeing
Subsidiaries in accordance with their terms and entitled to the
benefits of the Indenture (assuming the due execution and delivery
of the Indenture by the Trustee), subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights generally and to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought at law or in equity).
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30. To the knowledge of such counsel, except as disclosed in
the Offering Memorandum, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending against or affecting the Surviving
Company or any of its subsidiaries or any of their respective
properties which might result, singly or in the aggregate, in a
Material Adverse Effect on the Surviving Company.
In giving their opinion required by this subsection 9(f), Gordon
Altman Butowsky Weitzen Shalov & Wein shall also state that such counsel
has participated in conferences with directors, officers and other
representatives of IMED, IVAC Holdings and IVAC Medical Systems,
representatives of the independent public accountants of IMED and IVAC
Holdings, the Initial Purchasers' representatives and counsel for the
Initial Purchasers, in connection with the preparation of the Preliminary
Offering Memorandum and Offering Memorandum and has considered the matters
required to be stated therein and the statements contained therein and,
although such counsel has not independently verified the accuracy,
completeness or fairness of the statements contained in the Preliminary
Offering Memorandum and Offering Memorandum (other than those that such
counsel must opine on pursuant to paragraph (18) of this subsection 9(f))
such counsel advises you that, on the basis of the foregoing, no facts
have come to such counsel's attention which led it to believe that the
Preliminary Offering Memorandum (as amended or supplemented), as of its
date, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
The opinion of Gordon Altman Butowsky Weitzen Shalov & Wein may
state that the opinions set forth in paragraphs 21 through 30 of this
subsection 9(f) shall be deemed rendered immediately subsequent to the
Merger.
The opinion of Gordon Altman Butowsky Weitzen Shalov & Wein shall be
rendered to you at the request of the Company and shall so state therein.
For purposes of the opinion of Gordon Altman Butowsky Weitzen Shalov
& Wein, "Material Adverse Effect" shall mean a material adverse effect on
the assets, liabilities, results of operations, management, condition
(financial or other), properties or business of the relevant person.
(g) The Initial Purchasers shall have received on the Closing Date the
opinion of each of Davis Polk & Wardwell and Hazel Aker, Esq. delivered to
Donaldson, Lufkin & Jenrette Securities Corporation in connection with the
Tender Offer and Consent Solicitation, each of which shall contain a statement
or be accompanied by a letter addressed to you and dated the Closing Date to the
effect that you may rely on such opinion to the same extent as if it were
originally addressed to you.
(h) On the Closing Date, you shall have received an opinion (satisfactory
to the Initial Purchasers and the Initial Purchasers' counsel), dated the
Closing Date, of McDermott Will & Emery, regulatory counsel for the Company,
substantially to the effect that:
The statements under the caption "Business - Government
Regulation" insofar as such statements constitute a summary of legal
matters, documents or proceedings referred to therein, fairly and
accurately present in all material respects the information set
forth therein with respect to such legal matters, documents and
proceedings.
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The opinion of McDermott Will & Emery shall be rendered to you at
the request of the Company and shall so state therein.
(i) On the Closing Date, you shall have received an opinion (satisfactory
to the Underwriter and the Underwriter's counsel), dated the Closing Date, of
Pennie & Edmonds, patent and trademark counsel for the Company, to the effect
that:
1. The statements under the caption "Business - Patents,
Trademarks and Proprietary Rights," insofar as such statements
constitute a summary of legal matters, documents or proceedings
referred to therein, fairly and accurately present in all material
respects the information set forth therein with respect to such
legal matters, documents and proceedings.
2. The statements in the third, fourth and fifth sentences in
the first paragraph under the caption "Business - Patents,
Trademarks and Proprietary Rights" are true and correct in all
material respects.
3. Upon the consummation of the Merger, all of the
Intellectual Property of IMED will be owned by the Surviving
Company.
The opinion of Pennie & Edmonds shall be rendered to you at the
request of the Company and shall so state therein.
(j) You shall have received on the Closing Date from the opinion of each
Davis Polk & Wardwell and Gordon Altman Butowsky Weitzen Shalov & Wein delivered
in connection with the Merger Agreement, each of which shall contain a statement
or be accompanied by a letter addressed to you and dated the Closing Date to the
effect that you may rely on such opinion to the same extent as if it were
originally addressed to you.
(k) You shall have received an opinion, dated the Closing Date, of Latham
& Watkins, counsel to the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(l) On the Closing Date, you shall have received an opinion (satisfactory
to the Initial Purchasers and the Initial Purchasers' counsel), dated the
Closing Date, of Grantland E. Bryce, Esq., General Counsel of the Company,
substantially to the effect that:
To the knowledge of such counsel, neither IMED or any of its
subsidiaries is (A) in violation of its respective charter or bylaws
or (B) in default in the performance of any term, provision,
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or other contract, lease or other instrument
to which IMED or any of its subsidiaries is a party or by which any
of them is bound, or to which any of the property or assets of IMED
or any of its subsidiaries is subject, except for such defaults as
would not, individually or in the aggregate, have a Material Adverse
Effect on IMED.
(m) At the time this Agreement is executed and at the Closing Date the
Initial Purchasers shall have received letters from Price Waterhouse, L.L.P. and
Ernst & Young, L.L.P., independent public accountants, dated as of the date of
the Agreement and as of the Closing Date, a customary
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comfort letter addressed to the Initial Purchasers and in form and substance
satisfactory to the Initial Purchasers and counsel to the Initial Purchasers,
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(n) IMED, the Initial Guarantor and the Trustee shall have entered into
the Indenture and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(o) IMED, the Initial Guarantor shall have entered into the Registration
Rights Agreement for the benefit of the Initial Purchasers and the benefit of
other Purchasers, and each of the Initial Purchasers shall have received an
original, duly executed by IMED and the Initial Guarantor.
(p) On the Closing Date, the Initial Purchasers shall have received
evidence satisfactory to the Initial Purchasers that the indebtedness under the
IMED Credit Facility, the IVAC Credit Facility and the Junior Subordinated Notes
have been repaid in full.
(q) IMED shall have received no less than $20.0 million of proceeds from
the Capital Contribution and the Initial Purchasers shall have received evidence
satisfactory to the Initial Purchasers of the receipt thereof by IMED.
(r) IMED shall have entered into the New Credit Facility (the form and
substance of which shall be reasonably acceptable to the Initial Purchasers) and
the Initial Purchasers shall have received counterparts, conformed as executed,
thereof and of all other documents and agreements entered into in connection
therewith.
(s) Each condition to the closing contemplated by the New Credit Facility
(other than the issuance and sale of the Series A Notes pursuant hereto) shall
have been satisfied or waived. There shall exist at and as of the Closing Date
(after giving effect to the transactions contemplated by this Agreement and the
Merger Agreement) no conditions that would constitute a default (or an event
that with notice or the lapse of time, or both, would constitute a default)
under the New Credit Facility. On the Closing Date, the closing under the New
Credit Facility shall have been consummated on terms that conform in all
material respects to the description thereof in the Offering Memorandum and the
Initial Purchasers shall have received evidence satisfactory to the Initial
Purchasers of the consummation thereof.
(t) Each condition to the closing contemplated by the Merger Agreement
(other than the issuance and sale of the Series A Notes pursuant hereto and the
closing under the New Credit Facility) shall have been satisfied or waived.
There shall exist at and as of the Closing Date (after giving effect to the
transactions contemplated by this Agreement and the New Credit Facility) no
conditions that would constitute a default (or an event that with notice or the
lapse of time, or both, would constitute a default) under the Merger Agreement.
On the Closing Date, the Merger shall have been consummated on terms that
conform in all material respects to the description thereof in the Offering
Memorandum and the Initial Purchasers shall have received evidence satisfactory
to the Initial Purchasers of the consummation thereof. The Company shall deliver
to the Initial Purchasers copies of all of filings made with any governmental
entity (including, without limitation, the United States Patent and Trademark
Office and the United States Copyright Office) in order to effect the Secondary
Mergers, as certified by an appropriate official thereof, within a reasonable
period of time following the Closing Date. The Company shall deliver to the
Initial Purchasers copies of all of the certificates of merger required under
Delaware law to be made in order to effect each of the Initial Merger and the
Secondary Mergers, as certified by the Secretary of State of the State of
Delaware, within a reasonable period of time following the Closing Date.
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(u) On the Closing Date, the Initial Purchasers shall have received a
solvency opinion, in the form contemplated by the New Credit Facility, by an
independent third party addressed to the Trustee among others and reasonably
satisfactory to you as to the solvency of the Surviving Company and its
subsidiaries following the consummation of the transactions contemplated herein
and by the Merger Agreement.
(v) On the Closing Date, all of the outstanding Existing Senior Notes
shall have been purchased pursuant to the Tender Offer and Consent Solicitation.
(w) On the Closing Date, the Surviving Company and Advanced Medical shall
have entered into the Tax Sharing Agreement and the Initial Purchasers shall
have received counterparts, conformed as executed, thereof.
(x) On the Closing Date, each of the Surviving Company and the Second
Guarantor shall have entered into the Purchase Assumption and the Registration
Rights Assumption, and each of the Initial Purchasers shall have received an
original, duly executed by each of the Surviving Company and the Second
Guarantor. On the Closing Date, the Surviving Company and the Trustee shall have
entered into the Note Assumption and the Initial Purchasers shall have received
counterparts, conformed as execute, thereof. On the Closing Date, the Second
Guarantor and the Trustee shall have entered into the Supplemental Indenture and
the Initial Purchasers shall have received counterparts, conformed as executed,
thereof.
(y) Latham & Watkins shall have been furnished with such documents and
opinions, in addition to those set forth above, as they may reasonably require
for the purpose of enabling them to review or pass upon the matters referred to
in this Section 9 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations, warranties
or conditions herein contained.
(z) Prior to the Closing Date, the Company shall have furnished to the
Initial Purchasers such further information, certificates and documents as the
Initial Purchasers may reasonably request.
(aa) On or before the Closing Date, the Initial Purchasers shall have
received copies of all filings made with the United States Patent and Trademark
Office and the United States Copyright Office in connection with the transfer
from Advanced Medical to IMED of the Intellectual Property that was the subject
of the License Agreement, dated April 2, 1990, between Advanced Medical and
IMED.
All opinions, certificates, letters and other documents required by
this Section 9 to be delivered by the Company will be in compliance with
the provisions hereof only if they are reasonably satisfactory in form and
substance to the Initial Purchasers. The Company will furnish the Initial
Purchasers with such conformed copies of such opinions, certificates,
letters and other documents as the Initial Purchasers shall reasonably
request.
10. Defaults. If on the Closing Date, any Initial Purchaser shall fail or
refuse to purchase the Series A Notes that it has agreed to purchase hereunder
on such date, and the aggregate principal amount of such Series A Notes that
such defaulting Initial Purchaser agreed but failed or refused to purchase does
not exceed 10% of the total principal amount of such Series A Notes that all of
the Initial Purchasers are obligated to purchase on such Closing Date, the
non-defaulting Initial Purchaser(s) shall be obligated to purchase the amount of
the Series A Notes that such defaulting Initial Purchaser agreed but failed or
refused to purchase on such date in proportion to the respective proportions
that the principal amount of Series A Notes set forth opposite their respective
name(s) in Schedule A hereto bear to the aggregate
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principal amount of Series A Notes set forth opposite the names of the
non-defaulting Initial Purchaser(s). If, on the Closing Date, any of the Initial
Purchasers shall fail or refuse to purchase Series A Notes in an aggregate
principal amount that exceeds 10% of such total principal amount of the Series A
Notes and arrangements satisfactory to the other Initial Purchaser(s) and IMED
for the purchase of such Series A Notes are not made within 48 hours after such
default, this Agreement shall terminate without liability on the part of the
non-defaulting Initial Purchaser(s) or IMED, except as otherwise provided in
Section 11 hereof. In any such case that does not result in termination of this
Agreement, the Initial Purchasers or IMED may postpone the Closing Date for not
longer than seven days, in order that the required changes, if any, in any
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve a defaulting Initial Purchaser from liability in respect of
any default by any such Initial Purchaser under this Agreement.
