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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
DATE OF REPORT -- SEPTEMBER 30, 1994
(Date of earliest event reported)
MEDIQ INCORPORATED
(Exact name of Registrant as specified in its charter)
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DELAWARE 0-8147 51-0219413
(State of incorporation) (Commission file number) (IRS employer
identification number)
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ONE MEDIQ PLAZA, PENNSAUKEN, NJ 08110
(Address of principal executive offices, zip code)
AREA CODE (609) 665-9300
(Telephone number)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1994, MEDIQ Incorporated (the 'Company') acquired, through
wholly-owned subsidiaries, certain assets used by the medical equipment rental
division of Kinetic Concepts, Inc. ('KCI') for a purchase price of approximately
$65.3 million in cash and $18.8 million principal amount of notes payable to
KCI. The purchase price may be reduced based on a post-closing audit.
The assets acquired primarily consist of moveable critical care and life
support rental equipment similar in type and use to the rental medical equipment
currently utilized by the Company's subsidiary, MEDIQ/PRN Life Support Services,
Inc. ('MEDIQ/PRN'). The assets acquired are now being integrated into
MEDIQ/PRN's medical equipment rental business.
The cash portion of the consideration was financed with a term loan in the
amount of $43 million from Congress Financial Corporation, subordinated notes in
the amount of $10 million from Massachusetts Mutual Life Insurance Company and
its affiliates, and from working capital of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) Financial Statements of Business Acquired*
(b) Pro Forma Financial Information*
*It is not practicable for the financial information required by Items 7(a) and 7(b) of Form 8-K
to be filed herewith. Such financial information is currently being prepared and will be
filed promptly upon its availability through an amendment to this report.
(c) Exhibits.
ITEM NUMBER DESCRIPTION
2.1 Asset Purchase Agreement dated August 23, 1994 by and among Kinetic Concepts,
Inc., a Texas corporation, KCI Therapeutic Services, Inc., a Delaware corporation,
MEDIQ Incorporated, a Delaware corporation, PRN Holdings, Inc., a Delaware
corporation, and MEDIQ/PRN Life Support Services-I, Inc., a Delaware Corporation.
2.2 Amendment No. 1 to Asset Purchase Agreement dated September 30, 1994 by and among
Kinetic Concepts, Inc., a Texas corporation, KCI Therapeutic Services, Inc., a
Delaware corporation, MEDIQ Incorporated, a Delaware corporation, PRN Holdings,
Inc., a Delaware corporation, and MEDIQ/PRN Life Support Services-I, Inc., a
Delaware corporation.
4.1 Promissory Note dated September 30, 1994 in the principal amount of $2,000,000
payable by PRN Holdings, Inc. a Delaware corporation, to the order of KCI
Therapeutic Services, Inc., a Delaware corporation.
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4.2 Promissory Note dated September 30, 1994 in the principal amount of $3,000,000
payable by PRN Holdings, Inc., a Delaware corporation, to the order of KCI
Therapeutic Services, Inc., a Delaware corporation.
4.3 Promissory Note dated September 30, 1994 in the principal amount of $5,000,000
payable by PRN Holdings, Inc., a Delaware corporation, to the order of KCI
Therapeutic Services, Inc., a Delaware corporation.
4.4 Promissory Note dated September 30, 1994 in the principal amount of $2,956,957
payable by MEDIQ/PRN Life Support Services-I, Inc., a Delaware corporation, to
the order of KCI Therapeutic Services, a Delaware corporation.
4.5 Promissory Note Dated September 30, 1994 in the principal amount of $5,835,707
payable by MEDIQ/PRN Life Support Services, Inc., a Delaware corporation, to the
order of KCI Therapeutic Services, Inc., a Delaware corporation.
4.6 Negative Covenants Agreement dated September 30, 1994 by and among Kinetic
Concepts, Inc., a Texas corporation, KCI Therapeutic Services, Inc., a Delaware
corporation, MEDIQ Incorporated, a Delaware corporation, PRN Holdings, Inc., a
Delaware corporation, and MEDIQ/PRN Life Support Services-I, Inc., a Delaware
Corporation.
4.7 Guaranty Agreement dated September 30, 1994 made by PRN Holdings, Inc., a Delaware
corporation, in favor of KCI Therapeutic Services, Inc., a Delaware corporation.
4.8 Guaranty Agreement dated September 30,1994 made by MEDIQ Incorporated, a Delaware
corporation, in favor of KCI Therapeutic Services, Inc., a Delaware corporation.
4.9 Loan and Security Agreement by and between Congress Financial Corporation and
MEDIQ/PRN Life Support Services-I, Inc., dated September 30, 1994.
4.10 PRN Holdings, Inc. Note Agreement, dated as of September 30, 1994 Re: $10,000,000
Senior Subordinated Notes due October 1, 2004 and Warrants to Purchase Common
Stock.
4.11 Form of Warrant to Purchase Shares of Common Stock of PRN Holdings, Inc.
99. News Release, dated September 30, 1994.
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MEDIQ INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDIQ Incorporated
-------------------------------------
(Registrant)
/S/ MICHAEL F. SANDLER
------------------------------------
Michael F. Sandler
Senior Vice President -- Finance
& Chief Financial Officer
Date: October 15, 1994
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ASSET PURCHASE AGREEMENT
BY AND AMONG
KINETIC CONCEPTS, INC.,
KCI THERAPEUTIC SERVICES, INC.,
MEDIQ INCORPORATED,
PRN HOLDINGS, INC.
AND
MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.
AUGUST 23, 1994
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TABLE OF CONTENTS
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PAGE
SECTION 1. PURCHASE AND SALE OF BUSINESS AND ASSETS................................................ 1
1.1 Purchased Assets........................................................................ 1
1.2 Assets Excluded from Purchase........................................................... 3
SECTION 2. AGGREGATE CONSIDERATION AND PAYMENT; ASSUMED LIABILITIES................................ 3
2.1 Aggregate Consideration................................................................. 3
2.2 Liabilities Assumed..................................................................... 4
2.3 Excluded Liabilities.................................................................... 5
2.4 Allocation of Consideration............................................................. 6
2.5 Sales Taxes............................................................................. 6
SECTION 3. CLOSING PAYMENT ADJUSTMENTS............................................................. 7
3.1 Closing Statement....................................................................... 7
3.2 Post Closing Adjustment................................................................. 8
3.3 Certain Payments........................................................................ 9
3.4 Accounts Receivable..................................................................... 11
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLER......................................... 11
4.1 Organization and Good Standing.......................................................... 12
4.2 Power and Authorization................................................................. 12
4.3 No Conflicts............................................................................ 13
4.4 Investments and Subsidiaries............................................................ 14
4.5 Compliance with Laws.................................................................... 14
4.6 Litigation.............................................................................. 14
4.7 The February Statement.................................................................. 14
4.8 Accounts Receivable..................................................................... 15
4.9 Personal Property....................................................................... 15
4.10 Warranties, Insurance................................................................... 16
4.11 Real Property........................................................................... 16
4.12 Title to Assets......................................................................... 16
4.13 Contracts............................................................................... 17
4.14 Customers and Suppliers................................................................. 17
4.15 Taxes................................................................................... 18
4.16 Employee Matters........................................................................ 18
4.17 Environmental Matters................................................................... 19
4.18 Absence of Certain Changes and Events................................................... 20
4.19 Books and Records....................................................................... 21
4.20 Brokers................................................................................. 21
4.21 Full Disclosure......................................................................... 21
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER................................................. 21
5.1 Organization and Good Standing.......................................................... 22
5.2 Power and Authorization................................................................. 22
5.3 No Conflicts............................................................................ 23
5.4 Brokers................................................................................. 23
5.5 Financing Commitment.................................................................... 23
5.6 MHM Note................................................................................ 24
5.7 Full Disclosure......................................................................... 24
SECTION 6. OBLIGATIONS OF THE PARTIES UNTIL CLOSING................................................ 25
6.1 Conduct of Medical Services Business Pending Closing.................................... 25
6.2 Negative Covenants...................................................................... 26
6.3 Access to Information; Confidentiality.................................................. 26
6.4 Best Efforts............................................................................ 27
6.5 Consents................................................................................ 27
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6.6 Delivery of Additional Information...................................................... 27
6.7 Use of Business Name.................................................................... 28
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'S AND MEDIQ'S OBLIGATIONS......................... 28
7.1 Representations and Warranties.......................................................... 28
7.2 Assets of Seller........................................................................ 28
7.3 Performance of Covenants................................................................ 29
7.4 Approvals............................................................................... 29
7.5 Legal Matters........................................................................... 29
7.6 Escrow Agreement........................................................................ 29
7.7 Opinion of Counsel...................................................................... 29
7.8 Agreements with Congress................................................................ 29
7.9 MHM Subordination Agreement............................................................. 30
SECTION 8. CERTAIN CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.................................... 30
8.1 Representations and Warranties.......................................................... 30
8.2 Post-Closing Liability.................................................................. 30
8.3 Performance of Covenants................................................................ 30
8.4 Approvals............................................................................... 30
8.5 Legal Matters........................................................................... 31
8.6 Marketing Agreement..................................................................... 31
8.7 Escrow Agreement........................................................................ 31
8.8 Opinion of Counsel...................................................................... 31
8.9 Negative Covenants Agreement............................................................ 31
8.10 Collateral Transfer..................................................................... 31
8.11 MEDIQ Guaranty.......................................................................... 32
8.12 Highline Agreement...................................................................... 32
SECTION 9. CLOSING................................................................................. 32
9.1 Time and Place of Closing; Effective Time of Closing.................................... 32
9.2 Deliveries at the Closing............................................................... 32
9.3 Noncompetition; Confidential Information................................................ 35
9.4 Provisions Relating to Employees........................................................ 37
9.5 Transitional Activities................................................................. 38
9.6 Delivery of Financials.................................................................. 38
9.7 Bug-Out Procedures...................................................................... 38
9.8 Employee Health Insurance............................................................... 38
9.9 Customer Pricing........................................................................ 38
9.10 Computer Software Support............................................................... 39
9.11 Intercreditor and Subordination Agreements.............................................. 39
SECTION 10. TERMINATION AND ABANDONMENT............................................................. 40
10.1 Termination............................................................................. 40
10.2 Procedure for Termination............................................................... 40
SECTION 11. INDEMNIFICATION......................................................................... 40
11.1 Indemnification by Seller and KCI....................................................... 40
11.2 Indemnification by Buyer and MEDIQ...................................................... 41
11.3 Inter-Party Claims...................................................................... 41
11.4 Third Party Claims...................................................................... 41
11.5 Limitations and Requirements............................................................ 42
11.6 Right of Set-Off........................................................................ 42
SECTION 12. MISCELLANEOUS........................................................................... 43
12.1 Survival of Representations and Warranties.............................................. 43
12.2 Further Assurances...................................................................... 44
12.3 Bulk Sales.............................................................................. 44
12.4 Costs and Expenses...................................................................... 44
12.5 Public Announcements.................................................................... 44
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12.6 Notices................................................................................. 45
12.7 Assignment and Benefit.................................................................. 46
12.8 Amendment, Modification and Waiver...................................................... 47
12.9 Governing Law........................................................................... 47
12.10 Section Headings and Defined Terms 47
12.11 Severability............................................................................ 47
12.12 Counterparts............................................................................ 47
12.13 Entire Agreement........................................................................ 47
12.14 Guaranty................................................................................ 48
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SCHEDULES AND EXHIBITS
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Schedule 1.1.1............................... Equipment Categories
Schedule 1.1.2............................... Transferred Computer Assets
Schedule 1.1.3............................... Assumed Capital Leases
Schedule 1.1.4............................... Assumed Contracts
Schedule 1.1.5............................... Motor Vehicles
Schedule 2.4................................. Allocation of Aggregate Consideration
Schedule 3.4................................. Agreed Upon Procedures for Accounts Receivable
Schedule 9.7................................. Bug-Out Procedures
Exhibit IA................................... Form of Promissory Note (#1)
Exhibit IB................................... Form of Promissory Note (#2)
Exhibit IC................................... Form of Promissory Note (#3)
Exhibit II................................... Escrow Agreement
Exhibit III.................................. Certain Personnel Policies of Buyer
Exhibit IV................................... Form of Opinion of Cox & Smith Incorporated
Exhibit V.................................... Marketing Agreement
Exhibit VI................................... Form of Opinion of Drinker Biddle & Reath
Exhibit VII.................................. Form of Negative Covenants Agreement
Exhibit VIII................................. Form of Guaranty Agreement
Exhibit IX................................... Form of General Assignment and Bill of Sale
Exhibit X.................................... Form of Assumption Agreement
Exhibit XI................................... Form of Collateral Transfer of Note (Security Agreement)
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ('Agreement') is dated August 23, 1994, by
and among KINETIC CONCEPTS, INC., a Texas corporation ('KCI'), KCI THERAPEUTIC
SERVICES, INC., a Delaware corporation which is a wholly-owned subsidiary of KCI
('Seller'), MEDIQ Incorporated, a Delaware corporation ('MEDIQ'), PRN HOLDINGS,
INC., a Delaware corporation which is a wholly-owned subsidiary of MEDIQ
('Holdings'), and MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC., a Delaware
corporation which is a wholly-owned subsidiary of Holdings ('Buyer'). An index
of defined terms is attached as an appendix hereto.