11. Effective Date of Agreement and Termination.
(a) This Agreement shall become effective upon the execution and
delivery of this Agreement by the parties hereto.
(b) This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by notice to IMED if any of the
following has occurred: (i) subsequent to the date of this Agreement,
there has been any material adverse change, or any development involving a
prospective material adverse change, in the assets, properties, business,
results of operations, condition (financial or otherwise) or prospects,
whether or not arising in the ordinary course of business, of IMED and its
subsidiaries, taken as a whole, or IVAC Holdings and its subsidiaries,
taken as a whole that, in the judgment of DLJ, materially impairs the
investment quality of the Series A Notes; (ii) any outbreak or escalation
of hostilities or other national or international calamity or crisis or
material adverse change in the financial markets of the United States or
elsewhere, or any other substantial national or international calamity or
emergency, if the effect of such outbreak, escalation, calamity, crisis or
emergency would, in the judgment of any Initial Purchaser, make it
impracticable or inadvisable to market the Series A Notes or to enforce
contracts for the sale of the Series A Notes; (iii) any suspension or
limitation of trading generally in securities on the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter markets
or any setting of minimum prices for trading on such exchange or markets;
(iv) any declaration of a general banking moratorium by either federal or
New York authorities; (v) the taking of any action by any federal, state
or local government or agency in respect of its monetary or fiscal affairs
that, in the judgment of any Initial Purchaser, has a material adverse
effect on the financial markets in the United States and would, in the
judgment of any Initial Purchaser, make it impracticable or inadvisable to
market the Series A Notes or to enforce contracts for the sale of the
Series A Notes; (vi) the enactment, publication, decree, or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority that, in the judgment of any
Initial Purchaser materially and adversely affects the business or
operations of IMED, IVAC Holdings or any of their respective subsidiaries;
or (vii) any securities of the IMED, IVAC Holdings or any of their
respective subsidiaries shall have been downgraded or placed on any "watch
list" for possible downgrading by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the
Act), provided, however that in the case of such "watch list" placement,
termination shall be permitted only if such placement would, in the
judgment of DLJ, make it impracticable or inadvisable to market the Series
A Notes or to enforce contracts for the sale of the Series A Notes or
materially impair the investment quality of the Series A Notes.
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(c) The indemnities and contribution provisions and other
agreements, representations and warranties of the Company and the
Guaranteeing Subsidiaries, their respective officers and directors and of
the Initial Purchasers set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and shall survive
delivery of and payment for the Series A Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on
behalf of the Initial Purchasers or by or on behalf of IMED, IVAC
Holdings, the Surviving Company, their respective officers or directors or
any controlling person of IMED, IVAC Holdings or the Surviving Company,
(ii) acceptance of the Series A Notes and payment for them hereunder and
(iii) termination of this Agreement.
(d) If this Agreement shall be terminated by the Initial Purchasers
pursuant to paragraph (b) of this Section 11 or because of the failure or
refusal on the part of IMED to comply with the terms or to fulfill any of
the conditions of this Agreement, IMED agrees to reimburse the Initial
Purchasers for all out-of-pocket expenses (including, without limitation,
the fees and disbursements of counsel) incurred by the Initial Purchasers.
Notwithstanding any termination of this Agreement, IMED shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(f)
hereof.
12. Notices. Notices given pursuant to any provision of this Agreement
shall be addressed as follows:
(a) if to the Company, such notice shall be in writing addressed to
the Company or in care at its office as follows: (i) prior to closing to:
IMED Corporation
9775 Businesspark Avenue
San Diego, CA 92131
Attention: Chief Executive Officer
with a copy to:
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, NY 10036-1510
Attention: Keith L. Schaitkin, Esq.
(ii) after the closing to:
IVAC Holdings
10221 Wateridge Circle
San Diego, CA 92121
Attention: Chief Financial Officer
with a copy to:
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, NY 10036-1510
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Attention: Keith L. Schaitkin, Esq.
(b) if to any of the Initial Purchasers, such notice shall be in
writing addressed to Donaldson, Lufkin & Jenrette Securities Corporation
at its office as follows:
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Attention: Tom McGonagle
with a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Attention: Gay Bronson, Esq.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
14. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and other persons referred to in Section 8 hereof, and no other person
will have any right or obligation hereunder.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement among IMED, the Initial Guarantor and the
Initial Purchasers.
[signature pages follows]
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Very truly yours,
IMED CORPORATION
By: /s/ Jeffry M. Picower
------------------------------
Name: Jeffry M. Picower
Title: Chairman of the Board
IMED INTERNATIONAL TRADING CORP.
By: /s/ Joseph W. Kuhn
------------------------------
Name:Joseph W. Kuhn
Title: President
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Thomas G. McGonagle
- ------------------------------------
Name: Thomas G. McGonagle
Title: Senior Vice President
BT SECURITIES CORPORATION
By:_________________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By:_________________________________
Name:
Title:
PARIBAS CORPORATION
By:_________________________________
Name:
Title:
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_________________________________
Name:
Title:
BT SECURITIES CORPORATION
By: /s/ Art Penn
- ------------------------------------
Name: Art Penn
Title: Managing Director
BEAR, STEARNS & CO. INC.
By:_________________________________
Name:
Title:
PARIBAS CORPORATION
By:_________________________________
Name:
Title:
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_________________________________
Name:
Title:
BT SECURITIES CORPORATION
By:_________________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: /s/ Philip Berney
- ------------------------------------
Name: Philip Berney
Title: Senior Managing Director
PARIBAS CORPORATION
By:_________________________________
Name:
Title:
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_________________________________
Name:
Title:
BT SECURITIES CORPORATION
By:_________________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By:_________________________________
Name:
Title:
PARIBAS CORPORATION
By: /s/ Robert Howard
- ------------------------------------
Name: Robert Howard
Title: Managing Director
<PAGE>
SCHEDULE A
Initial Purchaser Amount
- ----------------- ------
Donaldson, Lufkin & Jenrette
Securities Corporation $114,000,000
BT Securities Corporation 47,500,000
Bear, Stearns & Co. Inc. 28,500,000
Paribas Corporation 10,000,000
------------
Total $200,000,000
S-1
<PAGE>
SCHEDULE B
Subsidiaries of IMED
IMED Merger Sub, Inc.
IMED International Trading Corp.
IMED Ltd. U.K. Corporation
IMED Pty. Ltd. Australia
IMED Canada Ltd.
IMED Holding Co. Ltd.
IMED Ireland
S-2
<PAGE>
SCHEDULE C
Subsidiaries of Surviving Company
IVAC Foreign Sales Corp.
River Medical, Inc.
IVAC Canada, Inc.
IVAC-Medical, B.V.
IVAC Scandanavia AB
IVAC Industries Limited
IVAC UK Limited
IVAC France S.A.
IVAC Medizintechnik GmbH
Electromedicina IVAC, S.L.
IMED International Trading Corp.
IMED Ltd.
IMED Pty. Ltd.
IMED Canada Ltd.
IMED Holding Co. Ltd.
IMED Ireland
S-3
<PAGE>
SCHEDULE D
IMED Domestic Subsidiaries
IMED Merger, Sub. Inc.
IMED International Trading Corp.
S-4
<PAGE>
SCHEDULE E
Surviving Company Domestic Subsidiaries
IVAC Overseas Holdings, Inc.
IMED International Trading Corp.
S-5
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
A-1
<PAGE>
PURCHASE AGREEMENT ASSUMPTION AGREEMENT
PURCHASE AGREEMENT ASSUMPTION AGREEMENT (this "Agreement"), dated as
of November 26, 1996, is by IVAC Holdings, Inc., a Delaware corporation (the
"Company"), and IVAC Overseas Holdings, Inc., a Delaware corporation (the
"Second Guarantor").
W I T N E S S E T H
WHEREAS, IMED Corporation, a Delaware corporation, ("IMED") has
heretofore executed and delivered to the Initial Purchasers a purchase agreement
(the "Purchase Agreement"), dated as of November 19, 1996, providing for the
terms pursuant to which the Initial Purchasers will purchase $200,000,000 of
aggregate principal amount of 9 3/4% Series A Senior Subordinated Notes due 2006
(the "Series A Notes") of IMED.
WHEREAS, IMED has been merged with and into the Company (the
"Merger");
WHEREAS, pursuant to the Purchase Agreement, the Company upon
consummation of the Merger is required to succeed to the obligations of IMED
under the Purchase Agreement and to execute and deliver this Agreement
concurrently with the Merger; and
WHEREAS, pursuant to the Purchase Agreement immediately subsequent
to the Merger, the Second Guarantor is required to become a party to the
Purchase Agreement;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Company and the Second Guarantor mutually covenant and agree for the equal and
ratable benefit of the Initial Purchasers as follows:
1. ASSUMPTION. The Company hereby agrees to assume all of the
obligations of IMED under the Purchase Agreement and, hereafter, shall be deemed
the "Company" for all purposes under the Purchase Agreement.
2. ADDITIONAL GUARANTOR. The Second Guarantor hereby agrees to be
deemed a "Guaranteeing Subsidiary" for all purposes under the Purchase Agreement
and to perform all obligations and duties of a Guaranteeing Subsidiary
thereunder.
3. DEFINITIONS. Capitalized terms used herein but not defined shall
have the meanings given to such terms in the Purchase Agreement.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New
York, without regard to the choice of law rules thereof, shall govern and be
used to construe this Agreement.
<PAGE>
5. COUNTERPARTS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
[Signatures on following page]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date first above written.
IVAC HOLDINGS, INC.
By: /s/ William J. Mercer
----------------------
Name: William J. Mercer
Title: President
IVAC OVERSEAS HOLDINGS, INC.
By: /s/ William J. Mercer
----------------------
Name: William J. Mercer
Title: President
-3-
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IVAC HOLDINGS, INC.
FIRST: The name of this corporation shall be:
IVAC Holdings, Inc.
SECOND: Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle 19805, and its
registered agent at such address is Corporation Service Company.
THIRD: The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is:
Three Thousand (3,000) shares of common stock with a par value of One Cent
($.01) per share, amounting to Thirty Dollars ($30.00).
FIFTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws of the Corporation.
SIXTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director except: (i) for breach of the director's duty of loyalty
to the Corporation or its stockholder, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv)
for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article Sixth shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
SEVENTH: The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said Section from and against any and all of the expenses,
liabilities or other matters referred to or covered by said Section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise, both as
<PAGE>
to action in his official capacity and as to action in another capacity while
holding office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
EIGHTH: The corporation elects not to be governed by the Section 203 of
the Delaware General Corporation Law.
2
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
IVAC HOLDINGS, INC.
(Effective as of November 26, 1996)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of Corporation Service Company in the
City of Wilmington, in the County of New Castle, in the State of Delaware, and
said corporation shall be the registered agent of the Corporation.
SECTION 2. OTHER OFFICES. The Corporation may have offices, either
within or without the State of Dela ware, at such place or places as the Board
of Directors may, from time to time, determine or the business of the Corpora
tion may require.
SECTION 3. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. An annual meeting of the stockholders,
for the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held at such place within or
without the State of Delaware, on such date, and at such time as the Board of
Directors shall each year fix, which
<PAGE>
date shall be within thirteen (13) months of the last annual meeting of
stockholders.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders,
other than those required by statute, may be called at any time by the Board of
Directors pursuant to a resolution approved by a majority of the whole Board of
Directors or by the Secretary at the request in writing of holders of record a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose(s) of the proposed meeting. The Board of
Directors may postpone or reschedule any previously scheduled special meeting.
Only such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the Corporation's notice
of meeting.
SECTION 3. TELEPHONIC MEETINGS. Meetings may be held by means of
conference telephone or similar communica tions equipment by means of which all
persons participating in the meeting can hear each other and participation in a
meeting pursuant to this Section shall constitute presence in person at a
meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice of the place, date,
and time of all meetings of the stockholders shall be given, not less than ten
(10) nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 5. PROXIES AND VOTING. Each stockholder entitled to vote in
accordance with the terms of the
2
<PAGE>
Certificate of Incorporation and in accordance with the provisions of these
By-Laws shall be entitled to one vote for each share of stock entitled to vote
held by such stockholder. At any meeting of the stockholders, every stockholder
entitled to vote may vote in person or by proxy authorized by an instrument in
writing or by a transmission permitted by law filed in accordance with the
procedure established for the meeting. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission created pursuant to
this Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
All voting, including on the election of directors but excepting
where otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefore by a stockholder entitled to vote or by his or her proxy,
a stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Such inspector(s), if any, shall
determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, bal lots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to
3
<PAGE>
all stockholders. On request of the person presiding at the meeting, the
aforesaid inspector(s), if any, shall make a report in writing of any challenge,
question or matter determined by him or her, or them and execute a certificate
of any fact found by him or her, or them.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast affirmatively or negatively.
SECTION 6. QUORUM. At any meeting of the stockholders, the holders
of a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes present in person or represented
by proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date or time.
SECTION 7. ORGANIZATION. Such person as the Board of Directors may
have designated or, in the absence of such a person, the Chairman of the Board
or, in his or her absence, the President/Chief Executive Officer of the
Corporation or, in his or her absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints.
SECTION 8. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him or her in order. The chairman shall have the power to
adjourn the meeting to another place, date and time. The date and time of the
opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting.
4
<PAGE>
SECTION 9. STOCK LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in his or her name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
SECTION 10. ACTION WITHOUT MEETING. Unless otherwise required by
law, any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting,
may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and law
to the Corporation, written consents signed by a sufficient number of holders to
take action are
5
<PAGE>
delivered to the Corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERM. Subject to the rights of the
holders of any series of preferred stock to elect directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies. Each director shall be elected at the annual meeting of
stockholders, except as provided in Section 4 of this ARTICLE III, and each
director so elected shall hold office until his or her successor shall have been
duly elected and qualified or until his or her earlier death, resignation or
removal. If authorized by a resolution of the Board of Directors, directors may
be elected at an annual meeting of stockholders to fill any vacancy on the Board
of Directors, regardless of how such vacancy shall have been created. Directors
need not be stockholders of the Corporation.
SECTION 2. RESIGNATIONS. Any director may resign at any time. Such
resignation shall be made in writing and given to the Board of Directors or the
Secretary. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3. REMOVAL. Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote and the
vacancy or vacancies, as the case may be, thus created may be filled in
accordance with Section 4 of this ARTICLE III.
SECTION 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to
applicable law and to the rights of the holders of any series of preferred stock
with respect to
6
<PAGE>
such series of preferred stock, and unless the Board of Directors otherwise
determines, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies on the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders and until
such director's successor shall have been duly elected and qualified or until
his or her earlier death, resignation or removal. No decrease in the number of
authorized directors constituting the entire Board of Directors shall shorten
the term of any incumbent director.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such place or places within or without the State of
Delaware, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President/Chief
Executive Officer or by two or more directors then in office and shall be held
at such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than five (5) days before the meeting or by telephone or by telegraphing or
telexing or by facsimile transmission of the same not less than twenty-four (24)
hours before the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.
SECTION 7. QUORUM. At any meeting of the Board of Directors, a
majority of the total number of the whole Board of Directors shall constitute a
quorum for all purposes, and the affirmative vote of a majority of the directors
present at the meeting at which a quorum is present shall be the act of the
Board of Directors. If a quorum shall fail to attend any meeting, a majority of
those present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof. At the adjourned meeting, the Board of
Directors may transact any
7
<PAGE>
business which might have been transacted at the original meeting.
SECTION 8. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the
Board of Directors, or of any committee thereof, may participate in a meeting of
such Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
SECTION 9. CONDUCT OF BUSINESS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board of
Directors may from time to time determine, and all matters shall be determined
by the vote of a majority of the directors present, except as otherwise provided
herein or required by law. Action may be taken by the Board of Directors without
a meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
SECTION 10. POWERS. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as my
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
8
<PAGE>
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent
with these By-Laws, for the management of the Corporation's business and
affairs.
SECTION 11. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of the directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or paid a stated salary or paid other compensation as director. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors, by a vote of a majority of the whole Board of Directors, may from
time to time designate committees of the Board of Directors, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board of Directors and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at
9
<PAGE>
any meeting of the committee. In the absence or disqualification of any member
of any committee and any alternate member in his or her place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third (1/3) of the members shall constitute a quorum unless the committee
shall consist of one (1) or two (2) members, in which event one (1) member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE V
OFFICERS
SECTION 1. GENERALLY. The officers of the Corporation shall consist
of a Chairman of the Board, a President/Chief Executive Officer, one or more
Executive or other Vice Presidents, a Secretary, a Treasurer and such other
officers as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of stockholders. Other
than the Chairman of the Board, none of the officers of the Corporation need be
directors. Each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier death, resignation or removal. Any
number of offices may be held by the same person. The salaries of officers
elected by the Board of Directors shall be fixed from time to time by the Board
of Directors or by such officers as may be designated by resolution of the Board
of Directors.
10
<PAGE>
SECTION 2. SUBORDINATE OFFICERS. In addition to the principal
officers enumerated in Section 1 of this ARTICLE V, the Corporation may have one
or more Assistant Treasurers, Assistant Secretaries and such other subordinate
officers, agents and employees as the Board of Directors may deem necessary,
each of whom shall hold office for such period as the Board of Directors may
from time to time determine.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
a member of the Board of Directors and shall preside at its meetings and at all
meetings of stockholders. He or she shall keep in close touch with the
administration of the affairs of the Corporation and supervise its general
policies. He or she shall see that the acts of the executive officers conform to
the policies of the Corporation as determined by the Board of Directors and
shall perform such other duties as may from time to time be assigned to him or
her by the Board of Directors.
SECTION 4. PRESIDENT/CHIEF EXECUTIVE OFFICER. The President/Chief
Executive Officer shall be the chief executive officer of the Corporation.
Subject to the provisions of these By-Laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
SECTION 5. VICE PRESIDENT. Each Vice President shall have such
powers and duties as may be delegated to him or her by the Board of Directors.
SECTION 6. TREASURER. The Treasurer shall have the responsibility
for maintaining the financial records of the Corporation. He or she shall make
such disbursements of the funds of the Corporation as are authorized and shall
render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as the Board of Directors may from time to time prescribe.
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SECTION 7. SECRETARY. The Secretary shall issue all authorized
notices for, and shall keep minutes of, all meetings of the stockholders and the
Board of Directors. He or she shall have charge of the corporate books and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
SECTION 8. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 9. REMOVAL. Any officer of the Corporation may be removed at
any time, with or without cause, by the Board of Directors.
SECTION 10. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President/Chief
Executive Officer or any officer of the Corporation authorized by the
President/Chief Executive Officer shall have power to vote and otherwise act on
behalf of the Corporation, in person or by proxy, at any meeting of stockholders
of or with respect to any action of stockholders of any other corporation in
which this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation.
ARTICLE VI
STOCK
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled
to a certificate signed by, or in the name of the Corporation by, the Chairman
of the Board, President/Chief Executive Officer or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
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SECTION 2. TRANSFERS OF STOCK. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of this ARTICLE VI, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor.
SECTION 3. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders, or to receive payment of any dividend or other distribution or
allotment of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may, except as otherwise required by law, fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of
the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such regulations as the Board of Directors may
establish concerning proof of such
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loss, theft or destruction and concerning the giving of a satisfactory bond or
bonds of indemnity.
SECTION 5. REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VII
NOTICES
SECTION 1. NOTICES. Except as otherwise specifically provided herein
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mails, postage paid, recognized overnight delivery
service or by sending such notice by facsimile, receipt acknowledged, or by
prepaid telegram or mailgram. Any such notice shall be addressed to such
stockholder, director, officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered through the
mails or by telegram or mailgram, shall be the time of the giving of the notice.
SECTION 2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver. Attendance at any meeting shall constitute waiver of notice
except attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES. In addition to the provisions for
use of facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may
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be used whenever and as authorized by the Board of Directors or a committee
thereof.
SECTION 2. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the books of account or other
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or employees, or
committees of the Board of Directors so designated, or by any other person as to
matters which such director or committee member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR. Until otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall begin on January 1st and end
on December 31st.
SECTION 5. TIME PERIODS. In applying any provision of these By-Laws
which requires that an act be done or not be done during a period of a specified
number of days prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or an officer of
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the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section 3 of this ARTICLE IX with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section 1 of this ARTICLE IX shall include the
right to be paid by the Corporation the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 2 or otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections 1 and 2 of this ARTICLE IX shall
be contract rights and such rights
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shall continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 or 2 of this ARTICLE IX is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not meet the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE IX or otherwise shall be on the Corporation.
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SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification
and to the advancement of expenses conferred in this ARTICLE IX shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this ARTICLE IX with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE X
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors is expressly authorized to make, alter, amend and repeal
these By-Laws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the By-Laws; provided, however, that, with
respect to the powers of holders of capital stock to make, alter, amend and
repeal By-Laws of the Corporation, notwithstanding any other provision of these
By-Laws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
By-Laws or any preferred stock, the affirmative vote of the holders of at least
sixty-seven percent (67%) of the voting power of all of the then-outstanding
shares entitled to vote generally in the election of directors,
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voting together as a single class, shall be required to make, alter, amend or
repeal any provision of these By-Laws.
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CERTIFICATE OF INCORPORATION
OF
IVAC OVERSEAS HOLDINGS, INC.
* * * * *
FIRST: The name of the corporation is Ivac Overseas Holdings, Inc.
SECOND: The address of its registered office in the State of
Delaware is Corporation Service Company, 1013 Centre Road, City of Wilmington,
County of New Castle, Delaware 19805. The name of its registered agent at such
address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended ("Delaware Law").
FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is 100, and the par value of each such share
is $1.00, amounting in the aggregate to $100.
FIFTH: The name and mailing address of the incorporator are:
Name Mailing Address
---- ---------------
Susan A. Palius Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
The power of the incorporator as such shall terminate upon the filing of this
Certificate of Incorporation.