BACKGROUND
Seller is engaged, through its KCI Medical Services Division (the
'Division'), in the business of offering for rent to hospitals and other health
care providers during peak-need times a complete portfolio of movable critical
care and life support equipment in the categories described in Schedule 1.1.1
hereto and selling disposable medical care products to hospitals and other
health care providers for use in conjunction with such equipment in the United
States (collectively referred to herein as the 'Medical Services Business').
Buyer is in the business of supplying critical care and life support equipment
to hospitals and other health care providers.
Seller is also engaged in the business of renting and selling therapeutic
specialty beds and patient surfaces and related products, accessories and
disposables to acute care, long term care and home care providers of health care
services (the 'KCITS Business').
The parties hereto desire to provide for the sale by Seller and the
acquisition by Buyer, subject to certain specified liabilities, of certain of
the assets of the Division, and for certain other matters, all on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. PURCHASE AND SALE OF BUSINESS AND ASSETS.
1.1 Purchased Assets. Subject to the terms and conditions hereof and on the
basis of and in reliance upon the covenants, agreements and representations and
warranties set forth herein, at the Closing (as herein defined), Seller (or
Seller's permitted assignee pursuant to Section 12.7) shall assign, sell and
transfer, or cause to be assigned, sold and transferred, to Buyer (or Buyer's
permitted assignee pursuant to Section 12.7) all of the following properties,
assets, rights and claims of Seller (other than the assets described in Section
1.2) wherever situated, which are then owned by Seller and used exclusively in,
or held for exclusive use in, the Medical Services Business:
(a) (i) all rental equipment and equipment held for resale in the
categories described in Schedule 1.1.1 hereto and disposable products used
in conjunction with such equipment, (ii) all other disposable medical care
products inventory, (iii) all packaging not bearing any of the Names (as
hereinafter defined), supplies and accessories related to any of the
foregoing, (iv) all furniture and office equipment (other than computer
equipment, including hardware and software) located at Seller's office in
Salt Lake City, Utah, (v) all biomedical spare parts, supplies and all
biomedical related testing and service equipment, and (vi) all computer
equipment (including software and hardware) referred to on Schedule 1.1.2
hereto;
(b) all documents, records, files and other documents (in whatever
form, including computer files, invoices, purchase orders and proofs of
delivery) relating to or evidencing the assets described in Section
1.1(a)(i) and the physical location thereof;
(c) all right, title and interest of Seller in, to and under all
capital and other leases expressly identified on Schedule 1.1.3 hereto (the
'Assumed Capital Leases');
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(d) all of the rights of Seller under all contracts, arrangements,
leases and other agreements relating to the Medical Services Business set
forth on Schedule 1.1.4 hereto (the 'Assumed Contracts'), and with respect
to real property interests pursuant thereto, all right, title and interest
of Seller in and to all improvements, fixtures and all other appurtenances
thereto, (or, in the case of Seller's Salt Lake City facility, a sublease
thereof); and
(e) the motor vehicles described in Schedule 1.1.5.
provided that to the extent that the consent of a third party is required in
order to assign to Buyer an Assumed Capital Lease or an Assumed Contract and
such consent is not (notwithstanding the use of reasonable efforts, as specified
in Section 6.5 hereof) obtained on or prior to Closing, none of Seller's right,
title and interest in, to or under any such Assumed Capital Lease or Assumed
Contract shall be sold, assigned or transferred to Buyer at Closing and from and
after the Closing, any such lease, contract, arrangement or agreement shall be
deemed not to be an Assumed Contract or Assumed Capital Lease and shall not be
included in the Assets (as hereinafter defined) (provided that for purposes of
representations and warranties set forth herein to the extent made as of the
date hereof and the covenants which are operable only prior to Closing
hereunder, any such lease, contract, arrangement and agreement shall be deemed
to be included in the Assets and to constitute an Assumed Contract or Assumed
Capital Lease, as the case may be).
All of the properties, assets, rights and claims referred to above in this
Section 1.1 are hereinafter called the 'Assets.'
1.2 Assets Excluded from Purchase. Except as otherwise expressly provided
herein, Buyer shall not acquire any assets of Seller, including, without
limitation, any of the following assets of Seller:
(a) cash and cash equivalents, such as bank deposits or money market
accounts;
(b) accounts receivable;
(c) rights under agreements, contracts and commitments to which Seller
is a party or by which it or any of its assets are bound other than the
Assumed Contracts and the Assumed Capital Leases;
(d) all corporate names, assumed names, trade names or trademarks,
including, without limitation, the trade names and trademarks 'KCI', 'KCI
Therapeutic', 'Kinetic Concepts', 'KCI Medical Services', 'KCI Financial
Services' and all trade names and trademarks derived from or including any
of the foregoing (collectively, the 'Names'); and
(e) any assets used in, or held for use in, the KCITS Business.
SECTION 2. AGGREGATE CONSIDERATION AND PAYMENT;
ASSUMED LIABILITIES.
2.1 Aggregate Consideration. Subject to Section 3, the aggregate
consideration (the 'Consideration') for the Assets acquired by Buyer hereunder
and for the agreement contained in Section 9.3(a) shall be equal to the sum of:
(a) sixty-five million, three hundred thousand dollars ($65,300,000) (the
'Closing Payment'), which shall be paid at the Closing by wire transfer of
immediately available funds pursuant to instructions previously given by Seller
to Buyer for that purpose; plus (b) an amount equal to the sum of five million
dollars ($5,000,000) and the Highline Buy-Out Amount (as hereinafter defined),
which shall be paid at the Closing by delivery of an executed promissory note of
Buyer (or of MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
('First PRN'), in the event Buyer makes the assignment contemplated in Section
12.7 hereof) in favor of Seller in the form of Exhibit IA hereto; plus (c) ten
million dollars ($10,000,000), which shall be paid at the Closing by delivery of
three executed promissory notes of Holdings in favor of Seller in the form of
Exhibit IB hereto, one in the principal amount of five million dollars
($5,000,000), one in the principal amount of three million dollars ($3,000,000),
and the other in the principal amount of two million dollars ($2,000,000); plus
(d) $2,956,957, which shall be paid at the
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Closing by delivery of an executed promissory note of Buyer in favor of Seller
in the form of Exhibit IC hereto (the promissory notes delivered pursuant to
this Section being referred to as the 'Notes'). The allocation of the
Consideration among the Assets and the agreement set forth in Section 9.3(a) is
as set forth in Schedule 2.4 hereof. For purposes hereof, 'Highline Buy-Out
Amount' means the amount (not exceeding $880,000) paid by Seller to Highline
Financial Services, Inc. with Buyer's approval in respect of the termination of
the Purchase, Administrative and Remarketing Agreement dated August 14, 1989
between Highline Financial Services, Inc. ('Highline') and Medirec (predecessor
in interest to Seller), as amended (the 'Highline Agreement'), and the
acquisition by Seller of all of Highline's right, title and interest in an to
the equipment covered by the Highline Agreement.
2.2 Liabilities Assumed. At the Closing, Buyer shall assume and agree to
pay, perform and discharge, or cause to be paid, performed and discharged, the
following obligations and liabilities of Seller to the extent incurred in
connection with the Division (the 'Assumed Liabilities'):
(a) any and all liabilities and obligations of Seller under the
Assumed Capital Leases included in the Assets, but only to the extent such
liabilities and obligations of Seller (i) arise or accrue after the Closing
Date (as herein defined) and (ii) do not arise from and are not
attributable to, in whole or in part, any breach or default thereunder
occurring on or prior to the Closing Date;
(b) any and all liabilities and obligations of Seller pursuant to or
arising under the Assumed Contracts included in the Assets, but only to the
extent such liabilities and obligations of Seller (i) arise or accrue after
the Closing Date and (ii) do not arise from and are not attributable to, in
whole or in part, any breach or default thereunder occurring on or prior to
the Closing Date;
(c) any and all liabilities and obligations of Seller, if any,
pursuant to the Worker Adjustment and Retraining Notification Act, 29
U.S.C. SectionSection 2101-2109 (the 'WARN Act'), and all state or local
'plant closing' or similar laws (collectively, the 'Plant Closing Laws')
in connection with the transactions contemplated hereby;
(d) any obligation of Seller with respect to (i) any warranty repair
claims involving any of the Assets or any equipment of a type described in
Schedule 1.1.1 hereto sold by Seller prior to the Closing Date in
connection with the remarketing portion of the Medical Services Business,
which claims either (A) are first made after the Closing Date or (B) relate
to warranty repairs which Seller is in the process of making as of the
Closing Date but which are not then complete and (ii) any product liability
or other claims on account of personal injury involving any of the Assets
or the Medical Services Business arising out of any injury occurring after
the Closing Date; and
(e) any obligation of Seller with respect to any warranty repair claim
involving any equipment (of a type described in Schedule 1.1.1 hereto) on
which Seller performed repair services during the period beginning six
months prior to the Closing Date and ending on the Closing Date in
connection with Seller's biomedical-for-hire business.
2.3 Excluded Liabilities. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
BUYER SHALL NOT DIRECTLY OR INDIRECTLY ASSUME ANY LIABILITIES OR OBLIGATIONS OF
SELLER OR ANY OF SELLER'S AFFILIATES OF ANY NATURE WHATSOEVER ('EXCLUDED
LIABILITIES'), WHETHER LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, ACTUAL OR
INCHOATE, ACCRUED, CONTINGENT OR OTHERWISE, AND WHETHER ARISING FROM FACTS
EXISTING OR EVENTS OCCURRING PRIOR TO, ON OR AFTER THE CLOSING DATE, INCLUDING,
WITHOUT LIMITATION:
(a) any obligation or liability to any present or former customer of
Seller, or pursuant to any contract, agreement, commitment or undertaking
not expressly included in the Assets (including, without limitation, the
existence of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance on any of the
Assets except as permitted hereby) or the Assumed Liabilities;
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(b) any obligation or liability of any nature whatsoever to, or with
respect to, any present or former employee of Seller, including, without
limitation, any obligation or liability of Seller with respect to any
employment benefit plan or any employment, severance, or collective
bargaining agreement (written or oral) to which Seller is a party,
including, without limitation, any such relating to severance (except to
the extent specifically provided in Section 3.3), bonuses or sales
incentives;
(c) any obligation to repay the amount of any indebtedness for
borrowed money incurred by Seller or any other person;
(d) any liabilities and obligations to or of any Seller Affiliate (as
hereinafter defined);
(e) any liability or obligation relating to any of the matters
disclosed or required to be disclosed on the Disclosure Statement
previously delivered to Buyer by Seller (the 'Disclosure Statement'),
including, without limitation, any liability, obligation or related expense
arising out of, pursuant to or in connection with any claim, action, suit,
litigation or administrative, arbitration or other proceeding or
governmental investigation involving Seller or KCI or any Seller Affiliate
or any employees thereof, or any products distributed, rented or leased on
or prior to the Closing Date or any services provided or failed to be
provided on or before the Closing Date, regardless of whether any such
claim, action, suit, litigation, arbitration, proceeding or investigation
is made, brought or commenced prior to or after the Closing;
(f) any obligation or liability of Seller which is incurred or arises
after the Closing except for the Assumed Liabilities;
(g) any obligation of Seller or KCI for state, local, foreign or
federal taxes, including, without limitation, any obligation for franchise,
unitary business, capital stock or income taxes (including, without
limitation, deferred taxes);
(h) any obligation or liability of Seller or KCI with respect to
product liability claims on account of personal injury arising out of any
injury occurring prior to the close of business on the Closing Date; and
(i) any obligation, duty, liability, expense or cost (including,
without limitation, costs and expenses of remediation) arising out of or
related to the discharge, dispersal, release, emission, escape,
transportation, storage, generation, treatment, or disposal of any
substance, material, smoke, vapor, soot, fumes, acids, alkalis, chemicals,
liquids, gases, irritants, pollutants and/or waste, whether hazardous,
toxic or otherwise, in violation of, or respecting which remedial action
may be required under any Law (as such term is defined herein) or
government license, permit, consent or authorization concerning or relating
to industrial hygiene or the protection of health and/or the environment
(collectively referred to as 'Environmental Laws'), including, but not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, USCA Section 9601 et seq. (as amended, 'CERCLA'), the
Resource Conservation and Recovery Act, 42 USCA Section 6901 et seq.
('RCRA'), the Federal Water Pollution Control Act, 33 USCA Section 1251 et
seq., the Clean Air Act, 42 USCA Section 7401 et seq., the Toxic Substances
Control Act, 15 USCA Section 2601 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 USCA Section 136 et seq., or the Safe
Drinking Water Act, 42 USCA Section 300 et seq., or regulations promulgated
thereunder.