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SIXTH: The names and mailing addresses of the persons who are to
serve as directors until the first annual meeting of stockholders or until their
successors are elected and qualified are:
Name Mailing Address
---- ---------------
Thompson Dean Donaldson, Lufkin & Jenrette
Merchant Banking, Inc.
140 Broadway, 48th Floor
New York, New York 10005
Reid Perper Donaldson, Lufkin & Jenrette
Merchant Banking, Inc.
140 Broadway, 48th Floor
New York, New York 10005
Kelly Masuda Donaldson, Lufkin & Jenrette
Merchant Banking, Inc.
140 Broadway, 48th Floor
New York, New York 10005
SEVENTH: The Board of Directors shall have the power to adopt, amend
or repeal the bylaws of the Corporation.
EIGHTH: Election of directors need not be by written ballot unless
the bylaws of the Corporation so provide.
NINTH: (1) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by Delaware Law.
(2)(a) Each person (and the heirs, executors or administrators of
such person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by Delaware Law. The right to indemnification conferred in this ARTICLE NINTH
shall also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware Law. The right to indemnification
conferred in this ARTICLE NINTH shall be a
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contract right.
(b) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the officers, employees and agents of the
Corporation to such extent and to such effect as the Board of Directors shall
determine to be appropriate and authorized by Delaware Law.
(3) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or loss
incurred by such person in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under Delaware Law.
(4) The rights and authority conferred in this ARTICLE NINTH shall
not be exclusive of any other right which any person may otherwise have or
hereafter acquire.
(5) Neither the amendment nor repeal of this ARTICLE NINTH, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws of
the Corporation, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this ARTICLE NINTH
in respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.
TENTH: The Corporation reserves the right to amend this Certificate
of Incorporation in any manner permitted by Delaware Law and, with the sole
exception of those rights and powers conferred under the above ARTICLE NINTH,
all rights and powers conferred herein on stockholders, directors and officers,
if any, are subject to this reserved power.
IN WITNESS WHEREOF, I have hereunto signed my name this 7th day of
December, 1994.
/s/ Susan A. Palius
-----------------------------
Susan A. Palius
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AMENDED AND RESTATED
BY-LAWS
OF
IVAC OVERSEAS HOLDINGS, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of Corporation Service Company in the
City of Wilmington, in the County of New Castle, in the State of Delaware, and
said corporation shall be the registered agent of the Corporation.
SECTION 2. OTHER OFFICES. The Corporation may have offices, either
within or without the State of Dela ware, at such place or places as the Board
of Directors may, from time to time, determine or the business of the Corpora
tion may require.
SECTION 3. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. An annual meeting of the stockholders,
for the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held at such place within or
without the State of Delaware, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen (13) months
of the last annual meeting of stockholders.
<PAGE>
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders,
other than those required by statute, may be called at any time by the Board of
Directors pursuant to a resolution approved by a majority of the whole Board of
Directors or by the Secretary at the request in writing of holders of record a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose(s) of the proposed meeting. The Board of
Directors may postpone or reschedule any previously scheduled special meeting.
Only such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the Corporation's notice
of meeting.
SECTION 3. TELEPHONIC MEETINGS. Meetings may be held by means of
conference telephone or similar communica tions equipment by means of which all
persons participating in the meeting can hear each other and participation in a
meeting pursuant to this Section shall constitute presence in person at a
meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice of the place, date,
and time of all meetings of the stockholders shall be given, not less than ten
(10) nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 5. PROXIES AND VOTING. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and in accordance
with the provisions of these By-Laws shall be entitled to one vote for each
share of stock entitled to vote held by such
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stockholder. At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument in writing or by
a transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
All voting, including on the election of directors but excepting
where otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefore by a stockholder entitled to vote or by his or her proxy,
a stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Such inspector(s), if any, shall
determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, bal lots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the aforesaid inspector(s), if any, shall make a report in writing
of any challenge, question or matter
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determined by him or her, or them and execute a certificate of any fact found by
him or her, or them.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast affirmatively or negatively.
SECTION 6. QUORUM. At any meeting of the stockholders, the holders
of a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes present in person or represented
by proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date or time.
SECTION 7. ORGANIZATION. Such person as the Board of Directors may
have designated or, in the absence of such a person, the Chairman of the Board
or, in his or her absence, the President/Chief Executive Officer of the
Corporation or, in his or her absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints.
SECTION 8. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him or her in order. The chairman shall have the power to
adjourn the meeting to another place, date and time. The date and time of the
opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting.
SECTION 9. STOCK LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class
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of stock and showing the address of each such stockholder and the number of
shares registered in his or her name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
SECTION 10. ACTION WITHOUT MEETING. Unless otherwise required by
law, any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting,
may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and law
to the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the
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book in which proceedings of meetings of stockholders are recorded.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERM. Subject to the rights of the
holders of any series of preferred stock to elect directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies. Each director shall be elected at the annual meeting of
stockholders, except as provided in Section 4 of this ARTICLE III, and each
director so elected shall hold office until his or her successor shall have been
duly elected and qualified or until his or her earlier death, resignation or
removal. If authorized by a resolution of the Board of Directors, directors may
be elected at an annual meeting of stockholders to fill any vacancy on the Board
of Directors, regardless of how such vacancy shall have been created. Directors
need not be stockholders of the Corporation.
SECTION 2. RESIGNATIONS. Any director may resign at any time. Such
resignation shall be made in writing and given to the Board of Directors or the
Secretary. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3. REMOVAL. Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote and the
vacancy or vacancies, as the case may be, thus created may be filled in
accordance with Section 4 of this ARTICLE III.
SECTION 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to
applicable law and to the rights of the holders of any series of preferred stock
with respect to such series of preferred stock, and unless the Board of
Directors otherwise determines, newly created directorships resulting from any
increase in the authorized number of
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directors or any vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled only by a majority vote of the directors then in office, though
less than a quorum, and directors so chosen shall hold office for a term
expiring at the next annual meeting of stockholders and until such director's
successor shall have been duly elected and qualified or until his or her earlier
death, resignation or removal. No decrease in the number of authorized directors
constituting the entire Board of Directors shall shorten the term of any
incumbent director.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such place or places within or without the State of
Delaware, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President/Chief
Executive Officer or by two or more directors then in office and shall be held
at such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than five (5) days before the meeting or by telephone or by telegraphing or
telexing or by facsimile transmission of the same not less than twenty-four (24)
hours before the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.
SECTION 7. QUORUM. At any meeting of the Board of Directors, a
majority of the total number of the whole Board of Directors shall constitute a
quorum for all purposes, and the affirmative vote of a majority of the directors
present at the meeting at which a quorum is present shall be the act of the
Board of Directors. If a quorum shall fail to attend any meeting, a majority of
those present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof. At the adjourned meeting, the Board of
Directors may transact any business which might have been transacted at the
original meeting.
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SECTION 8. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the
Board of Directors, or of any committee thereof, may participate in a meeting of
such Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
SECTION 9. CONDUCT OF BUSINESS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board of
Directors may from time to time determine, and all matters shall be determined
by the vote of a majority of the directors present, except as otherwise provided
herein or required by law. Action may be taken by the Board of Directors without
a meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
SECTION 10. POWERS. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as my
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
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(6) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent
with these By-Laws, for the management of the Corporation's business and
affairs.
SECTION 11. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of the directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or paid a stated salary or paid other compensation as director. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors, by a vote of a majority of the whole Board of Directors, may from
time to time designate committees of the Board of Directors, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board of Directors and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified
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from voting, whether or not he or she or they constitute a quorum, may by
unanimous vote appoint another member of the Board of Directors to act at the
meeting in the place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third (1/3) of the members shall constitute a quorum unless the committee
shall consist of one (1) or two (2) members, in which event one (1) member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE V
OFFICERS
SECTION 1. GENERALLY. The officers of the Corporation shall consist
of a Chairman of the Board, a President/Chief Executive Officer, one or more
Executive or other Vice Presidents, a Secretary, a Treasurer and such other
officers as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of stockholders. Other
than the Chairman of the Board, none of the officers of the Corporation need be
directors. Each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier death, resignation or removal. Any
number of offices may be held by the same person. The salaries of officers
elected by the Board of Directors shall be fixed from time to time by the Board
of Directors or by such officers as may be designated by resolution of the Board
of Directors.
SECTION 2. SUBORDINATE OFFICERS. In addition to the principal
officers enumerated in Section 1 of this ARTICLE V, the Corporation may have one
or more Assistant Treasurers, Assistant Secretaries and such other subordinate
officers, agents and employees as the Board of Directors may
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deem necessary, each of whom shall hold office for such period as the Board of
Directors may from time to time determine.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
a member of the Board of Directors and shall preside at its meetings and at all
meetings of stockholders. He or she shall keep in close touch with the
administration of the affairs of the Corporation and supervise its general
policies. He or she shall see that the acts of the executive officers conform to
the policies of the Corporation as determined by the Board of Directors and
shall perform such other duties as may from time to time be assigned to him or
her by the Board of Directors.
SECTION 4. PRESIDENT/CHIEF EXECUTIVE OFFICER. The President/Chief
Executive Officer shall be the chief executive officer of the Corporation.
Subject to the provisions of these By-Laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
SECTION 5. VICE PRESIDENT. Each Vice President shall have such
powers and duties as may be delegated to him or her by the Board of Directors.
SECTION 6. TREASURER. The Treasurer shall have the responsibility
for maintaining the financial records of the Corporation. He or she shall make
such disbursements of the funds of the Corporation as are authorized and shall
render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as the Board of Directors may from time to time prescribe.
SECTION 7. SECRETARY. The Secretary shall issue all authorized
notices for, and shall keep minutes of, all meetings of the stockholders and the
Board of Directors. He or she shall have charge of the corporate books and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
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SECTION 8. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 9. REMOVAL. Any officer of the Corporation may be removed at
any time, with or without cause, by the Board of Directors.
SECTION 10. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President/Chief
Executive Officer or any officer of the Corporation authorized by the
President/Chief Executive Officer shall have power to vote and otherwise act on
behalf of the Corporation, in person or by proxy, at any meeting of stockholders
of or with respect to any action of stockholders of any other corporation in
which this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation.
ARTICLE VI
STOCK
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled
to a certificate signed by, or in the name of the Corporation by, the Chairman
of the Board, President/Chief Executive Officer or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
SECTION 2. TRANSFERS OF STOCK. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of this ARTICLE VI, an outstanding
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certificate for the number of shares involved shall be surrendered for
cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders, or to receive payment of any dividend or other distribution or
allotment of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may, except as otherwise required by law, fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of
the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such regulations as the Board of Directors may
establish concerning proof of such loss, theft or destruction and concerning the
giving of a satisfactory bond or bonds of indemnity.
SECTION 5. REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall
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be governed by such other regulations as the Board of Directors may establish.
ARTICLE VII
NOTICES
SECTION 1. NOTICES. Except as otherwise specifically provided herein
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mails, postage paid, recognized overnight delivery
service or by sending such notice by facsimile, receipt acknowledged, or by
prepaid telegram or mailgram. Any such notice shall be addressed to such
stockholder, director, officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered through the
mails or by telegram or mailgram, shall be the time of the giving of the notice.
SECTION 2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver. Attendance at any meeting shall constitute waiver of notice
except attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES. In addition to the provisions for
use of facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name
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of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the books of account or other
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or employees, or
committees of the Board of Directors so designated, or by any other person as to
matters which such director or committee member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR. Until otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall begin on January 1st and end
on December 31st.
SECTION 5. TIME PERIODS. In applying any provision of these By-Laws
which requires that an act be done or not be done during a period of a specified
number of days prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"),
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whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this ARTICLE IX with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section 1 of this ARTICLE IX shall include the
right to be paid by the Corporation the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 2 or otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections 1 and 2 of this ARTICLE IX shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
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SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 or 2 of this ARTICLE IX is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not meet the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE IX or otherwise shall be on the Corporation.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification
and to the advancement of expenses conferred in this ARTICLE IX shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of
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Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this ARTICLE IX with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE X
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors is expressly authorized to make, alter, amend and repeal
these By-Laws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the By-Laws; provided, however, that, with
respect to the powers of holders of capital stock to make, alter, amend and
repeal By-Laws of the Corporation, notwithstanding any other provision of these
By-Laws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
By-Laws or any preferred stock, the affirmative vote of the holders of at least
sixty-seven percent (67%) of the voting power of all of the then-outstanding
shares entitled to vote generally in the election of directors, voting together
as a single class, shall be required to make, alter, amend or repeal any
provision of these By-Laws.
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CERTIFICATE OF INCORPORATION
OF
IMED INTERNATIONAL TRADING CORP.
FIRST: The name of this corporation shall be:
IMED INTERNATIONAL TRADING CORP.
SECOND: Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle 19805 and its
registered agent at such address is Corporation Service Company.
THIRD: The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is:
Three Thousand (3,000) shares with a par value of One Cent ($.01) per
share, amounting to Thirty Dollars ($30.00).
FIFTH: The name and address of the incorporator is as follows:
Kathleen Crowley
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
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SEVENTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
EIGHTH: The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said Section from and against any and all of the expenses,
liabilities or other matters referred to or covered by said Section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
NINTH: The corporation elects not to be governed by the Takeover Statute
(S203).
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this Thirty-First of May, A.D., 1996.
/s/ Kathleen Crowley
-------------------------------
Kathleen Crowley
Incorporator
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AMENDED AND RESTATED
BY-LAWS
OF
IMED INTERNATIONAL TRADING CORP.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of Corporation Service Company in the
City of Wilmington, in the County of New Castle, in the State of Delaware, and
said corporation shall be the registered agent of the Corporation.
SECTION 2. OTHER OFFICES. The Corporation may have offices, either
within or without the State of Dela ware, at such place or places as the Board
of Directors may, from time to time, determine or the business of the Corpora
tion may require.
SECTION 3. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. An annual meeting of the stockholders,
for the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held at such place within or
without the State of Delaware, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen (13) months
of the last annual meeting of stockholders.
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SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders,
other than those required by statute, may be called at any time by the Board of
Directors pursuant to a resolution approved by a majority of the whole Board of
Directors or by the Secretary at the request in writing of holders of record a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose(s) of the proposed meeting. The Board of
Directors may postpone or reschedule any previously scheduled special meeting.
Only such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the Corporation's notice
of meeting.
SECTION 3. TELEPHONIC MEETINGS. Meetings may be held by means of
conference telephone or similar communica tions equipment by means of which all
persons participating in the meeting can hear each other and participation in a
meeting pursuant to this Section shall constitute presence in person at a
meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice of the place, date,
and time of all meetings of the stockholders shall be given, not less than ten
(10) nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 5. PROXIES AND VOTING. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and in accordance
with the provisions of these By-Laws shall be entitled to one vote for each
share of stock entitled to vote held by such
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stockholder. At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument in writing or by
a transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
All voting, including on the election of directors but excepting
where otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefore by a stockholder entitled to vote or by his or her proxy,
a stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Such inspector(s), if any, shall
determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, bal lots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the aforesaid inspector(s), if any, shall make a report in writing
of any challenge, question or matter
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determined by him or her, or them and execute a certificate of any fact found by
him or her, or them.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast affirmatively or negatively.
SECTION 6. QUORUM. At any meeting of the stockholders, the holders
of a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes present in person or represented
by proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date or time.
SECTION 7. ORGANIZATION. Such person as the Board of Directors may
have designated or, in the absence of such a person, the Chairman of the Board
or, in his or her absence, the President/Chief Executive Officer of the
Corporation or, in his or her absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints.
SECTION 8. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him or her in order. The chairman shall have the power to
adjourn the meeting to another place, date and time. The date and time of the
opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting.
SECTION 9. STOCK LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class
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of stock and showing the address of each such stockholder and the number of
shares registered in his or her name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
SECTION 10. ACTION WITHOUT MEETING. Unless otherwise required by
law, any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting,
may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and law
to the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the
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book in which proceedings of meetings of stockholders are recorded.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERM. Subject to the rights of the
holders of any series of preferred stock to elect directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies. Each director shall be elected at the annual meeting of
stockholders, except as provided in Section 4 of this ARTICLE III, and each
director so elected shall hold office until his or her successor shall have been
duly elected and qualified or until his or her earlier death, resignation or
removal. If authorized by a resolution of the Board of Directors, directors may
be elected at an annual meeting of stockholders to fill any vacancy on the Board
of Directors, regardless of how such vacancy shall have been created. Directors
need not be stockholders of the Corporation.
SECTION 2. RESIGNATIONS. Any director may resign at any time. Such
resignation shall be made in writing and given to the Board of Directors or the
Secretary. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3. REMOVAL. Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote and the
vacancy or vacancies, as the case may be, thus created may be filled in
accordance with Section 4 of this ARTICLE III.
SECTION 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to
applicable law and to the rights of the holders of any series of preferred stock
with respect to such series of preferred stock, and unless the Board of
Directors otherwise determines, newly created directorships resulting from any
increase in the authorized number of
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directors or any vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled only by a majority vote of the directors then in office, though
less than a quorum, and directors so chosen shall hold office for a term
expiring at the next annual meeting of stockholders and until such director's
successor shall have been duly elected and qualified or until his or her earlier
death, resignation or removal. No decrease in the number of authorized directors
constituting the entire Board of Directors shall shorten the term of any
incumbent director.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such place or places within or without the State of
Delaware, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President/Chief
Executive Officer or by two or more directors then in office and shall be held
at such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than five (5) days before the meeting or by telephone or by telegraphing or
telexing or by facsimile transmission of the same not less than twenty-four (24)
hours before the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.
SECTION 7. QUORUM. At any meeting of the Board of Directors, a
majority of the total number of the whole Board of Directors shall constitute a
quorum for all purposes, and the affirmative vote of a majority of the directors
present at the meeting at which a quorum is present shall be the act of the
Board of Directors. If a quorum shall fail to attend any meeting, a majority of
those present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof. At the adjourned meeting, the Board of
Directors may transact any business which might have been transacted at the
original meeting.
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SECTION 8. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the
Board of Directors, or of any committee thereof, may participate in a meeting of
such Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
SECTION 9. CONDUCT OF BUSINESS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board of
Directors may from time to time determine, and all matters shall be determined
by the vote of a majority of the directors present, except as otherwise provided
herein or required by law. Action may be taken by the Board of Directors without
a meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
SECTION 10. POWERS. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as my
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
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(6) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent
with these By-Laws, for the management of the Corporation's business and
affairs.
SECTION 11. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of the directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or paid a stated salary or paid other compensation as director. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors, by a vote of a majority of the whole Board of Directors, may from
time to time designate committees of the Board of Directors, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board of Directors and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified
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from voting, whether or not he or she or they constitute a quorum, may by
unanimous vote appoint another member of the Board of Directors to act at the
meeting in the place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third (1/3) of the members shall constitute a quorum unless the committee
shall consist of one (1) or two (2) members, in which event one (1) member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE V
OFFICERS
SECTION 1. GENERALLY. The officers of the Corporation shall consist
of a Chairman of the Board, a President/Chief Executive Officer, one or more
Executive or other Vice Presidents, a Secretary, a Treasurer and such other
officers as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of stockholders. Other
than the Chairman of the Board, none of the officers of the Corporation need be
directors. Each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier death, resignation or removal. Any
number of offices may be held by the same person. The salaries of officers
elected by the Board of Directors shall be fixed from time to time by the Board
of Directors or by such officers as may be designated by resolution of the Board
of Directors.
SECTION 2. SUBORDINATE OFFICERS. In addition to the principal
officers enumerated in Section 1 of this ARTICLE V, the Corporation may have one
or more Assistant Treasurers, Assistant Secretaries and such other subordinate
officers, agents and employees as the Board of Directors may
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deem necessary, each of whom shall hold office for such period as the Board of
Directors may from time to time determine.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
a member of the Board of Directors and shall preside at its meetings and at all
meetings of stockholders. He or she shall keep in close touch with the
administration of the affairs of the Corporation and supervise its general
policies. He or she shall see that the acts of the executive officers conform to
the policies of the Corporation as determined by the Board of Directors and
shall perform such other duties as may from time to time be assigned to him or
her by the Board of Directors.
SECTION 4. PRESIDENT/CHIEF EXECUTIVE OFFICER. The President/Chief
Executive Officer shall be the chief executive officer of the Corporation.
Subject to the provisions of these By-Laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
SECTION 5. VICE PRESIDENT. Each Vice President shall have such
powers and duties as may be delegated to him or her by the Board of Directors.
SECTION 6. TREASURER. The Treasurer shall have the responsibility
for maintaining the financial records of the Corporation. He or she shall make
such disbursements of the funds of the Corporation as are authorized and shall
render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as the Board of Directors may from time to time prescribe.
SECTION 7. SECRETARY. The Secretary shall issue all authorized
notices for, and shall keep minutes of, all meetings of the stockholders and the
Board of Directors. He or she shall have charge of the corporate books and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
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SECTION 8. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 9. REMOVAL. Any officer of the Corporation may be removed at
any time, with or without cause, by the Board of Directors.
SECTION 10. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President/Chief
Executive Officer or any officer of the Corporation authorized by the
President/Chief Executive Officer shall have power to vote and otherwise act on
behalf of the Corporation, in person or by proxy, at any meeting of stockholders
of or with respect to any action of stockholders of any other corporation in
which this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation.
ARTICLE VI
STOCK
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled
to a certificate signed by, or in the name of the Corporation by, the Chairman
of the Board, President/Chief Executive Officer or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
SECTION 2. TRANSFERS OF STOCK. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of this ARTICLE VI, an outstanding
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certificate for the number of shares involved shall be surrendered for
cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders, or to receive payment of any dividend or other distribution or
allotment of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may, except as otherwise required by law, fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of
the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such regulations as the Board of Directors may
establish concerning proof of such loss, theft or destruction and concerning the
giving of a satisfactory bond or bonds of indemnity.
SECTION 5. REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall
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be governed by such other regulations as the Board of Directors may establish.
ARTICLE VII
NOTICES
SECTION 1. NOTICES. Except as otherwise specifically provided herein
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mails, postage paid, recognized overnight delivery
service or by sending such notice by facsimile, receipt acknowledged, or by
prepaid telegram or mailgram. Any such notice shall be addressed to such
stockholder, director, officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered through the
mails or by telegram or mailgram, shall be the time of the giving of the notice.
SECTION 2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver. Attendance at any meeting shall constitute waiver of notice
except attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES. In addition to the provisions for
use of facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name
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of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the books of account or other
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or employees, or
committees of the Board of Directors so designated, or by any other person as to
matters which such director or committee member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR. Until otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall begin on January 1st and end
on December 31st.