2.4 Allocation of Consideration. The consideration paid by Buyer to Seller
for the various assets and rights acquired hereunder shall be allocated pursuant
to Schedule 2.4 hereto. Buyer and Seller shall file all tax returns consistently
with such allocation. On a timely basis, Buyer and Seller shall prepare and
submit Internal Revenue Form 8594 (relating to purchase price allocation) to the
Internal Revenue Service (the 'IRS') prepared in accordance with this Section
2.4.
2.5 Sales Taxes. Buyer shall pay all sales, transfer and documentary taxes
(the 'Transfer Taxes') (but not any income or franchise taxes of Seller or any
Seller Affiliate), if any, payable in connection with the sale, transfer, and
assignment of the Assets to be made hereunder. Buyer shall
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prepare and timely file with the appropriate governmental agency all tax returns
required to be filed in respect of the Transfer Taxes.
SECTION 3. CLOSING PAYMENT ADJUSTMENTS.
3.1 Closing Statement.
(a) Promptly following the Closing, Seller shall cause to be prepared
a statement as of the close of business on the Closing Date, which shall
set forth (i) the Assets acquired by Buyer pursuant to Section 1.1 and (ii)
the Assumed Liabilities assumed by Buyer pursuant to Section 2.2(a). Each
line item included in (i) and (ii) above shall be accounted for
consistently with United States generally accepted accounting principles
('GAAP') applied on a basis consistent with the preparation of the February
Statement (as defined herein). Such statement of assets and liabilities
prepared as provided in this Section 3.1 is referred to herein as the
'Closing Statement.' Seller shall, at its sole expense, engage KPMG Peat
Marwick ('Seller's Auditors') to perform an audit in accordance with
generally accepted auditing standards with respect to the Closing
Statement. Buyer, MEDIQ and Seller shall cooperate fully with such audit
and shall use best efforts to cause their respective affiliates so to
cooperate, so as to cause Seller's Auditors to complete such audit within
40 days after the Closing Date. Buyer and Buyer's independent public
accountants ('Buyer's Auditors') shall have the opportunity, at Buyer's
sole expense, to review the work papers of Seller and Seller's Auditors
relating to such audit.
(b) Upon completion of such audit, Seller shall deliver to Buyer (i)
the Closing Statement, (ii) the calculation of Net Asset Value (as defined
below), in each case as of the close of business on the Closing Date, and
(iii) Seller's Auditors' unqualified opinion on the Closing Statement to
the effect that (A) the Closing Statement is accounted for in accordance
with GAAP applied on a basis consistent with the preparation of the
February Statement and the requirements of this Section 3 and (B) the
calculation of Net Asset Value complies with the requirements of this
Section 3.
(c) Unless Buyer notifies Seller within 30 days after receipt of the
Closing Statement and calculation of Net Asset Value of any objections
thereto (specifying in reasonable detail the basis therefor), such Closing
Statement and calculation shall be the definitive Closing Statement and
shall be final, binding and conclusive for all purposes. If Buyer timely
notifies Seller of any such objection, Buyer and Seller shall, together
with Seller's Auditors and Buyer's Auditors, attempt in good faith to reach
an agreement as to the matter in dispute. If the parties shall have failed
to resolve such disputed matter within ten (10) business days after receipt
of notice of such objection, then any such disputed matter shall, at the
instance of Buyer or Seller, be submitted to and resolved by a national
accounting firm other than Seller's Auditors and Buyer's Auditors
reasonably acceptable to Buyer and Seller. The fees and expenses of any
such accounting firm incurred in resolving the disputed matters shall be
divided equally between Seller and Buyer. The Closing Statement and
calculation of Net Asset Value shall, after adjustment to reflect the
resolution of any disputes pursuant to this Section 3.1, be the definitive
Closing Statement and shall be final, binding and conclusive for all
purposes.
3.2 Post Closing Adjustment.
(a) If the amount of inventories set forth on the Closing Statement is
less than $3,479,000, Seller shall pay or cause to be paid to Buyer the
amount of the difference.
(b) If the sum of (i) Net Asset Value set forth on the Closing
Statement and (ii) the amount, if any, by which the amount of inventories
set forth on the Closing Statement exceeds $3,479,000 is less than
$37,283,177, Seller shall pay or cause to be paid to Buyer the amount of
the difference.
(c) Seller shall, at the time it delivers the Closing Statement and
other documents pursuant to Section 3.1(b), pay Buyer any and all amounts
payable pursuant to Sections 3.2(a) and 3.2(b) based on the Closing
Statement delivered by Seller pursuant to Section 3.1(b), together with
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interest thereon from the Closing Date at the rate of 8% per annum. If the
amount paid by Seller pursuant to the preceding sentence with respect to
either or both of Sections 3.2(a) and 3.2(b) (and if no amount has been
paid with respect thereto, an amount equal to zero shall be deemed to have
been paid) is (i) less than the amount payable pursuant to Sections 3.2(a)
and 3.2(b) based upon the definitive Closing Statement referred to in
Section 3.1(c), Seller shall, within five business days following the date
on which such definitive Closing Statement becomes final, binding and
conclusive pursuant to Section 3.1(c), pay Buyer the difference, together
with interest thereon from the Closing Date at the rate of 8% per annum or
(ii) greater than the amount payable pursuant to Sections 3.2(a) and 3.2(b)
based upon the definitive Closing Statement referred in Section 3.1(c),
Buyer shall, within five business days following the date on which such
definitive Closing Statement becomes final, binding and conclusive pursuant
to Section 3.1(c), pay Seller the excess, together with interest thereon
from the date on which Buyer received such amount from Seller at the rate
of 8% per annum. All payments by Seller made pursuant to this Section 3.2
shall be made by wire transfer of immediately available funds to an account
designated by Buyer.
(d) For purposes of this Agreement, 'Net Asset Value' shall mean the
sum of (i) the net book value of the assets other than inventories included
in the Assets (other than Assets acquired by Seller from Highline as a
result of the termination of the Highline Agreement), plus (ii) an amount
equal to depreciation expense for the Assets for the period from February
28, 1994 to and including the Closing Date, minus (iii) all indebtedness
and other liabilities assumed pursuant to Section 2.2(a), in each case to
the extent set forth on the Closing Statement and determined in accordance
with the requirements of Section 3.1.
3.3 Certain Payments.
(a) On the Closing Date, Buyer and MEDIQ shall establish and fund an
escrow account (the 'Escrow') maintained by a third party reasonably
satisfactory to Buyer and Seller (the 'Escrow Agent') in an amount equal to
$1.6 million (the 'Escrow Payment'). All payments made pursuant to this
Section 3.3 shall be made in accordance with the terms and conditions of
the escrow agreement attached hereto as Exhibit II (the 'Escrow
Agreement'). The Escrow Agreement shall provide that payments shall be made
by the Escrow Agent to Seller in order to reimburse Seller (up to an
aggregate maximum amount of $1.6 million) for (i) severance payments
actually made by Seller to employees of Seller identified in Schedule 1 to
the Escrow Agreement whose employment is terminated by Seller after the
date hereof and before the 90th day after the Closing Date and who (A) do
not become employees of Buyer, MEDIQ or an Affiliate of MEDIQ or (B) become
employees of Buyer, MEDIQ or an Affiliate of MEDIQ after the Closing
(collectively, 'Transferred Employees') whose employment with Buyer or
MEDIQ or an Affiliate of MEDIQ is terminated by Buyer or MEDIQ or an
Affiliate of MEDIQ prior to the first anniversary of the Closing Date,
except any such Transferred Employee terminated by Buyer or MEDIQ or an
Affiliate of MEDIQ for reasons that would constitute 'cause' as set forth
in the modified form of Buyer's personnel policies described in Exhibit III
hereto or (C) are Transferred Employees whose employment with Buyer or
MEDIQ or an Affiliate of MEDIQ is terminated by the employee as a result of
any action by Buyer or MEDIQ or an Affiliate of MEDIQ materially decreasing
the employee's level of responsibility, salary or benefits or transferring
the employee to a location greater than 25 miles of the principal place of
his employment with Seller; (ii) payments by Seller to Jonathan M. Sadock
referred to in Section 3.3(e); (iii) payments by Seller to Robert A.
Wehrmeyer, Jr. referred to in Section 3.3(f); and (iv) the employer's
portion of FICA taxes relating to any of the foregoing. The aggregate
amount payable to reimburse Seller for (i) payments in respect of any
employee and the employer's portion of FICA taxes relating to such payments
shall not exceed the amount shown for such employee in Schedule 1 to the
Escrow Agreement and (ii) payments to Mr. Sadock shall not exceed the
Sadock Amount (as hereinafter defined). In the case of any written inquiry
from Seller requesting that MEDIQ confirm whether or not a specified
Transferred Employee has been terminated for reasons that would constitute
'cause' as described in Exhibit III hereto, MEDIQ or Buyer shall promptly
respond to Seller with such information.
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(b) Notwithstanding the foregoing, Seller shall (i) not be entitled to
reimbursement for severance payments relating to any employee of Seller (or
for the employer's portion of FICA taxes relating to such payments) who is
offered employment with Buyer, MEDIQ or an Affiliate of MEDIQ in writing on
or prior to the Closing Date for a similar position and level of
responsibility, at a location within 25 miles of the principal place of his
employment with Seller and at a similar salary and with similar benefits
and who does not accept such offer and (ii) pay Buyer all amounts paid to
Seller out of the Escrow with respect to any employee (other than Jonathan
M. Sadock, and, subject to Section 3.3(f), Robert A. Wehrmeyer, Jr.) who,
subject to Section 3.3(c), becomes an employee of, or independent
contractor or consultant to, or otherwise provides any other services to,
Seller or any Seller Affiliate prior to one year after such termination of
employment (each such payment by Seller to be made within 30 days after any
such event.
(c) The provisions of Section 3.3(b)(ii) shall not apply to, and
Seller shall not be required to reimburse Buyer for, severance payments to
employees who are offered employment relating to the transition arising
from the transactions contemplated under this Agreement by Seller or a
Seller Affiliate on or prior to the Closing Date; provided that if any such
employee remains in the employ of Seller or a Seller Affiliate for a period
of one (1) year or more following the Closing Date, Seller will pay Buyer,
within 30 days after the expiration of such one year period, all amounts
paid to Seller out of the Escrow on account of any such employee.
(d) Notwithstanding anything to the contrary herein provided, the
limitations of Section 3.3(b)(i) shall not apply to the employees of Seller
listed in Schedule 2 to the Escrow Agreement.
(e) Of the Escrow Payment, the Sadock Amount (as defined below) is to
be paid to reimburse Seller for payments to Jonathan M. Sadock in
satisfaction of all obligations of Seller to Mr. Sadock (including, without
limitation, severance, commissions and rights under employment agreements).
Notwithstanding anything to the contrary herein, Seller shall not be
entitled to receive out of the Escrow any reimbursement for payments to Mr.
Sadock unless Seller shall have previously delivered to Buyer the duly
executed agreement of Mr. Sadock to the effect that the non-competition
obligations of Mr. Sadock set forth in the Employment Agreement dated
October 2, 1990 between Mr. Sadock and Medirec are in full force and effect
and will continue, notwithstanding anything to the contrary in such
Employment Agreement, in full force and effect through April 1, 1996, and
shall be deemed for the benefit of, and enforceable by Buyer. The 'Sadock
Amount' shall mean an amount equal to $175,000 minus the aggregate amount
of compensation (including, without limitation, salary, commissions and
bonus, but not including expense reimbursement and health benefit payments)
paid (or which should have been paid) by KCI, Seller or a Seller Affiliate
to Mr. Sadock for periods after August 31, 1994, through the Closing Date.
(f) The amount payable to Robert A. Wehrmeyer, Jr. from the Escrow
pursuant to this Section shall be payable whether or not Seller's payment
to him constitutes severance and whether or not he continues to be an
employee of or becomes an independent contractor or consultant to Seller or
any Seller Affiliate. However, Seller shall pay to Buyer all amounts paid
to Seller out of the Escrow with respect to Mr. Wehrmeyer if and only if
Mr. Wehrmeyer continues to be or becomes an employee of or independent
contractor or consultant to Seller or a Seller Affiliate and his activities
in that capacity (i) constitute an activity in which Seller may not engage
pursuant to Section 9.3 hereof or (ii) are in pursuance of the therapeutic
bed portion of the KCITS Business (other than consulting with respect to
certain pending litigation). Such repayment shall be made within 30 days
after the event giving rise to the requirement to make the repayment.
3.4 Accounts Receivable.
(a) Seller's Auditors will within 15 business days after the Closing
Date perform agreed upon procedures as set forth on Schedule 3.4 with
respect to a schedule (prepared by Seller) of accounts receivable of the
Division which are due and payable as of Closing and with respect to any
unbilled amounts accrued through the Closing Date; Seller will deliver to
Buyer a copy of such
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schedule within 2 business days of the completion of the performance of
such agreed upon procedures thereon by Seller's Auditors. The cost of
preparation of such schedule will be borne half by Seller and half by
Buyer.
(b) Within 30 days after the Closing Date, Seller shall deliver to
each customer of the Medical Services Business with respect to amounts
which have not previously been invoiced by Seller an invoice for all
services rendered, equipment rented and products sold through the Closing
Date, along with a notification satisfactory to Buyer of the sale of the
Medical Services Business. Seller shall promptly deliver copies thereof to
Buyer after delivery thereof to customers. All such invoices shall be
consistent with the schedule prepared in accordance with subsection (a).
Seller shall deliver prorated invoices in any instances in which the end of
Seller's billing cycle for such customers does not correspond to the
Closing Date. Any payment or proceeds received from any customer with
respect to such invoices or any accounts receivable of the Division which
are due and payable as of the Closing are the property of Seller, and if
received by Buyer shall be remitted within five business days to Seller in
the form received, endorsed by Buyer to the order of Seller (if necessary).
Any payment or proceeds with respect to services rendered or equipment
rented or products sold after the Closing Date are the property of Buyer,
and if received by Seller shall be remitted within five business days to
Buyer in the form received, endorsed by Seller to the order of Buyer (if
necessary). Any payment received respecting which a customer has not
specified the accounts receivable to which it should be applied shall be
applied to the oldest account receivable of such customer which is not
disputed by that customer.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLER.
Seller and KCI hereby jointly and severally represent and warrant to Buyer
and MEDIQ as of the date of this Agreement and as of the Closing Date as
follows:
4.1 Organization and Good Standing.
(a) Seller and KCI are corporations duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
organization and have all necessary corporate power and authority to carry
on their businesses as presently conducted, to own and lease the assets
which they own and lease and to perform all of their obligations under each
agreement and instrument by which they are bound. Seller is duly qualified
to do business as a foreign corporation and is in good standing under the
laws of the jurisdictions identified in the Disclosure Statement, which
includes each jurisdiction in which its ownership or leasing of assets or
properties relating to the Division or the operation of the Division
requires such qualification.
(b) The authorized, issued and outstanding capital stock and other
securities of Seller and the beneficial and record ownership thereof are
fully and accurately described in the Disclosure Statement. Except as
described in the Disclosure Statement, no person has any preemptive or
other rights with respect to any such equity interests or other securities
of such corporation and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) relating to
the issuance, conversion, voting, sale or transfer of any such equity
interests or securities or obligating Seller or any other person to
purchase or redeem any such equity interests or other securities.
4.2 Power and Authorization. Seller and KCI have the corporate right, power
and authority to enter into and perform their respective obligations under this
Agreement and under the other agreements and documents (the 'Seller Transaction
Documents') required to be delivered by them under this Agreement prior to or at
the Closing. The execution, delivery and performance by Seller and KCI of their
respective obligations under this Agreement and the Seller Transaction Documents
have been duly authorized by all necessary corporate action. This Agreement has
been duly and validly executed and delivered by Seller and KCI and, assuming the
due execution and delivery by Buyer and MEDIQ, constitutes the respective legal,
valid and binding obligation of each of them, enforceable against each of them
in accordance with its terms. When executed and delivered as contemplated
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herein, each of the Seller Transaction Documents shall, assuming the due
execution and delivery by the other parties thereto, constitute the respective
legal, valid and binding obligation of Seller and KCI, enforceable against each
of them in accordance with its terms. Upon transfer of the Assets to Buyer at
Closing as contemplated by this Agreement, Buyer shall acquire good and valid
title thereto (other than any interest in Real Property), free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance, other than the Assumed Liabilities and any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance placed upon the Assets by Buyer or any of its
Affiliates.
4.3 No Conflicts.
(a) Except as described in the Disclosure Statement, the execution,
delivery and performance of this Agreement and the Seller Transaction
Documents do not and will not (with or without the passage of time or the
giving of notice):
(i) violate or conflict with the certificate or articles of
incorporation or bylaws (or other organizational documents) of
Seller or KCI or any applicable law (including, without limitation,
principles of common law), statute, regulation, permit, license,
certificate, judgment, order, award or other decision or requirement
of any arbitrator, court, government or governmental agency or
instrumentality (domestic or foreign) (collectively, 'Laws') binding
upon Seller or KCI or any of the Assets;
(ii) violate or conflict with, result in a breach or
termination of, or constitute a default or otherwise cause any loss
of benefit under any agreement or other obligation included in the
Assets or by which any of the Assets are bound, or give to others
any rights (including rights of termination, foreclosure,
cancellation or acceleration), in or with respect to any of the
Assets; or
(iii) except as contemplated in the Negative Covenants
Agreement (as hereinafter defined), result in or require the
creation or imposition of any restriction, mortgage, deed of trust,
pledge, lien, security interest or other charge, claim or
encumbrance upon or with respect to any of the Assets.
(b) The Disclosure Statement sets forth each consent or approval of,
or registration, notification, filing and/or declaration with, any court,
government or governmental agency or instrumentality, creditor, lender,
lessor or other person required to be given or made by Seller in connection
with the execution, delivery and performance of this Agreement and the
other agreements and instruments contemplated herein. Except as described
in the Disclosure Statement, all such consents, approvals, registrations,
notifications, filings and declarations have been obtained or made or will
be obtained or made or the requirement therefor waived in writing prior to
the Closing without loss of benefit to the Medical Services Business (or
Buyer as the successor to the Medical Services Business).
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of
Seller or KCI, threatened, that question any of the transactions
contemplated by this Agreement or the validity of this Agreement or any of
the other agreements or instruments contemplated hereby or which, if
adversely determined, could have a material adverse effect upon Seller's or
KCI's ability to enter into or perform its obligations under this Agreement
or any of the other agreements or instruments contemplated hereby. Neither
Seller nor KCI has received any request from any governmental agency or
instrumentality for information with respect to the transactions
contemplated hereby, except (if any) pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the 'HSR Act').
4.4 Investments and Subsidiaries. Except as described in the Disclosure
Statement, the Medical Services Business is, and during the last three years has
been, conducted solely by and through Seller, and neither Seller nor any other
person directly or indirectly owns, controls or has any investment or other
interest in any corporation, partnership, joint venture, business trust or other
entity engaged or involved in the Medical Services Business. Except as described
in the Disclosure Statement or as
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contemplated herein, in connection with the Medical Services Business, neither
Seller nor KCI has agreed, contingently or otherwise, to share any profits,
losses, costs or liabilities, or to indemnify any person or entity or to
guaranty the obligations of any person or entity.
4.5 Compliance with Laws. Except as described in the Disclosure Statement,
Seller, with respect to the Division, is in compliance, in all material
respects, with all applicable Laws and does not have any basis to expect, and
has not received, any written notice, order or other communication from any
government, governmental agency or instrumentality of any alleged, actual, or
potential violation of, or failure to comply with, any applicable Law.
4.6 Litigation. Except as described in the Disclosure Statement, there are
no, and during the last three years, there have not been any, claims, actions,
suits, proceedings (arbitration or otherwise) or, to the knowledge of Seller or
KCI, investigations involving or affecting Seller or KCI with respect to the
Medical Services Business or any of the Assets, or any of Seller's directors,
officers or shareholders in their capacities as such, before or by any court,
government, governmental agency or instrumentality, or before an arbitrator of
any kind; and there is no pending claim, action, suit, proceeding or
investigation which, if determined adversely, could either individually or in
the aggregate have a material effect on the earnings, business, operations or
financial condition of the Division, or could result in a liability in excess of
$25,000 in the case of any single action or $100,000 in the case of all such
actions in the aggregate. To Seller's or KCI's knowledge, except as described in
the Disclosure Statement, no such claim, action, suit, proceeding or
investigation is presently threatened or contemplated. Except as described in
the Disclosure Statement, there are no unsatisfied judgments, penalties or
awards against or affecting the Division or any of the Assets.
4.7 The February Statement. The Disclosure Statement includes a statement
of the Assets and the Assumed Liabilities described in Section 2.2(a) as of
February 28, 1994 (the 'February Statement'). Each line item of the February
Statement has been accounted for in accordance with GAAP. The only Assumed
Liabilities reflected in the February Statement are Assumed Liabilities
described in Section 2.2(a) as of February 28, 1994.
4.8 Accounts Receivable.
(a) The Disclosure Statement includes a correct and complete accounts
and notes receivable aging of Seller with respect to the Medical Services
Business with the names of the customers deleted, as of June 30, 1994,
reflecting the designated and undesignated reserves for possible losses and
customer credits and discounts as of such date and the aggregate dollar
amount of all accounts and notes receivable which have been outstanding
for: 30 days or less; more than 30 but less than 61 days; more than 60 but
less than 91 days; more than 90 days but less than 121 days; and more than
120 days. Seller has provided to Buyer's Auditors an identical document,
except that the names of customers have been included therein.
(b) All accounts receivable of Seller with respect to the Medical
Services Business represent valid obligations from bona fide rentals or
sales made or services rendered in the ordinary course of business.
4.9 Personal Property.
(a) The rental equipment and disposable medical care products
inventory of Seller with respect to the Medical Services Business is valued
on the February Statement at the lower of cost or fair market value
thereof, based upon the 'first in, first out' method of accounting. The
rental equipment inventory has been depreciated for financial reporting
purposes in accordance with GAAP and on a basis consistent with KCI's past
practices over the respective periods described in the Disclosure Statement
for each class of such equipment.
(b) Except (i) for obsolete items and items of below-standard quality,
all of which have been accounted for in accordance with GAAP on a basis
consistent with the preparation of the February Statement, (ii) for
cleaning, prepping and preventive maintenance of equipment to be performed
in the ordinary course of business, and (iii) as set forth in the
Disclosure Statement, all of the
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rental equipment and equipment held for resale of Seller with respect to
the Medical Services Business meets, as of July 25, 1994, all applicable
requirements of applicable Laws and is, as of July 25, 1994, in good
operating condition and repair and is, as of July 25, 1994, usable in the
ordinary course of business consistent with past practice.
(c) All rental equipment and disposable medical care products
inventory is in the possession or under the control of Seller, except any
rental equipment inventory which is (i) currently being rented or held by a
customer and therefore is in the possession or control of a customer or
(ii) in transit with a common carrier for delivery to or from a customer of
Seller.
(d) The representations and warranties set forth in this Section 4.9
shall survive until resolution of the Closing Statement and the final
determination and payment of any post closing adjustment under Section 3.2.
4.10 Warranties, Insurance.
(a) Except as described in the Disclosure Statement: (a) Seller has
not agreed to become responsible for consequential damages or made any
express warranties to third parties with respect to any products
distributed, rented or leased, or any services rendered, by the Medical
Services Business; and (b) there are no warranties (express or implied)
outstanding with respect to any such products or services other than any
such implied by law, including, without limitation, pursuant to Sections
2-312 and 2-314 of the Uniform Commercial Code. A copy of each standard
warranty of Seller with respect to such products is included in the
Disclosure Statement.
(b) The Disclosure Statement describes each policy and binder of
insurance maintained for the benefit of, or respecting which any premiums
are paid directly or indirectly by, the Division, including whether such
policies and binders are 'claims made' or 'occurrence' policies, and the
respective issuers and expiration dates thereof.
4.11 Real Property.
(a) The Disclosure Statement describes each interest in real property
leased by Seller pursuant to a lease included in the Assets (the 'Real
Property'), including the location and a brief description thereof. Except
as described in the Disclosure Statement, Seller owns all right, title and
interest in all leasehold estates and other rights purported to be granted
to it by the leases referred to above free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other charge,
claim or encumbrance in favor of any person claiming by, under or through
Seller or any Seller Affiliate.
(b) The amount of each security deposit made by Seller in respect of a
lease of Real Property is set forth in the Disclosure Statement. Following
transfer of such leases to Buyer as part of the Assets, Buyer shall be
entitled to receive refunds of such amounts subject to the terms of the
applicable leases.
4.12 Title to Assets. Except as described in the Disclosure Statement,
Seller has good and valid title to all of the Assets (excluding Real Property),
including without limitation, all such reflected on the February Statement or to
be reflected on the Closing Statement, free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other charge, claim
or encumbrance (all of which, if any, will be released or terminated prior to
Closing, unless expressly assumed by Buyer as an Assumed Liability). The
Disclosure Statement lists each contract, agreement or commitment which
restricts or purports to restrict any business activities of Seller or KCI with
respect to the Medical Services Business or the freedom of Seller or KCI (or, to
the knowledge of Seller or KCI, any of their officers or employees) to engage in
the Medical Services Business or to compete with any person.