SECTION 5. TIME PERIODS. In applying any provision of these By-Laws
which requires that an act be done or not be done during a period of a specified
number of days prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"),
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whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this ARTICLE IX with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section 1 of this ARTICLE IX shall include the
right to be paid by the Corporation the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 2 or otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections 1 and 2 of this ARTICLE IX shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
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SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 or 2 of this ARTICLE IX is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not meet the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE IX or otherwise shall be on the Corporation.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification
and to the advancement of expenses conferred in this ARTICLE IX shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of
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Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this ARTICLE IX with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE X
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors is expressly authorized to make, alter, amend and repeal
these By-Laws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the By-Laws; provided, however, that, with
respect to the powers of holders of capital stock to make, alter, amend and
repeal By-Laws of the Corporation, notwithstanding any other provision of these
By-Laws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
By-Laws or any preferred stock, the affirmative vote of the holders of at least
sixty-seven percent (67%) of the voting power of all of the then-outstanding
shares entitled to vote generally in the election of directors, voting together
as a single class, shall be required to make, alter, amend or repeal any
provision of these By-Laws.
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INDENTURE ASSUMPTION AGREEMENT
INDENTURE ASSUMPTION AGREEMENT (this "Agreement"), dated as of November
26, 1996, between IVAC Holdings, Inc., a Delaware corporation (the "Company"),
and United States Trust Company of New York, a New York banking corporation and
trust company, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, IMED Corporation, a Delaware corporation ("IMED"), has heretofore
executed and delivered to the Trustee an indenture (the "Indenture"), dated as
of the date hereof, providing for the issuance of $200,000,000 aggregate
principal amount of 9 3/4% Senior Subordinated Notes due 2006 (the "Notes") of
IMED;
WHEREAS, IMED has been merged with and into the Company;
WHEREAS, pursuant to Section 4.20 of the Indenture, the Company is
required to execute and deliver this Agreement concurrently with such merger;
WHEREAS, pursuant to Section 9.01 of the Indenture the Trustee is
authorized to execute and deliver this Agreement; and
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the Company
and the Trustee mutually covenant and agree for the equal and ratable benefit of
the holders of the Notes as follows:
1. ASSUMPTION. The Company hereby assumes all of the obligations of IMED
under the Indenture and the Notes and, hereafter, shall be deemed the "Company"
for all purposes under the Indenture and the Notes.
2. NEW YORK LAW TO GOVERN. The internal law of the State of New York,
without regard to the choice of law rules thereof, shall govern and be used to
construe this Agreement.
3. COUNTERPARTS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
4. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
[Signatures on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date first above written.
Dated: November 26, 1996 IVAC HOLDINGS, INC.
By: /s/ William J. Mercer
---------------------------
Name: William J. Mercer
Title: President
Dated: November 26, 1996 UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By: /s/ James E. Logan
---------------------------
Name: James E. Logan
Title: Vice President
<PAGE>
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
November 26, 1996 between IVAC Overseas Holdings Inc. ("IVAC Overseas
Holdings"), a subsidiary of IVAC Holdings, Inc. (as successor to IMED
Corporation), a Delaware corporation (the "Company"), and United States Trust
Company of New York, as trustee under the indenture referred to below (the
"Trustee"). Capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Indenture (as defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of November 26, 1996, providing for the
issuance of an aggregate principal amount of $200,000,000 of 9 3/4% Senior
Subordinated Notes due 2006 (the "Notes");
WHEREAS, Section 4.20 of the Indenture provides that the Company is
required to cause IVAC Overseas Holding to execute and deliver to the Trustee a
supplemental indenture pursuant to which IVAC Overseas Holding shall
unconditionally guarantee all of the Company's Obligations under the Notes
pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein;
and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, IVAC
Overseas Holdings and the Trustee mutually covenant and agree for the equal and
ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. IVAC Overseas Holdings hereby
agrees, jointly and severally with all other Guaranteeing Subsidiaries, to
guarantee the Company's Obligations under the Notes and the Indenture on the
terms and subject to the conditions set forth in Article 11 of the Indenture and
to be bound by all other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture.
5. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
<PAGE>
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the Guaranteeing
Subsidiary.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed and attested, all as of the date first above written.
Dated: November 26, 1996 IVAC OVERSEAS HOLDINGS, INC.
By: /s/ William J. Mercer
---------------------------
Name: William J. Mercer
Title: President
Dated: November 26, 1996 UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By: /s/ James E. Logan
---------------------------
Name: James E. Logan
Title: Vice President
<PAGE>
================================================================================
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of November 26, 1996
by and among
IMED Corporation
IMED International Trading Corp.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
BT Securities Corporation
Bear, Stearns & Co. Inc.
Paribas Corporation
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of November 26, 1996, by and among IMED Corporation, a Delaware
corporation (the "Company"), IMED International Trading Corp., a Delaware
corporation (the "Guarantor"), and Donaldson, Lufkin & Jenrette Securities
Corporation, BT Securities Corporation, Bear, Stearns & Co. Inc. and Paribas
Corporation (each an "Initial Purchaser" and, collectively, the "Initial
Purchasers"), each of whom has agreed to purchase (the "Initial Placement") the
Company's 9 3/4% Series A Senior Subordinated Notes due 2006 (the "Series A
Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated November
19, 1996, (the "Purchase Agreement"), by and among the Company, the Guarantor
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Series A Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Initial Purchasers set forth in Section
3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A Notes
that such Broker-Dealer acquired for its own account as a result of
market-making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
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Damages Payment Date: With respect to the Transfer Restricted Securities,
each Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3), (5) or (7) of
Regulation D under the Act.
Global Noteholder: As defined in the Indenture.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated the Closing Date, among the Company, the
Guarantor and United States Trust Company of New York, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Offering Memorandum: As defined in the Purchase Agreement.
Person: An individual, partnership, corporation, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
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<PAGE>
Record Holder: With respect to any Damages Payment Date, each Person who
is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantor relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Series B Notes: The Company's 9 3/4% Series B Senior Subordinated Notes
due 2006 to be issued pursuant to the Indenture (i) in the Exchange Offer or
(ii) upon the request of any Holder of Series A Notes covered by a Shelf
Registration Statement, in exchange for such Series A Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantor
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<PAGE>
shall (i) cause to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 45 days after the Closing Date, the
Exchange Offer Registration Statement, (ii) use its best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 120 days after the Closing Date, (iii)
in connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause such
Exchange Offer Registration Statement to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered in exchange for
the Series A Notes that are Transfer Restricted Securities and to permit sales
of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company and the Guarantor shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company and the Guarantor shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Company and the Guarantor shall use their respective
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Series B Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company and the Guarantor shall use their respective best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that
such Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and
4
<PAGE>
regulations of the Commission as announced from time to time, for a period of
180 days from the date on which the Exchange Offer is Consummated.
The Company and the Guarantor shall promptly provide sufficient copies of
the latest version of such Prospectus to such Restricted Broker-Dealers promptly
upon request, and in no event later than one day after such request, at any time
during such 180-day period in order to facilitate such sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Notes because
the Exchange Offer is not permitted by applicable law (after the procedures set
forth in Section 6(a)(i) below have been complied with) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Series A Notes acquired directly from the Company or one of its
affiliates, then the Company and the Guarantor shall (x) cause to be filed on or
prior to 45 days after the date on which the Company determines that it is not
required to file the Exchange Offer Registration Statement pursuant to clause
(i) above or 45 days after the date on which the Company receives the notice
specified in clause (ii) above a shelf registration statement pursuant to Rule
415 under the Act (which may be an amendment to the Exchange Offer Registration
Statement (in either event, the "Shelf Registration Statement")), relating to
all Transfer Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof, and shall (y) use their
respective best efforts to cause such Shelf Registration Statement to become
effective on or prior to 120 days after the date on which the Company becomes
obligated to file such Shelf Registration Statement. If, after the Company has
filed an Exchange Offer Registration Statement which satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above. The Company and the Guarantor shall use their respective best efforts to
keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least three years (as extended pursuant to Section 6(c)(i))
following the date on which such Shelf Registration Statement first becomes
effective under the Act or such shorter period ending when all of the Transfer
Restricted Securities available for sale thereunder have been sold.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information
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<PAGE>
specified in Item 507 of Regulation S-K under the Act for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement, (iii) the Exchange Offer has not been Consummated within 30
Business Days after the Exchange Offer Registration Statement is first declared
effective by the Commission or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each such
event referred to in clauses (i) through (iv), a "Registration Default"), then
the Company and the Guarantor hereby jointly and severally agree to pay
liquidated damages to each Holder of Transfer Restricted Securities with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by mailing checks to their registered
addresses on each Damages Payment Date. All obligations of the Company and the
Guarantor set forth in the preceding paragraph that are outstanding with respect
to any Transfer Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
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<PAGE>
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantor shall comply with all applicable provisions
of Section 6(c) below, shall use their respective best efforts to effect such
exchange and to permit the sale of Broker-Dealer Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution
thereof (which shall be in a manner consistent with the terms of this
Agreement), and shall comply with all of the following provisions:
(i) If, following the date hereof there has been published a change in
Commission policy with respect to exchange offers such as the Exchange Offer,
such that in the reasonable opinion of counsel to the Company there is a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantor hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing the
Company and the Guarantor to Consummate an Exchange Offer for such Series A
Notes. The Company and the Guarantor hereby agree to pursue the issuance of
such a decision to the Commission staff level. In connection with the
foregoing, the Company and the Guarantor hereby agree to take all such other
actions as are requested by the Commission or otherwise required in
connection with the issuance of such decision, including without limitation
(A) participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C) diligently
pursuing a resolution (which need not be favorable) by the Commission staff
of such submission.