4.13 Contracts. Except as described in the Disclosure Statement, each of
the Assumed Contracts and the Assumed Capital Leases (including any such
required to be identified in the Disclosure Statement) was made in the ordinary
course of business, is in full force and effect and is valid, binding and
enforceable against the parties thereto in accordance with its terms. Except as
described in the Disclosure Statement, Seller has performed in all material
respects all obligations required to be
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performed by it under the Assumed Contacts and the Assumed Capital Leases and no
condition exists or event has occurred which with notice or lapse of time would
constitute a default or a basis for delay or non-performance by Seller or, to
the best knowledge of Seller, by any other party thereto. Upon consummation of
the Closing, all of Seller's rights in the Assumed Contracts and the Assumed
Capital Leases shall be transferred to Buyer, and Buyer will acquire such rights
free and clear of all restrictions, pledges, liens or other claims or
encumbrances of any nature; provided that in the case of leases relating to the
Real Property only, Buyer will acquire such rights free and clear only of
restrictions, pledges, liens or other claims or encumbrances in favor of persons
claiming by, under or through Seller or any Seller Affiliate. Except as set
forth in the Disclosure Statement, there are no consents or notices required to
be given in order to assign the Assumed Contracts or Assumed Capital Leases to
Buyer.
4.14 Customers and Suppliers. Seller has provided to Buyer's Auditors an
accurate and complete list of the names of the customers of the Division, and
the revenues attributable to each during each of 1993 and 1994 through April 30,
1994, and of the twenty (20) suppliers and vendors with respect to the
Division's disposable medical care products business from whom the Division made
the most purchases during each such period and the aggregate expenditures
attributable to each in each such period. To the best knowledge of the persons
identified by an asterisk in Schedule 2 to the Escrow Agreement ('Senior
Management'), no customer that accounted for more than $100,000 of the rentals
or sales of the Division during the last twelve months has terminated or
materially reduced or has given notice that it intends to terminate or
materially reduce the amount of business done with the Division, except as
disclosed to Buyer's Auditors on such list. Except as set forth on the
Disclosure Statement, to the best knowledge of Senior Management, no supplier or
vendor that accounted for more than $50,000 of the purchases of the Division
with respect to the disposable medical care products business during the last
twelve months has terminated or materially reduced or has given written notice
that it intends to terminate or materially reduce, the amount of business done
with the Division. Except as set forth in the Disclosure Statement, there are
no, and during the last three years there have not been, any disputes or
controversies of which Seller or KCI has received notice involving, in the
aggregate, more than $25,000 between Seller or KCI with respect to the Medical
Services Business, on the one hand, and any customer, supplier or other person,
on the other hand, regarding the quality, merchantability or safety of, or
involving a claim of breach of warranty which has not been fully resolved with
respect to, or defect in, any product purchased, rented or leased by Seller.
4.15 Taxes. Except as described in the Disclosure Statement: (a) all
federal, state, local and foreign tax returns and tax, duty and value added
statements and reports (or extensions relating thereto) required to be filed by
Seller, KCI or any affiliate of Seller or KCI, including, without limitation,
those relating to or affecting the Assets or the Medical Services Business, have
been filed on a timely basis with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed and all
such returns, statements, and reports were true and correct when filed; (b) all
federal, state, local and foreign income, duties, profits, franchise, sales,
use, payroll, premium, occupancy, property, severance, excise, withholding,
value added and other taxes (including interest and penalties) due from Seller
or KCI with respect to the Medical Services Business including, without
limitation, those relating to the Assets, have been fully and timely paid,
except for such taxes as are being contested in good faith; and those not yet
due and payable have been provided for in accordance with GAAP on the February
Statement or on the books and records of Seller; and (c) there are no material
levies, liens, or other encumbrances existing, pending or, to the knowledge of
Seller or KCI, threatened with respect to any of the Assets relating to any
taxes described in (b) above.
4.16 Employee Matters.
(a) Except as described in the Disclosure Statement: (i) none of the
employees of Seller involved in the Medical Services Business are, or
during the last three years have been, represented by any union or other
bargaining representative and no application or petition for certification
of a collective bargaining agent is pending; (ii) to the knowledge of
Seller, during the last three years, no union has attempted to organize any
group of such employees and no such group has sought to organize into a
union or similar organization for the purpose of collective
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bargaining; (iii) there are no pending grievances, arbitration proceedings,
unfair labor practice charges or other similar controversies between Seller
and any such employees; and (iv) to the knowledge of Seller or KCI, no such
agreement, action, proceeding or occurrence is threatened or contemplated
by any person.
(b) The Disclosure Statement describes each employment, severance,
change of control, consulting, commission, agency and representative
agreement or arrangement to which Seller or KCI with respect to the Medical
Services Business is a party or is otherwise bound including, without
limitation, all agreements and commitments relating to wages, hours,
severance, retirement benefits or annuities, or other terms or conditions
of employment (other than unwritten employment arrangements terminable at
will without payment of any contractual severance or other amount).
(c) Except as set forth in the Disclosure Statement, neither Seller
nor KCI maintains or contributes to any employee pension benefit plan
('Pension Plan'), as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ('ERISA'), or any
employee welfare benefit plan ('Welfare Plan'), as such term is defined in
Section 3(1) of ERISA, in either case with respect to any employee or
former employee of the Medical Services Business. Each Pension Plan and
each Welfare Plan listed in the Disclosure Statement is, has been or will
be in all cases prior to the end of the applicable reporting period
administered in compliance in all material respects with the applicable
provisions of ERISA and the Internal Revenue Code of 1986, as amended (the
'Code'). Neither Seller nor any organization which is in a controlled group
of organizations which includes Seller under either Section 414(b), (c),
(m) or (o) of the Code is obligated to contribute to any multiemployer
plan, as defined in Section 3(37) of ERISA.
(d) The Salt Lake City, Utah facility is the only facility of Seller
relating to the Medical Services Business that employs sufficient employees
to be subject to the WARN Act, and neither that facility nor any of
Seller's other facilities are subject to the requirements of any state or
local Plant Closing Laws.
4.17 Environmental Matters.
(a) Except as described in the Disclosure Statement: (i) Seller is
operating the Medical Services Business in material compliance with all
applicable Environmental Laws; (ii) to the knowledge of Seller, there are
no conditions on, about, beneath or arising from the Real Property which
might, under any applicable Environmental Law, (A) give rise to liability
of Seller or KCI or the imposition of a statutory lien on the Assets, or
(B) which would or may require any 'Response,' 'Removal' or 'Remedial
Action' (as those terms are defined below) or any other action, including
without limitation reporting, monitoring, cleanup or contribution; (iii)
neither Seller nor KCI has received any written notification of a release
or threat of a release of a 'Hazardous Substance' (as defined below) with
respect to the Real Property; and (iv) to the knowledge of Seller or KCI,
no Hazardous Substances have been used, handled, generated, processed,
treated, stored, transported to or from, released, discharged or disposed
of by Seller or KCI or any third party on, about, or beneath the Real
Property in a manner not consistent with applicable Laws.
(b) Neither Seller nor KCI has received written notice or otherwise
has knowledge of: any claim, demand, suit or action, made or threatened by
any person against Seller or KCI with respect to the Real Property pursuant
to any of the Environmental Laws or relating to any form of damage, loss or
injury resulting from, or claimed to result from, any Hazardous Substance
on, about, beneath or arising from the Real Property; or any written
communication to or from any governmental or regulatory agency arising out
of or in connection with Hazardous Substances on, about, beneath, arising
from or generated at the Real Property.
(c) As used in this Agreement: (i) the terms 'Response,' 'Removal' and
'Remedial Action' shall have the meanings ascribed to them in Sections
101(23)-101(25) of CERCLA; and
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(ii) the term 'Hazardous Substances' or 'Hazardous Substance' shall mean
any substance regulated under any of the Environmental Laws including,
without limitation, any substance which is: (A) petroleum, asbestos or
asbestos-containing material or polychlorinated biphenyls; (B) defined,
designated or listed as a 'Hazardous Substance' pursuant to Sections 307
and 311 of the Clean Water Act, 33 U.S.C. SectionSection 1317, 1321 or
Section 101(14) of CERCLA, 42 U.S.C. Section 9601 (C) listed in the United
States Department of Transportation Hazardous Material Tables, 49 C. F. R.
Section 172.101 or (D) defined, designated or listed as a 'Hazardous
Waste' under Section 1004(5) of the Resource and Conservation and Recovery
Act, 42 U.S.C. 6903(5).
4.18 Absence of Certain Changes and Events.
(a) Except as described in the Disclosure Statement, from the date of
the February Statement to the date of this Agreement, Seller has conducted
the Medical Services Business only in the usual and ordinary course
consistent with its current calendar year's practices and there has not
been any:
(i) material change in the business or operations of the
Medical Services Business or any damage, destruction or loss to any
material asset or property of the Medical Services Business, whether
or not covered by insurance;
(ii) entry into, amendment, termination or receipt of notice of
termination of any Assumed Contract or Assumed Capital Lease or of
any other material agreement, document or commitment which is
required to be disclosed in the Disclosure Statement or any material
transaction affecting the Division or the Assets, whether or not in
the ordinary course of business;
(iii) sale, assignment, conveyance, lease, or other disposition
of any asset or property of Seller with respect to the Medical
Services Business (other than sales of inventory and sales, rentals
and leases of equipment, in each case in the ordinary course of
business) or mortgage, pledge, or imposition of any lien or other
encumbrance on any of the Assets;
(iv) change in the accounting methods, principles or practices
followed by Seller with respect to the Medical Services Business or
any change in any of the assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserve; or
(v) agreement, whether or not in writing, to do any of the
foregoing.
(b) Since the date of the February Statement, there has not been any
material adverse change in the business, operations, properties, assets,
prospects, working capital, or condition (financial or otherwise) of the
Medical Services Business or the Assets or any event, condition or
contingency that is likely to result in such a material adverse change.
4.19 Books and Records. The copies of the certificates or articles of
incorporation of Seller and KCI and of their bylaws which have been delivered to
Buyer are true, complete and correct and are in full force and effect as of the
date hereof. The books and records of Seller fairly reflect the assets and
liabilities set forth in the February Statement and Seller maintains internal
accounting controls which provide reasonable assurance that: (i) transactions
are executed in accordance with management's authorization; (ii) transactions
are recorded as necessary to permit preparation of reliable financial statements
and to maintain accountability for earnings and assets; (iii) access to assets
is permitted only in accordance with management's authorization; (iv) the
recorded accountability of all assets is compared with existing assets at
reasonable intervals; and (v) all intercompany transactions, charges and
expenses among or between Seller and/or its affiliates are accurately reflected
at fair arms length value in all financial statements. Seller has furnished to
Buyer true and complete copies of each agreement, plan and other document
required to be disclosed on the Disclosure Statement.
4.20 Brokers. No person acting on behalf of Seller, KCI or any of their
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
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transactions contemplated by this Agreement, other than Alex. Brown & Sons
Incorporated, whose fees and expenses shall be paid by Seller and KCI and not by
Buyer.
4.21 Full Disclosure. No representation or warranty of Seller and KCI
contained in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein,
in light of the circumstances under which they were made, not misleading in any
material respect. Except as described in this Agreement or the Disclosure
Statement, there is no material fact known to Seller or KCI (other than general
economic or industry conditions) which materially adversely affects or, so far
as Seller and KCI can reasonably foresee, materially threatens, the assets,
business, financial condition or results of operations of the Division or Seller
with respect to the Medical Services Business or the ability of Seller or KCI to
perform this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer, Holdings and MEDIQ, jointly and severally, hereby represent and
warrant to Seller and KCI as of the date of this Agreement and of the Closing
Date as follows:
5.1 Organization and Good Standing. (a) Buyer, Holdings and MEDIQ are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and each of Buyer, Holdings and MEDIQ has all
necessary corporate power and authority to carry on its business as presently
conducted, to own and lease the assets which it owns and leases and to perform
all its obligations under each agreement and instrument by which it is bound.
Each of Buyer, Holdings and MEDIQ is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
its ownership or leasing of assets or properties requires such qualification,
provided, however, that as a newly-formed corporation, Buyer is in the process
of applying for qualification as a foreign corporation and has not yet become so
qualified in certain of the jurisdictions in which it will be required to be so
qualified after the consummation of the transactions contemplated herein.
(b) MEDIQ owns all of the outstanding capital stock of Holdings, and
Holdings owns all of the outstanding capital stock of Buyer and First PRN.
Except for the warrant to purchase 2.5% of the capital stock of First PRN
granted to Internationale Nederlanden (U.S.) Finance Corporation dated May
29, 1992, no person has any preemptive or other rights with respect to any
such equity interests and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) (other than
any of the foregoing in favor of lenders to MEDIQ, Holdings, Buyer or First
PRN) relating to the issuance, conversion, voting, sale or transfer of any
such equity interests or obligating Holdings, First PRN or Buyer or any
other person to purchase or redeem any such equity interests. Except for
First PRN and Buyer, Holdings does not have any equity investment in any
corporation, partnership, joint venture, business trust or other entity.
5.2 Power and Authorization. Buyer, Holdings, First PRN and MEDIQ have the
corporate right, power and authority to enter into and perform their respective
obligations under this Agreement and under the other agreements and documents
(the 'Buyer Transaction Documents') required to be delivered by them prior to or
at the Closing. The execution, delivery and performance by Buyer, Holdings and
MEDIQ of this Agreement and the Buyer Transaction Documents have been duly
authorized by all necessary corporate action. The execution, delivery and
performance by First PRN of the promissory note referred to in Section 2.1(b)
hereof (in the event Buyer makes the assignment contemplated in Section 12.7
hereof) have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed and delivered by Buyer, Holdings
and MEDIQ and, assuming the due execution and delivery by Seller and KCI,
constitutes the respective legal, valid and binding obligation of each of them,
enforceable against each of them in accordance with its terms. When executed and
delivered as contemplated herein, each of the Buyer Transaction Documents shall,
assuming the due execution and delivery by the other parties thereto, constitute
the respective legal, valid and binding obligation of each of Buyer, Holdings,
First PRN and MEDIQ that is a party thereto, enforceable against each of them in
accordance with its terms.
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5.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Buyer Transaction Documents do not and will not (with or without the
passage of time or the giving of notice): (i) violate or conflict with
Buyer's, Holdings', First PRN's or MEDIQ's certificate of incorporation or
bylaws or any Law binding upon Buyer; or (ii) violate or conflict with,
result in a breach or termination of, or constitute a default or otherwise
cause any loss of benefit under any material agreement or other material
obligation to which Buyer, Holdings, First PRN or MEDIQ is a party.
(b) Except in connection with the MHM Subordination Agreement (as
hereinafter defined), no consents or approvals of, or registrations,
notifications, filings and/or declarations with, any court, government or
governmental agency or instrumentality, creditor, lessor or other person
are required to be given or made by Buyer, Holdings, First PRN or MEDIQ in
connection with the execution, delivery and performance of this Agreement
and the other agreements and instruments contemplated herein, other than
pursuant to HSR Act and such as have been obtained or made or with respect
to which the requirement therefor has been waived in writing or which the
failure to obtain would not have a material adverse affect on Buyer's,
Holdings', First PRN's or MEDIQ's ability to consummate the transactions
contemplated herein and therein.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of
Buyer, Holdings, First PRN and MEDIQ, threatened that question any of the
transactions contemplated by this Agreement or the validity of this
Agreement or any of the other agreements or instruments contemplated hereby
or which, if adversely determined, could have a material adverse effect
upon Buyer's, Holdings', First PRN's and MEDIQ's ability to enter into or
perform their obligations under this Agreement or any of the other
agreements or instruments contemplated hereby. Buyer, Holdings, First PRN
and MEDIQ have not received any request from any governmental agency or
instrumentality for information with respect to the transactions
contemplated hereby, except (if any) pursuant to the HSR Act.
5.4 Brokers. No person acting on behalf of Buyer or any Affiliate of MEDIQ
or under the authority of any of the foregoing is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee, directly or
indirectly, from any of such parties in connection with any of the transactions
contemplated by this Agreement, other than Dillon, Read & Co. Inc., whose fees
and expenses shall be paid by Buyer, Holdings and MEDIQ and not by Seller or
KCI.
5.5 Financing Commitment. Buyer has delivered to Seller a true and correct
copy of a commitment letter from Congress Financial Corporation pursuant to
which Congress Financial Corporation has advised Buyer that it is willing, on
the terms and subject to the conditions set forth in such commitment letter, to
provide up to an aggregate $55,000,000 of credit facilities to Buyer upon the
consummation of the transactions contemplated by this Agreement and the Buyer
Transaction Documents.
5.6 MHM Note.
(a) The promissory note dated August 31, 1993, issued by Mental Health
Management, Inc. ('MHM') in favor of MEDIQ, in the original principal
amount of $11,500,000 (the 'MHM Note'), a true and correct copy of which
has been delivered to Seller, is owned by MEDIQ free and clear of liens,
charges and encumbrances, and no payment of principal has been made on the
MHM Note.
(b) The MHM Note is in full force and effect and has not been
modified, supplemented, cancelled, renewed, extended, altered or otherwise
amended in any respect. There is no default under the MHM Note, and no
condition or circumstance exists, which, but for the passage of any
applicable cure or grace period, the giving of notice or both, would
constitute a default under the MHM Note.
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(c) To the knowledge of Buyer and MEDIQ, MHM is solvent and there are
no bankruptcies, liens or executions, voluntary or involuntary, pending or
threatened against MHM under the laws of the United States of any state
thereof.
(d) To the knowledge of Buyer and MEDIQ, MHM has no claims against
MEDIQ or any defenses or rights of offset against any of the amounts due
and owing to MEDIQ under the MHM Note.
(e) Except for the Subordination and Intercreditor Agreement
dated as of September 30, 1993 (the 'MHM Subordination Agreement'),
executed by MEDIQ and MHM for the benefit of Maryland National Bank,
there are no other agreements, written or oral, which govern,
evidence, pertain to, arise out of, or otherwise relate to the
indebtedness evidenced by the MHM Note and MHM does not have any right
or option to renew the indebtedness evidenced by the MHM Note or to
otherwise modify, extend, or alter the MHM Note or the indebtedness
evidenced thereby.
5.7 Full Disclosure.
(a) All registration statements, reports, proxy statements and other
materials (collectively 'SEC Reports') filed by MEDIQ or First PRN
(collectively the 'MEDIQ Group'), with the Securities and Exchange
Commission ('SEC') since January 1, 1993 complied in all material respects
with the applicable requirements of the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, (the '1934 Act'), and
the applicable rules and regulations of the SEC promulgated thereunder and
at the time filed did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein when
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Since January 1,
1993, each member of the MEDIQ Group has made all filings with the SEC
which it is required to make and has not received any requests from the SEC
to file any amendment or supplement to any of the reports described in the
preceding sentence. To the knowledge of MEDIQ, neither it nor any member of
the MEDIQ Group or any of the officers or directors of any member of the
MEDIQ Group have been since January of 1989, or currently are the subject
of any investigation or proceeding by any state or federal securities
agency or any self regulatory authority, have been made subject to any stop
order or similar restriction in the offer or sale of securities, been
enjoined from any activities relating to the offer or sale of securities,
or had entered against it or him a judgment involving fraud or
misrepresentation with respect to any transaction involving a security.
(b) No representation or warranty of Buyer, Holdings or MEDIQ
contained in this Agreement contains any untrue statement of material fact
or omits to state a material fact necessary in order to make the statements
herein, in light of the circumstances under which they were made, not
misleading in any material respect. Except as described in this Agreement
or the Schedules relating to Buyer, Holdings and MEDIQ hereto, there is no
material fact known to Buyer, Holdings and MEDIQ (other than general
economic or industry conditions) which materially adversely affects or, so
far as Buyer, Holdings and MEDIQ can reasonably foresee, materially
threatens, the assets, business, financial condition or results of
operations of the MEDIQ Group or the ability of Buyer to perform this
Agreement or any of the Buyer Transaction Documents.
SECTION 6. OBLIGATIONS OF THE PARTIES UNTIL CLOSING.
6.1 Conduct of Medical Services Business Pending Closing. Except as
expressly provided herein, between the date hereof and the Closing Date, without
the prior written consent of Buyer, Seller shall:
(a) maintain Seller's and KCI's corporate existence, pay and discharge
all debts, liabilities and obligations as they become due except where
Seller or KCI, in good faith, disputes such debts, liabilities and other
obligations and operate the Medical Services Business solely in the
ordinary course in a manner consistent with its current calendar year's
practices and the provisions of this Agreement and in compliance with all
applicable Laws, government licenses,
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permits, consents, authorizations, contracts and agreements (including,
without limitation, those identified in the Disclosure Statement);
(b) maintain the Assets, in the same state of repair, order and
condition as they were on the date hereof, reasonable wear and tear
excepted;
(c) maintain Seller's and KCI's books and records relating to the
Medical Services Business in accordance with past practice, and use all
reasonable efforts to maintain in full force and effect all authorizations
and all insurance policies and binders relating to the Medical Services
Business (including all such relating to workers' compensation, business
interruption, property, and products liability);
(d) use all reasonable efforts to preserve intact their present
business organization relating to the Medical Services Business and
maintain their relations and goodwill with the suppliers, customers,
employees and others having a business relationship relating to the Medical
Services Business with them.
6.2 Negative Covenants. Except as expressly provided herein, between the
date hereof and the Closing, without the prior written consent of Buyer, Seller
shall not:
(a) fail to pay or discharge when due any liability or obligation of
Seller relating to the Medical Services Business or which is secured, in
whole or in part, by any of the Assets including, without limitation, any
such included in the Assumed Liabilities except where Seller, in good
faith, contests such liability or obligation (it being understood that,
notwithstanding Section 2.2, Buyer shall not be required to assume any
liability being so contested);
(b) amend or terminate any Assumed Capital Lease or Assumed Contract;
(c) directly or indirectly, through any representative or otherwise,
solicit or entertain offers from, negotiate with or in any manner
encourage, accept or consider any proposal of any other person relating to
the acquisition of the Medical Services Business or the Assets, in whole or
in part, except in the ordinary course of business;
(d) take any action or permit to occur any event which would breach
any covenant of Seller contained herein or cause any representation or
warranty of Seller contained herein to be untrue if made immediately after
such event; or
(e) permit any of the furniture or equipment identified in Section
1.1(a)(iv) or Section 1.1(a)(vi) hereof to be moved out of Seller's Salt
Lake City, Utah office.
6.3 Access to Information; Confidentiality.
(a) Prior to the Closing, KCI shall cause Seller to, and Seller shall,
give Buyer and its authorized representatives complete access to all of
Seller's and KCI's personnel, books, records, plants, offices and other
facilities and properties relating to the Medical Services Business and the
Assets and permit Buyer to make such inspections thereof as Buyer may
reasonably request, and cause their officers, employees and advisors to
furnish Buyer with such financial, operating and other information
regarding the Medical Services Business and agreements, commitments,
liabilities, personnel and properties relating to the Medical Services
Business as Buyer may reasonably request; provided, however, Buyer's access
to personnel of Seller and KCI before the Closing shall be subject to the
consent (not to be unreasonably withheld) of the President of the Division,
and Seller shall not be required to deliver any customer list to Buyer (as
opposed to Buyer's Auditors) until the Closing shall have occurred. Buyer
acknowledges that the information which may be made available to it is
proprietary and includes confidential information. The parties will remain
subject to that certain confidentiality letter agreement dated November 12,
1993 by and between Seller and MEDIQ (the 'Confidentiality Agreement').
(b) Until Closing, Seller shall provide Buyer, within 15 days after
the beginning of each month, with (i) a statement of revenues by segment of
the Division as of and for the month then ended and (ii) a Statement of the
Assets and Assumed Liabilities set forth in Section 2.2(a) as of the end of
such month, all of which shall be prepared in accordance with GAAP on a
basis
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consistent with the preparation of the February Statement, and certified as
such by the chief financial officer of the Division.
6.4 Best Efforts. Prior to the Closing, each party hereto shall use best
efforts to cause to occur the transactions contemplated hereby and by the
Transaction Documents and to cause all conditions to the performance of the
parties hereto that are within its control to be satisfied. No party shall take
any action to cause any such covenant, agreement, transaction or condition not
to occur, be satisfied or be performed, as the case may be.
6.5 Consents. Buyer, MEDIQ, Seller and KCI shall fully comply with the
requirements of the HSR Act and the documents filed by Buyer, MEDIQ, Seller and
KCI, respectively, pursuant to the HSR Act shall adequately respond to its
requirements. Prior to the Closing, all parties hereto shall use all reasonable
efforts to obtain (and cooperate with the other parties hereto in obtaining) all
consents, permits, authorizations, approvals of, and exemptions by, any
regulatory authority or third party (including, without limitation, lenders and
lessors) necessary for the consummation of the transactions contemplated by this
Agreement, including, without limitation, pursuant to the HSR Act, provided that
Buyer shall have sole responsibility for complying with all notice and other
requirements of the WARN Act and the Plant Closing Laws in connection with the
transactions contemplated hereby. In connection with obtaining consents to the
assignment of leases of the Real Property, Seller shall obtain the
acknowledgement of the lessors with respect to the amount of security deposits
relating to such leases and the fact that the security deposits will be payable
to Buyer following such assignment subject to the terms of the applicable
leases. Seller shall use all reasonable efforts to negotiate the termination of
the Highline Agreement in consideration of payment by Seller of the Highline
Buy-Out Amount.
6.6 Delivery of Additional Information. Seller shall deliver to Buyer
promptly after the date hereof a list setting forth the following information
for each officer and employee of Seller involved in the Medical Services
Business and for each consultant and independent contractor regularly retained
(including each such person on leave or layoff status): employee name and job
title; current annual rate of compensation (identifying bonuses, car allowances
and other fringe benefits separately), and the amount of severance compensation
to which such person is entitled, if any, upon termination of employment
pursuant to applicable Law, contractual obligation, policy or otherwise, and any
change in compensation since the date of the February Statement and service
credited for purposes of vesting and eligibility to participate in applicable
Employee Benefit Plans.