(ii) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each Holder of Transfer Restricted Securities
shall furnish, upon the request of the Company, prior to the Consummation of
the Exchange Offer, a written representation to the Company and the Guarantor
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
course of business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to participate in
a distribution of the securities to be acquired in the Exchange Offer (1)
could not under Commission policy as in effect on the date of this Agreement
rely on the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction and
that such a secondary resale transaction must be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K if the resales
are of Series B Notes obtained by such Holder in exchange for Series A Notes
acquired by such Holder directly from the Company or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantor shall provide a supplemental letter
to the Commission (A) stating that the Company
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and the Guarantor are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings Corporation
(available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5,
1991) and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that neither the Company nor the
Guarantor has entered into any arrangement or understanding with any Person
to distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's and the Guarantor's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other undertaking
or representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Intentionally Omitted.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company and the
Guarantor shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company and the Guarantor shall file promptly an appropriate
amendment to such Registration Statement, (1) in the case of clause (A),
correcting any such misstatement or omission, and (2) in the case of clauses
(A) and (B), use their respective best efforts to cause such amendment to be
declared effective and such Registration Statement and the related Prospectus
to become usable for their intended purpose(s) as soon as practicable
thereafter.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, or such shorter period as will terminate when
all Transfer Restricted Securities covered by such Registration Statement
have been sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the provisions
of the Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B) of
any request by the Commission for amendments to the Registration Statement or
amendments or supplements to the
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<PAGE>
Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of any
fact or the happening of any event that makes any statement of a material
fact made in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein untrue,
or that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company and the Guarantor shall use
their respective best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) furnish to the Initial Purchaser(s), each selling Holder under any
Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission, copies
of any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing
of such Registration Statement), which documents will be subject to the
review and comment of such Holders and underwriter(s) in connection with such
sale, if any, for a period of at least five Business Days, and the Company
will not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) if the selling Holders of the
Transfer Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale shall provide notice to the
Company within five Business Days after the receipt thereof to the effect
that (A) such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act or
(B) that any of the information furnished to the Company by such selling
Holder or underwriter, if any, and included in such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be filed
is incorrect in any respect;
(v) at reasonable times requested by the selling Holders and/or the
underwriters upon reasonable notice, prior to the filing of any document that
is to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's and
the Guarantor's representatives available for discussion of such document and
other customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the selling
Holders, any managing underwriter participating in any disposition pursuant
to such Registration Statement and any attorney or accountant retained by
such selling Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and the
Guarantor and cause
9
<PAGE>
the Company's and the Guarantor's officers, directors and employees to supply
all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior
to its effectiveness; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the
time of delivery of such information shall be kept confidential by the
Holders or any such underwriter, attorney or accountant, unless such
disclosure is sought in connection with a court proceeding (in which case,
any such person shall, upon learning that such disclosure is sought in
connection with a court proceeding, deliver a notice to the Company in order
to allow the Company to undertake appropriate action at the Company's sole
expense to prevent disclosure of such information deemed confidential) or
required by law, or such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality;
(vii) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the offering of
the Transfer Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein
and all exhibits (including exhibits incorporated therein by reference);
(ix) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantor hereby consent
to the use (in accordance with law) of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other actions
in connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder
of Transfer Restricted Securities or underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated by this
Agreement, and in such connection, whether or not an underwriting agreement
is entered into and whether or not the registration is an Underwritten
Registration, the Company and the Guarantor shall:
10
<PAGE>
(A) furnish to each selling Holder and each underwriter, if any,
upon the effectiveness of the Shelf Registration Statement and to each
Restricted Broker-Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration Statement,
as the case may be, signed on behalf of the Company and the Guarantor
by (x) the President or any Vice President and (y) a principal
financial or accounting officer of the Company and the Guarantor,
confirming, as of the date thereof, the matters set forth in Exhibit A
hereto and such other similar matters as the Holders, underwriter(s)
and/or Restricted Broker Dealers may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration Statement,
as the case may be, of counsel for the Company and the Guarantor
covering matters similar to those set forth in clauses (1), (4) through
(13) and (18) of paragraph (f) of Section 9 of the Purchase Agreement
and such other matter as the Holders, underwriters and/or Restricted
Broker Dealers may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company and
the Guarantor, representatives of the independent public accountants
for the Company and the Guarantor and have considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying as to materiality
to a large extent upon facts provided to such counsel by officers and
other representatives of the Company and the Guarantor and without
independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective and, in the case of
the Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement as of its
date and, in the case of the opinion dated the date of Consummation of
the Exchange Offer, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included in
any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may be, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 9(l) of the Purchase Agreement, without exception;
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<PAGE>
(B) set forth in full or incorporated by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all parties
to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if any,
and Restricted Broker Dealers, if any, to evidence compliance with clause
(A) above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company and the Guarantor
pursuant to this clause (x).
If at any time the representations and warranties of the Company and the
Guarantor contained in the certificate described in (A)(1) above cease to be
true and correct, the Company and the Guarantor shall so advise the selling
Holders and each Restricted Broker-Dealer promptly and if requested by such
Persons, shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s), if any, may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor the Guarantor shall be required to
register or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to the service of process in
suits or to taxation, other than as to matters and transactions relating to
the Registration Statement, in any jurisdiction where it is not now so
subject;
(xii) issue, upon the request of any Holder of Series A Notes covered
by any Shelf Registration Statement contemplated by this Agreement, Series B
Notes having an aggregate principal amount equal to the aggregate principal
amount of Series A Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such Series B Notes to be
registered in the name of such Holder or in the name of the purchaser(s) of
such Notes, as the case may be; in return, the Series A Notes held by such
Holder shall be surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the Holders or the underwriter(s), if
any, may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xiv) use their respective best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
12
<PAGE>
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are in
a form eligible for deposit with the Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xviii) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable Registration
Statement, as soon as practicable, a consolidated earnings statement meeting
the requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
(xix) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 or Section
15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by
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<PAGE>
Section 6(c)(xv) hereof, or until it is advised in writing by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus (the "Advice"). If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the
Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantor's performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by any Purchaser or Holder with the NASD (and, if applicable, the fees and
expenses of any "qualified independent underwriter") and its counsel that may be
required by the rules and regulations of the NASD); (ii) all fees and expenses
of compliance with federal securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing certificates for the Series B
Notes to be issued in the Exchange Offer and printing of Prospectuses), (iv) all
messenger and delivery services and telephone expenses of the Company and the
Guarantor; (v) all fees and disbursements of counsel for the Company, the
Guarantor and the Holders of Transfer Restricted Securities (subject, in the
case of counsel for the Holders of Transfer Restricted Securities, to Section
7(b) below); (vi) all application and filing fees in connection with listing the
Notes on a national securities exchange or automated quotation system pursuant
to the requirements hereof; and (vii) all fees and disbursements of independent
certified public accountants of the Company and the Guarantor (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantor's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantor.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantor
will reimburse the Purchasers and the Holders of Transfer Restricted Securities
being tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
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<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantor, jointly and severally, agree to
indemnify and hold harmless (i) each Initial Purchaser, (ii) each Holder, (iii)
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) any Initial Purchaser or Holder (any of the
persons referred to in this clause (iii) being hereinafter referred to as a
"controlling person") and (iv) the respective officers, directors, partners,
employees, representatives and agents of any Initial Purchaser or Holder or any
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "Indemnified Holder"), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by an untrue statement or omission
or alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to any of the Initial Purchasers or the
Holders furnished in writing to the Company by any of the Initial Purchasers or
Holders expressly for use therein. The Company and the Guarantor also agree,
jointly and severally, to reimburse each Indemnified Holder for any and all fees
and expenses (including, without limitation, the fees and expenses of counsel)
as they are incurred in connection with enforcing such Indemnified Holder's
rights under this Agreement (including, without limitation, its rights under
this Section 8).
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company or the Guarantor, such Indemnified Holder (or the Indemnified Holder
controlled by such controlling person) shall promptly notify the Company and the
Guarantor in writing (provided, that the failure to give such notice shall not
relieve the Company or the Guarantor of their obligations pursuant to this
Agreement). Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the fees and expenses of such counsel shall be
paid, as incurred, by the Company and the Guarantor (regardless of whether it is
ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). The Company and the Guarantor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for all such Indemnified Holders, which firm
shall be designated by the Indemnified Holders. The Company and the Guarantor
shall be liable for any settlement of any such action or proceeding effected
with the Company's prior written consent, which consent shall not be withheld
unreasonably, and the Company and the Guarantor agree to indemnify and hold
harmless each Indemnified Holder from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with the
written consent of the Company. Neither the Company nor the Guarantor shall,
without the prior written consent of each Indemnified Holder, settle
15
<PAGE>
or compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Holder from all liability arising out of such action, claim,
litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantor, and
their respective directors, officers, and any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company,
and the respective officers, directors, partners, employees, representatives and
agents of each such person, to the same extent as the foregoing indemnity from
the Company and the Guarantor to each of the Indemnified Holders, but only with
respect to claims and actions based on information relating to such Holder
furnished in writing by such Holder expressly for use in any Registration
Statement. In case any action or proceeding shall be brought against the
Company, the Guarantor or its directors or officers or any such controlling
person in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given the
Company and the Guarantor, and the Company, the Guarantor, such directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. In no event shall any Holder be liable
or responsible for any amount in excess of the amount by which the total
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, from the Initial Placement and the sale of Transfer Restricted Securities
pursuant to the applicable Registration Statement or if such allocation is not
permitted by applicable law, the relative fault of such indemnifying party, on
the one hand, and of such indemnified party, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Guarantor shall be deemed
to be equal to the sum of (i) the total proceeds from the Initial Placement (net
of the Initial Purchasers' commissions, but before deducting expenses) as set
forth on the cover page of the Offering Memorandum and (ii) the total amount of
additional interest which the Company and the Guarantor were not required to pay
as a result of registering the securities covered by the Registration Statement
which resulted in such losses, claims, damages, liabilities or expenses. The
relative benefits of the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of the
Offering Memorandum and benefits received by any other Indemnified Holders shall
be deemed to be equal to the value of receiving the Notes, and the guarantees
thereof, registered under the Act. The relative fault of such indemnifying
party, on the one hand, and of such indemnified party, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to
16
<PAGE>
information supplied by such indemnifying party or by such indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Guarantor, the Initial Purchasers and each Holder of
Transfer Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Initial Purchaser or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount equal to (A) the amount of the total purchase
discounts and commissions applicable to such Transfer Restricted Securities less
(B) any amount paid or contributed by any Initial Purchaser under the Purchase
Agreement; nor shall any Holder or its related Indemnified Holders be required
to contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted Securities plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The obligations of the
Initial Purchasers and the Holders to contribute pursuant to this Section 8(c)
are several in proportion to the respective principal amount of Series A Notes
held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company and the Guarantor hereby agree with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company and the Guarantor is not subject to Section 13 or 15(d) of
the Securities Exchange Act, to make available, upon request of any Holder of
Transfer Restricted Securities, to any Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any prospective
purchaser of such Transfer Restricted Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
17
<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering of Notes, the investment banker or
investment bankers and manager or managers for any Underwritten Offering of
Notes, that will administer such offering will be selected by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
included in such offering. Such investment bankers and managers are referred to
herein as the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Guarantor agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by them of the provisions of this Agreement
and hereby agree to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor the Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantor's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor the Guarantor
will take any action, or voluntarily permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
18
<PAGE>
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantor:
IVAC Holdings, Inc.
10221 Wateridge Circle
San Diego, CA 92121
Telecopier No.: (619) 458-6217
Attention: Joseph W. Kuhn and Jay de Groot, Esq.
With a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036-1510
Telecopier No.: (212) 626-0799
Attention: Keith L. Schaitkin, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder. Each Holder by
accepting Transfer Restricted Securities agrees to be bound by and comply with
the terms and provisions of this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
19
<PAGE>
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IMED CORPORATION
By: /s/ Joseph W. Kuhn
------------------------------
Name: Joseph W. Kuhn
Title: President
IMED INTERNATIONAL TRADING CORP.
By: /s/ Grantland E. Bryce
------------------------------
Name: Grantland E. Bryce
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BT SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: ______________________________
Name:
Title:
PARIBAS CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IMED CORPORATION
By: ______________________________
Name:
Title:
IMED INTERNATIONAL TRADING CORP.
By: ______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Thomas G. McGonagle
------------------------------
Name: Thomas G. McGonagle
Title: Senior Vice President
BT SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: ______________________________
Name:
Title:
PARIBAS CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IMED CORPORATION
By: ______________________________
Name:
Title:
IMED INTERNATIONAL TRADING CORP.
By: ______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BT SECURITIES CORPORATION
By: /s/ Art Penn
------------------------------
Name: Art Penn
Title: Managing Director
BEAR, STEARNS & CO. INC.
By: ______________________________
Name:
Title:
PARIBAS CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IMED CORPORATION
By: ______________________________
Name:
Title:
IMED INTERNATIONAL TRADING CORP.