6.7 Use of Business Name. After the Closing, neither MEDIQ nor any MEDIQ
Affiliate shall, directly or indirectly, use or do business, or assist any third
party in using or doing business, under the Names except that Buyer will have 90
days after the Closing in which to remove any labels or other insignia
containing any of the Names from the Assets.
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'S
AND MEDIQ'S OBLIGATIONS.
The obligation of Buyer to consummate the acquisition of the Assets is
subject to the fulfillment by or at the Closing of each of the following
conditions, any or all of which may be waived by Buyer in its sole discretion:
7.1 Representations and Warranties. The representations and warranties of
Seller and KCI set forth in this Agreement, as of the date of this Agreement and
as of the time of Closing, shall not contain inaccuracies, misrepresentations,
or breaches which, in the aggregate, would have a material adverse effect on the
Assets, the Medical Services Business, the consummation of the transactions
contemplated hereby or Seller's ability to perform its obligations hereunder.
For purposes of this Section 7.1 and Section 7.4 below, the phrase 'material
adverse effect' as it relates to the Assets or the Medical Services Business
shall mean an effect which is likely to result in damages or liabilities in
excess of $5 million, determined without reference to (i) the Basket described
in Section 11.5, (ii) the fact that the representation or warranty in question
does not survive the Closing or cannot constitute the
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basis of a claim for indemnification under Section 11.1, and (iii) any
post-Closing adjustments to the Consideration made pursuant to Section 3.2.
7.2 Assets of Seller. As of the Closing Date: (i) the amount of the
disposable medical care products inventory of Seller with respect to the Medical
Services Business, determined consistently with the February Statement, shall
not be less than $1.75 million; and (ii) the amount of all of the other Assets
in the aggregate, determined consistently with such value on the February
Statement, plus an amount equal to depreciation expenses of the Assets for the
period from February 28, 1994 to and including the Closing Date, shall not be
less than the amount of all of such other Assets in the aggregate as set forth
on the February Statement minus $4.2 million.
7.3 Performance of Covenants. Seller and KCI shall have performed or
complied in all material respects with all of the agreements, covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.
7.4 Approvals. The waiting period under the HSR Act shall have expired or
been terminated. The consent or approval of (i) all persons not within the
control of Buyer, MEDIQ or Holdings necessary (by reason of any agreement or
requirement of law applicable to Seller or KCI) for the consummation of the
transactions contemplated hereby (including, without limitation, consent or
approval of lenders and lessors to Seller and KCI), (ii) all parties to each of
the leases identified on Schedule 1.1.3 hereto whose consent is necessary for
the assignment to Buyer of each such lease as contemplated herein and (iii) the
lessor under the lease of Seller's facility in Salt Lake City with respect to
the assignment or sublease to Buyer of such lease as contemplated herein, except
where the failure to obtain such consent (other than the consent or approval of
a lender and the consents and approvals referred to in the foregoing clauses
(ii) and (iii)) would not have a material adverse effect on the Assets or the
Medical Services Business, and no such consent or approval (A) shall have been
conditioned upon the modification, cancellation or termination of any lease,
commitment, agreement or right of Seller included in the Assets or (B) shall
impose on the Buyer any condition, provision or requirement not presently
imposed upon Seller and which is not described in the Disclosure Statement, or
any condition that is not described in the Disclosure Statement that would be
more restrictive after the Closing on Buyer than the conditions presently
imposed on Seller.
7.5 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction and no suit, action,
proceeding or investigation, shall have been brought or threatened by any person
(other than Buyer or any of its affiliates) which questions the validity or
legality of this Agreement or the transactions contemplated hereby.
7.6 Escrow Agreement. Seller shall have executed and delivered the Escrow
Agreement.
7.7 Opinion of Counsel. Buyer shall have received the opinion of Cox &
Smith Incorporated, counsel for Seller and KCI, dated as of the Closing Date,
substantially in the form of Exhibit IV hereto, it being understood that
paragraph 4 of such opinion may be stated to be subject to exceptions the
existence of which do not constitute a failure to satisfy any of the conditions
precedent stated in this Section 7.
7.8 Agreements with Congress. Seller and KCI shall have (a) executed and
delivered an intercreditor and subordination agreement (the 'Congress
Intercreditor Agreement') with Congress Financial Corporation containing the
provisions described in paragraph 12(d)(ii)(X) and (Y) of the commitment letter
mentioned in Section 5.5 and otherwise on terms satisfactory to Seller, and (b)
executed a consent, on terms satisfactory to Seller, to the assignment by Buyer,
MEDIQ and First PRN to Congress Financial Corporation of all indemnification
rights and remedies and claims for damages or other relief under this Agreement
and the Seller Transaction Documents, such assignment to be subject to any
restrictions and limitations contained in this Agreement and the Seller
Transaction Documents on such rights, remedies and claims.
7.9 MHM Subordination Agreement. Seller and KCI shall have executed and
delivered a subordination agreement with respect to the MHM Note in favor of
NationsBank, N.A. (successor to Maryland National Bank) on the same terms as the
MHM Subordination Agreement.
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SECTION 8. CERTAIN CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
The obligation of Seller to consummate the sale of the Assets is subject to
the fulfillment by or at the Closing of each of the following conditions, any or
all of which may be waived by Seller in its sole discretion:
8.1 Representations and Warranties. The representations and warranties of
Buyer, Holdings and MEDIQ set forth in this Agreement, as of the date of this
Agreement and as of the time of Closing, shall not contain inaccuracies,
misrepresentations, or breaches which, in the aggregate, would have a material
adverse effect on the consummation of the transactions contemplated herein or
Buyer's, Holdings' or MEDIQ's ability to perform their obligations hereunder.
8.2 Post-Closing Liability. Under the facts and circumstances as they exist
at the Closing Date, it shall not be reasonably likely that KCI and Seller will
have liability to Buyer under Section 11.1(a) of this Agreement in excess of $5
million in the aggregate, determined with reference to the Basket described in
Section 11.5 but without reference to any post-Closing adjustment to the
Consideration made pursuant to Section 3.2.
8.3 Performance of Covenants. Each of Buyer, Holdings and MEDIQ shall have
performed or complied in all material respects with all of the agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing.
8.4 Approvals. The waiting period under the HSR Act shall have expired or
been terminated. The consent or approval of (i) all persons not within the
control of KCI or Seller necessary (by reason of any agreement or requirement of
law applicable to MEDIQ or any Affiliate of MEDIQ) for the consummation of the
transactions contemplated hereby (including, without limitation, consent or
approval of lenders of MEDIQ or any Affiliate of MEDIQ) and (ii) all third
parties who are parties to any of the leases identified on Schedule 1.1.3 hereto
whose consent is necessary for the assignment to Buyer of each such lease as
contemplated herein shall have been obtained, except where the failure to obtain
such consent would not have a material adverse effect on the Buyer's, Holdings'
and MEDIQ's ability to consummate the transactions contemplated herein.
8.5 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction and no suit, action,
investigation, or legal or administrative proceeding shall have been brought or
threatened by any person (other than Seller, KCI or any Seller Affiliate) which
questions the validity or legality of this Agreement or the transactions
contemplated hereby.
8.6 Marketing Agreement. Holdings, its subsidiaries and MEDIQ shall have
entered into a Marketing Agreement substantially in the form of Exhibit V hereto
(the 'Marketing Agreement').
8.7 Escrow Agreement. Buyer and MEDIQ shall have executed and delivered the
Escrow Agreement.
8.8 Opinion of Counsel. Seller and KCI shall have received an opinion of
Drinker Biddle & Reath, counsel for Buyer, dated as of the Closing,
substantially in the form of Exhibit VI hereto, it being understood that (i) any
opinion concerning the absence of conflict with the financing pursuant to the
commitment described in Section 5.5 hereof and with the Indenture dated as of
June 6, 1992, between First PRN and United Jersey Bank, as trustee, may be given
by other counsel reasonably satisfactory to Seller, and (ii) paragraph 4 of such
opinion may be stated to be subject to exceptions the existence of which do not
constitute a failure to satisfy any of the conditions precedent stated in this
Section 8.
8.9 Negative Covenants Agreement.
(a) Holdings, Buyer and MEDIQ shall have entered into a negative
covenants agreement (the 'Negative Covenants Agreement') substantially in
the form of Exhibit VII hereto.
(b) The Services Agreement, the Tax Sharing Agreement, the Insurance
Agreement and the Reimbursement Agreement referred to in the Negative
Covenants Agreement shall have been
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executed and delivered by MEDIQ, Buyer, Leasing and Hold-ings; Seller shall
have received copies of such agreements; and such agreements shall be in
substantially the form of the corresponding agreements between MEDIQ and
First PRN, copies of which have been previously delivered to Seller, except
that payments under the Services Agreement shall be limited to $50,000 per
year.
8.10 Collateral Transfer. MEDIQ shall have executed and delivered to Seller
a Collateral Transfer of Note (Security Agreement) (the 'Collateral Transfer')
substantially in the form attached hereto as Exhibit XI, and shall have endorsed
and delivered the MHM Note to Seller; and MHM shall have executed and delivered
to Seller an estoppel certificate (the 'Estoppel Certificate') in a form
reasonably satisfactory to Seller.
8.11 MEDIQ Guaranty. MEDIQ and Holdings shall have entered into a guaranty
agreement (the 'Guaranty Agreement') substantially in the form of Exhibit VIII
hereto.
8.12 Highline Agreement. Highline Financial Services, Inc. and Seller shall
have agreed to terminate the Highline Agreement.
SECTION 9. CLOSING.
9.1 Time and Place of Closing; Effective Time of Closing. The closing of
the purchase and sale of the Assets and the assumption of the Assumed
Liabilities (the 'Closing') pursuant to this Agreement shall take place on the
later of: (a) the second Friday following termination or expiration of the
waiting period under the HSR Act, or (b) September 30, 1994, at the offices of
Drinker Biddle & Reath, Broad and Chestnut Streets, Philadelphia, Pennsylvania
commencing at 10:00 A.M., local time or at such other date, time or place as may
be agreed to by Buyer and Seller (the 'Closing Date'). Subject to Section 11,
failure to consummate the Closing shall not result in the termination of this
Agreement or relieve any person of any obligation hereunder. Notwithstanding the
actual time at which the Closing occurs on the Closing Date, the Closing shall
be deemed effective (i) solely for purposes of determining the time on the
Closing Date at which title to each of the Assets passes from Seller to Buyer,
at 11:59 p.m., local time in the jurisdiction in which such Asset is then
located, on the Closing Date, and (ii) for all other purposes hereunder, at
11:59 p.m., Eastern Time, on the Closing Date.
9.2 Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
(a) Seller and KCI shall deliver or cause to be delivered to Buyer and
MEDIQ the following:
(i) one or more general warranty bills of sale and general
assignment agreements duly executed by Seller, substantially in the form
of Exhibit IX hereto (the 'Bill of Sale'), conveying title of all of the
Assets (other than Real Property) to Buyer (or Buyer's permitted
assignee pursuant to Section 12.7), free and clear of any liability,
obligation, restriction, mortgage, lien, security interest, or other
charge, claim or encumbrance not included in the Assumed Liabilities;
(ii) specific assignment of the Assumed Contracts and the Assumed
Capital Leases included in the Assets, together with all requisite
consents of third parties which are parties to any of the foregoing;
(iii) such other instruments of transfer and assignment as may be
necessary or appropriate to vest in Buyer (or Buyer's permitted assignee
pursuant to Section 12.7) good title to the Assets (including, without
limitation, title certificates for the motor vehicles described in
Schedule 1.1.5, duly endorsed for transfer);
(iv) a certificate, dated the Closing Date, to the effect set forth
in Sections 7.1, 7.2, 7.3 and 7.4 (with respect to Seller and KCI);
(v) the Marketing Agreement, duly executed by Seller;
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(vi) the Escrow Agreement, duly executed by Seller;
(vii) the Negative Covenants Agreement, duly executed by Seller;
(viii) the subordination agreement mentioned in Section 7.9;
(ix) duly executed releases or terminations of financing
statements, or other evidence reasonably satisfactory to Buyer's lenders
that all liens on and security interests in the Assets have been
released and terminated;
(x) copies of the certificate or articles of incorporation and
bylaws of Seller and KCI, or the corresponding charter documents, and
all amendments thereof to date, certified as of a recent date by the
Secretary of State or corresponding certifying authority of its
jurisdiction of organization and by the Secretary or an Assistant
Secretary of Seller and KCI;
(xi) a certificate of good standing of a recent date for Seller,
certified by the Secretary of State or corresponding certifying
authority of Seller's jurisdiction of organization;
(xii) copies of the resolutions of the boards of directors of
Seller and KCI and, if necessary, stockholders of Seller and KCI
authorizing the execution, delivery and performance of this Agreement
and the other agreements and instruments referred to herein, certified
as of the Closing Date by the Secretary or an Assistant Secretary of
Seller; and
(xiii) such other documents and instruments as Buyer may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
(b) Buyer, Holdings and MEDIQ shall deliver, or shall cause to be
delivered, to Seller and KCI the items described below:
(i) the Closing Payment and the Notes;
(ii) the Guaranty Agreement, duly executed by MEDIQ and Holdings;
(iii) one or more Assumption of Liabilities Agreements, duly
executed by Buyer (or Buyer's permitted assignee pursuant to Section
12.7), substantially in the form of Exhibit X hereto, pursuant to which
Buyer shall assume the Assumed Liabilities;
(iv) a certified check or official bank check in next day funds
payable to Seller in the aggregate amount of $23,135.68 in respect of
the security deposits made by Seller under the leases of Real Property
(or such lesser amount as is equal to the aggregate amount of security
deposits under leases of Real Property included in the Assets if fewer
than all leases of real property set forth in the Disclosure Statement
are included in the Assets).