By: ______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BT SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: /s/ Don Mullen
------------------------------
Name: Don Mullen
Title: Senior Managing Director
PARIBAS CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IMED CORPORATION
By: ______________________________
Name:
Title:
IMED INTERNATIONAL TRADING CORP.
By: ______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BT SECURITIES CORPORATION
By: ______________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: ______________________________
Name:
Title:
PARIBAS CORPORATION
By: /s/ Robert Howard
------------------------------
Name: Robert Howard
Title: Managing Director
<PAGE>
EXHIBIT A
(a) No stop order suspending the qualification or exemption from
qualification of the Notes in any jurisdiction referred to in Section 6(c)(xi)
of the Registration Rights Agreement shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending, threatened or,
to the Company's knowledge, contemplated.
(b) (i) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
that would as of the date of Consummation of the Exchange Offer or the date of
the effectiveness of the Shelf Registration Statement, prevent the issuance or
sale of the Notes; (ii) no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction shall have been issued as
of the date of the Consummation of the Exchange Offer or the date of the
effectiveness of the Shelf Registration Statement, as the case may be, that
would prevent the issuance or sale of the Notes; and (iii) on the date of the
Consummation of the Exchange Offer or the date of the effectiveness of the Shelf
Registration Statement, as the case may be, no action, suit or proceeding shall
be pending against or affecting or threatened against the Company or any of its
respective subsidiaries before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) (i) Since the date of the latest balance sheet in the Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable, there
shall not have been any material adverse change, or any development involving a
prospective material adverse change, in the assets, properties, business,
results of operations, condition (financial or otherwise) or prospects, whether
or not arising in the ordinary course of business, of the Company and its
subsidiaries, taken as a whole, (ii) since the date of the latest balance sheet
included in the Exchange Offer Registration Statement or Shelf Registration
Statement, as applicable, there shall not have been any material change, or any
development that is reasonably likely to result in a material change, in the
capital stock or in the long-term debt, or material increase in short-term debt,
of the Company and its subsidiaries, taken as a whole, from that set forth in
the Exchange Offer Registration Statement or Shelf Registration Statement, as
applicable, and (iii) neither the Company nor any of its subsidiaries shall have
any liability or obligation, direct or contingent, which is material to the
Company.
A-1
<PAGE>
REGISTRATION RIGHTS ASSUMPTION AGREEMENT
REGISTRATION RIGHTS ASSUMPTION AGREEMENT (this "Agreement"), dated
as of November 26, 1996, is by IVAC Holdings, Inc., a Delaware corporation (the
"Company"), and IVAC Overseas Holdings, Inc., a Delaware Corporation (the
"Second Guarantor").
W I T N E S S E T H
WHEREAS, IMED Corporation, a Delaware corporation ("IMED"), has
heretofore executed and delivered to the Initial Purchasers a registration
rights agreement (the "Registration Rights Agreement") dated as of the date
hereof, providing for registration rights whereby IMED, among other things, will
file with the Commission under the circumstances set forth therein, (i) the
Exchange Offer Registration Statement and (ii) the Shelf Registration Statement
and use its best efforts to cause such Registration Statements to be declared
effective and consummate the Exchange Offer;
WHEREAS, IMED has been merged with and into the Company (the
"Merger");
WHEREAS, the Second Guarantor is a wholly owned subsidiary of the
Company and pursuant to the Registration Rights Agreement a guarantor of the
Notes;
WHEREAS, the Company, upon consummation of the Merger is required to
succeed to the obligations of IMED under the Registration Rights Agreement and
is required to execute and deliver this Agreement concurrently with the Merger;
and
WHEREAS, the Second Guarantor is required to execute and deliver
this Agreement concurrently with the Merger;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Company and the Second Guarantor mutually covenant and agree for the equal and
ratable benefit of the Initial Purchasers and each Holder of Transfer Restricted
Securities as follows:
1. ASSUMPTION. The Company hereby assumes all of the obligations of
IMED under the Registration Rights Agreement and, hereafter, shall be deemed the
"Company" for all purposes under the Registration Rights Agreement.
2. ADDITIONAL GUARANTOR. The Second Guarantor hereby agrees to be
deemed a Guarantor for all purposes under the Registration Rights Agreement and
to perform all obligations and duties of a Guarantor thereunder.
3. DEFINITIONS. Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Registration Rights Agreement.
<PAGE>
4. NEW YORK LAW TO GOVERN. The internal law of the State of New
York, without regard to the choice of law rules thereof, shall govern and be
used to construe this Agreement.
5. COUNTERPARTS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
[Signatures on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date first above written.
IVAC HOLDINGS, INC.
By: /s/ William J. Mercer
-----------------------------
Name: William J. Mercer
Title: President
IVAC OVERSEAS HOLDINGS, INC.
By: /s/ William J. Mercer
-----------------------------
Name: William J. Mercer
Title: President
<PAGE>
EXHIBIT 12
IMED CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) from continuing operations $ 5,523 $ 13,939 $ (377) $ 13,955 $ 16,365 $ 11,121 $ 11,776
Fixed charges:
Interest expense and amortization of debt
discount and premium on all indebtedness 7,682 5,046 4,159 2,805 2,052 1,647 1,119
Interest portion of rentals (33% of rent expense) 1,460 1,232 1,252 1,226 1,046 784 793
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total fixed charges 9,142 6,278 5,411 4,031 3,098 2,431 1,912
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes and fixed charges $ 14,665 $ 20,217 $ 5,034 $ 17,986 $ 19,463 $ 13,552 $ 13,688
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ratio of earnings to fixed charges 1.6 3.2 n/a 4.5 6.3 5.6 7.2
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings insufficient to cover fixed charges by n/a n/a $ 377 n/a n/a n/a n/a
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
PRO FORMA
---------------------------------
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
------------ ---------- ---------
<S> <C> <C> <C>
Pre-tax income (loss) from continuing operations $ (27,231) $(27,045) $ 8,271
Fixed charges:
Interest expense and amortization of debt
discount and premium on all indebtedness 44,633 32,945 30,074
Interest portion of rentals (33% of rent expense) 1,340 876 1,623
------------ ---------- ---------
Total fixed charges 45,973 33,821 31,697
------------ ---------- ---------
------------ ---------- ---------
Earnings before income taxes and fixed charges $ 18,742 $ 6,776 $ 39,968
------------ ---------- ---------
------------ ---------- ---------
Ratio of earnings to fixed charges n/a n/a 1.3
------------ ---------- ---------
------------ ---------- ---------
Earnings insufficient to cover fixed charges by $ 27,231 $ 27,045 n/a
------------ ---------- ---------
------------ ---------- ---------
</TABLE>
<PAGE>
SUBSIDIARIES OF IVAC HOLDINGS, INC.
Name Jurisdiction of Incorporation
- ---- -----------------------------
IVAC Overseas Holdings, Inc. Delaware
River Medical, Inc. Delaware
IVAC Foreign Sales Corp. Barbados
IVAC Canada, Inc. Canada
IVAC-Medical, B.V. Belgium
IVAC Scandinavia AB Sweden
IVAC Industries Limited United Kingdom
IVAC UK Limited United Kingdom
IVAC France S.A. France
IVAC Medizintechnik GmbH Germany
Electromedicina IVAC, S.L. Spain
IMED International Trading Corp. Delaware
IMED Ltd. United Kingdom
IMED Pty. Ltd. Australia
IMED Canada Ltd. Canada
IMED Holding Co. Ltd. British Virgin Islands
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our report dated March 19, 1996 relating
to the financial statements of IMED Corporation, our report dated March 29, 1996
relating to the financial statements of IVAC Holdings, Inc., and our report
dated June 29, 1995 relating to the financial statements of IVAC Corporation
which appear in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Diego, California
December 19, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Historical Consolidated Financial Data of IVAC" and "Experts" and to
the use of our report dated February 28, 1994, with respect to the financial
statements of IVAC Corporation included in the Registration Statement on Form
S-4 and related Prospectus of IVAC Holdings, Inc. for the registration of
$200,000,000 of Senior Subordinated Notes due 2006.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
December 19, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
Section 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
IVAC Holdings, Inc.
(Exact name of OBLIGOR as specified in its charter)
Delaware 13-3800335
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
IVAC Overseas Holdings, Inc.
(Exact name of OBLIGOR as specified in its charter)
Delaware 13-3800332
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE>
- 2 -
--------------------------
IMED International Trading Corp.
(Exact name of OBLIGOR as specified in its charter)
Delaware 33-0712032
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
10221 Wateridge Circle 92121
San Diego, California (Zip code)
(Address of principal executive offices)
--------------------------
9-3/4% Senior Subordinated Notes due 2006
(Title of the indenture securities)
<PAGE>
- 3 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Ivac Holdings, Inc., Ivac Overseas Holdings, Inc. and Imed International
Trading Corp. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 4 -
16. LIST OF EXHIBITS
(CONT'D)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of December 16, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 17th day
of December, 1996.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ James E. Logan
-------------------------
James E. Logan
Vice President
JEL/pg(rev:kk)
<PAGE>
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
-------------------------
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
(IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 38,257
Short-Term Investments 82,377
Securities, Available for Sale 861,975
Loans 1,404,930
Less: Allowance for Credit Losses 13,048
----------
Net Loans 1,391,882
Premises and Equipment 60,012
Other Assets 133,673
----------
TOTAL ASSETS $2,568,176
----------
----------
LIABILITIES
Deposits:
Non-Interest Bearing $ 466,849
Interest Bearing 1,433,894
----------
Total Deposits 1,900,743
Short-Term Credit Facilities 369,045
Accounts Payable and Accrued Liabilities 143,604
----------
TOTAL LIABILITIES $2,413,392
----------
----------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,402
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,007)
----------
TOTAL STOCKHOLDER'S EQUITY 154,784
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,568,176
----------
----------
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
October 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029069
<NAME> IVAC HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 436
<SECURITIES> 0
<RECEIVABLES> 20,473
<ALLOWANCES> (875)
<INVENTORY> 15,829
<CURRENT-ASSETS> 46,975
<PP&E> 30,640
<DEPRECIATION> (17,988)
<TOTAL-ASSETS> 122,597
<CURRENT-LIABILITIES> 21,222
<BONDS> 11,213
23,631
0
<COMMON> 0
<OTHER-SE> 32,477
<TOTAL-LIABILITY-AND-EQUITY> 122,597
<SALES> 112,551
<TOTAL-REVENUES> 112,551
<CGS> 63,270
<TOTAL-COSTS> 63,270
<OTHER-EXPENSES> 32,746
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 2,052
<INCOME-PRETAX> 16,365
<INCOME-TAX> 8,099
<INCOME-CONTINUING> 8,266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMTHE CONDENSED
CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029069
<NAME> IVAC HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 851
<SECURITIES> 0
<RECEIVABLES> 18,421
<ALLOWANCES> (935)
<INVENTORY> 20,339
<CURRENT-ASSETS> 49,150
<PP&E> 35,222
<DEPRECIATION> (21,010)
<TOTAL-ASSETS> 130,337
<CURRENT-LIABILITIES> 21,447
<BONDS> 19,865
0
0
<COMMON> 0
<OTHER-SE> 87,493
<TOTAL-LIABILITY-AND-EQUITY> 130,337
<SALES> 81,770
<TOTAL-REVENUES> 81,770
<CGS> 44,757
<TOTAL-COSTS> 44,757
<OTHER-EXPENSES> 25,915
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 1,119
<INCOME-PRETAX> 11,776
<INCOME-TAX> 5,573
<INCOME-CONTINUING> 6,203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,614
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