(v) a certificate of Buyer, dated the Closing Date, to the effect
set forth in Sections 8.1, 8.3 and 8.4;
(vi) the Marketing Agreement, duly executed by Holdings, its
subsidiaries and MEDIQ;
(vii) the Escrow Agreement, duly executed by Buyer and MEDIQ and
accompanied by the delivery by Buyer to Escrow Agent of the Escrow
Payment;
(viii) the Negative Covenants Agreement, duly executed by MEDIQ,
Holdings and Buyer;
(ix) the Collateral Transfer, duly executed by MEDIQ, and the MHM
Note, duly endorsed by MEDIQ, and the Estoppel Certificate, duly
executed by MHM;
(x) a copy of Buyer's, Holdings' and MEDIQ's certificates of
incorporation and bylaws and all amendments thereof to date, certified
as of a recent date by the Secretary of State of Delaware and by the
Secretary or an Assistant Secretary of Buyer, Holdings and MEDIQ, and
accompanied by a certificate of good standing as of a recent date for
Buyer, Holdings and MEDIQ, certified by the Secretary of State of
Delaware;
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(xi) a copy of the resolutions of the board of directors of Buyer,
Holdings and MEDIQ authorizing the execution, delivery and performance
by Buyer, Holdings and MEDIQ of this Agreement and the other agreements
and instruments referred to herein to which such entity is a party,
certified as of the Closing by the Secretary or an Assistant Secretary
of Buyer, Holdings and MEDIQ; and
(xii) such other documents and instruments as Seller may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
9.3 Noncompetition; Confidential Information.
(a) For a period of five (5) years from and after the Closing Date,
unless expressly consented to in writing by Buyer, neither Seller, KCI nor
any Seller Affiliate shall, directly or indirectly: (i) engage, anywhere in
the United States of America, in the rental of a portfolio of
standard-of-care medical products manufactured by third parties (examples
of which include but are not limited to the products identified on Schedule
1.1.1); or (ii) be or become a stockholder, partner, owner, officer,
director or employee or agent of, or a consultant to or give financial or
other assistance to, any person or entity considering engaging in any such
activities or so engaged; provided, however, that nothing herein shall
prohibit Seller, KCI and/or any Seller Affiliate from (A) owning, as
passive investors, in the aggregate not more than 5.0% of the outstanding
publicly traded stock of any corporation so engaged or (B) engaging in the
KCITS Business or (C) engaging in the manufacture, sale, lease, rental,
distribution or marketing of any medical product or equipment (including,
without limitation, the PlexiPulse and any other product or product-line
acquired or developed by Seller, KCI or a Seller Affiliate) (1) that
Seller, KCI or a Seller Affiliate manufactures, (2) with respect to which
Seller, KCI or a Seller Affiliate owns proprietary rights (including,
without limitation, through development of such product or equipment), or
(3) for which KCI, Seller or a Seller Affiliate has distribution rights
(but nothing in this clause (C)(3) shall permit KCI, Seller or any Seller
Affiliate to obtain distribution rights for a series of products
manufactured by third parties such that Seller and/or its Affiliates are
engaged in the rental of a portfolio of standard-of-care products), or (D)
engaging in the business conducted by KCI Financial Services, Inc. a
wholly-owned subsidiary of KCI, on the date hereof, including, without
limitation, the leasing and 'rent-to-own' types of financing. The duration
of Seller's and KCI's covenants set forth in this Section shall be extended
by a period of time equal to the number of days, if any, during which
Seller or KCI is in violation of the provisions hereof.
(b) For a period of five (5) years from and after the Closing Date,
neither Seller, KCI nor any Seller Affiliate shall, directly or indirectly
use in furtherance of any of their business affairs or otherwise and to the
detriment of Buyer with respect to the Medical Services Business, or
disclose to any third party except as required by Law, any trade secret,
customer list, supplier list, financial data, pricing or marketing policy
or plan or any other proprietary or confidential information relating
exclusively to the Medical Services Business or any of its products or
services so long as the same is not publicly known (other than by the act
of Seller, KCI or any Seller Affiliate).
(c) For the purposes of this Agreement, an 'Affiliate' of a person
means: (i) any corporation, limited liability company, partnership or other
entity of which such person owns or otherwise possesses the power to direct
the vote, directly or indirectly, of an amount of voting securities
sufficient to elect a majority of the board of directors of such
corporation, and (ii) any other person or entity controlled by such person.
For the purposes of this definition of 'Affiliate,' 'control' means the
power to direct the management and policies of a person or entity, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; provided that, any person or entity of which a
person owns beneficially or of record, either directly or through one or
more intermediaries, more than 20% of the ownership interests, shall be
conclusively presumed to be an 'Affiliate' of such person. A 'Seller
Affiliate' is an Affiliate of Seller or KCI.
(d) If any party hereto learns of any breach or potential breach of
Section 9.3, such party shall immediately notify the other party hereto of
such event, specifying the basis therefor in
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reasonable detail. Buyer may, in its sole discretion, afford Seller and KCI
an opportunity to remedy or otherwise cure such breach or potential breach
before seeking legal redress, provided that Seller and KCI are actively
seeking to cure or remedy such breach or potential breach; but such
opportunity to remedy shall be without prejudice to the right of Buyer to
seek and obtain injunctive or other relief.
(e) Seller and KCI acknowledge that damages alone shall not be an
adequate remedy for any breach by Seller, KCI or any Seller Affiliate of
Seller's covenants contained in this Agreement and accordingly expressly
agree that, in addition to any other remedies which Buyer may have, Buyer
shall be entitled to injunctive relief in any court of competent
jurisdiction for any breach or threatened breach of any such covenants by
Seller, KCI and/or any Seller Affiliate.
(f) Seller and KCI acknowledge and agree that the covenants contained
in this Section 9.3 are fair and reasonable in light of the consideration
paid hereunder and in order to protect Buyer's investment through its
acquisition of the Assets in the Medical Services Business, and the
invalidity or unenforceability of any particular provision, or part of any
provision, of this Section shall not affect the other provisions or parts
hereof. If any provision hereof is determined to be invalid or
unenforceable by a court of competent jurisdiction, Seller and KCI shall
negotiate in good faith to provide Buyer with protection as nearly
equivalent to that found to be invalid or unenforceable and if any such
provision shall be so determined to be invalid or unenforceable by reason
of the duration or geographical scope of the covenants contained therein,
such duration or geographical scope, or both, shall be considered to be
reduced to a duration or geographical scope to the extent necessary to cure
such invalidity. The parties acknowledge and agree that the amount of
Buyer's damages for any breach by Seller and KCI of the provisions of this
Section 9.3 shall be determined without reference to, and irrespective of,
the allocation of the Consideration pursuant to Section 2.4.
9.4 Provisions Relating to Employees.
(a) Except as set forth in Sections 2.2(d) and 3.3, Seller and KCI
shall be solely responsible for any severance pay, accrued salary, pension
benefit, unemployment compensation, vacation pay and any other obligations
to present or former employees created or owing as a consequence of the
termination or prior employment (whether by agreement, policy or by Law) of
any employees of Seller involved in the Medical Services Business. Seller
and KCI shall be solely responsible for preparing and filing for all their
Pension Plans and Welfare Plans all Forms 5500 (Annual Return/Report of
Employee Benefit Plan) and all other reports and filings required with
respect thereto. Seller and KCI shall remain solely responsible for any and
all violations of the Code and/or ERISA with respect to Seller's and KCI's
Pension Plans and Welfare Plans (including the reporting and disclosure
requirements and the fiduciary standards), and shall be solely responsible
for all continuation coverage requirements of the Code and ERISA with
respect to all such plans and for all such continuation coverage
requirements as a result of the sale of Assets to Buyer or any termination
of Seller's employees following the sale of Assets.
(b) Buyer shall have the right (but not the obligation) in its sole
discretion to offer to employ employees of Seller who are employed in the
Medical Services Business on the last business day prior to the Closing
Date, on terms and conditions determined solely by Buyer; provided that
Buyer shall not have any obligation to continue the employment of any such
person hired by Buyer or to provide any benefits or pay any salaries
comparable to those provided by Seller.
(c) Except as set forth in Section 2.2(d) or Section 3.3, Buyer is not
assuming, nor shall Buyer be responsible for any liability or obligation
whatsoever to any present or former employee of Seller, or any liability or
obligation under any Employee Benefit Plan with respect to any present or
former employee of Seller whether or not such present or former employee is
hired by Buyer pursuant to Section 9.4(b).
(d) Notwithstanding any other provision of this Agreement, if the
Closing occurs, Buyer and MEDIQ shall be responsible for any and all
liabilities, obligations, commitments, costs and
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expenses, including reasonable fees and disbursements of attorneys and
other advisors, incurred in respect of any Transferred Employee relating to
or arising in connection with any and all claims made after the Closing
Date for workers compensation benefits arising in connection with any
occupational injury or disease occurring after the Closing Date.
9.5 Transitional Activities. From and after the Closing, Seller promptly
shall forward or refer to Buyer any orders, inquiries and requests received by
any of them for the sale, lease or rental of, or with respect to, the Assets
sold to Buyer hereunder, and shall take all other actions reasonably requested
by Buyer to assist in the prompt and orderly transition of the Medical Services
Business to Buyer.
9.6 Delivery of Financials. Within 40 days after the Closing, Seller and
KCI shall provide with respect to the Division: audited statements of assets
being purchased and liabilities being assumed for the years ended December 31,
1991, December 31, 1992 and December 31, 1993 and audited statements of income
and cash flows for the years ended December 31, 1991, 1992 and 1993 (together
with the original report thereon and required consents related thereto of
Seller's Auditors) and all interim financial statements, in each case to the
extent required for compliance by Buyer and Buyer's Affiliates with the
requirements of Rule 13a-11 of the SEC issued pursuant to the Securities
Exchange Act of 1934, as amended, and Rule 3-05 of Regulation S-X of the SEC.
The expense of such audit shall be borne equally by Seller and Buyer. In
addition, Seller shall reasonably cooperate and cause Seller's Auditors to
reasonably cooperate with Buyer and Buyer's Auditors in the preparation of any
other financial statements or schedules required to enable Buyer and Buyer's
affiliates to comply with applicable federal and state securities laws and
regulations.
9.7 Bug-Out Procedures. During the period described in Schedule 9.7 hereto,
Buyer and Seller shall carry out the procedures described in Schedule 9.7 hereto
relating to the verification of the existence, location and status (i.e.,
whether or not ready for patient use, whether or not under repair and whether or
not currently rented) of all of the equipment constituting Assets and confirming
the transfer of such Assets to Buyer.
9.8 Employee Health Insurance. From and after the effective time of
Closing, all employees of Seller who are employed by Buyer as of the Closing
shall cease to participate in any health insurance plans maintained by Seller or
KCI or any Seller Affiliate and shall, at the employee's election, commence
participation, on a basis whereby all waiting period and pre-existing condition
requirements shall have been waived or shall otherwise be inapplicable to such
employees (and covered dependents), in health insurance plans maintained by
Buyer or an Affiliate of Buyer. Any such health insurance plan maintained by
Buyer or an Affiliate of Buyer shall only cover (to the extent provided in such
plan) claims relating to health care services rendered after the Closing Date.
The health insurance plans maintained by Seller, KCI or a Seller Affiliate shall
cover (to the extent provided in such plans) all claims relating to health care
services rendered to such employees (and covered dependents) on or prior to the
Closing Date.
9.9 Customer Pricing. From and after Closing, Buyer shall, with respect to
all customer contracts of Seller relating to the Medical Services Business that
do not constitute Assumed Contracts, honor each pricing arrangement between
Seller and a customer of Seller under each such contract during the period
beginning on the Closing Date and ending on the earlier to occur of (i) the date
90 days after the Closing and (ii) the date on which such pricing arrangement
(or the customer contract to which it relates), by its terms, expires.
9.10 Computer Software Support. In connection with obtaining consents of
third parties to the assignment to Buyer of Assumed Contracts that provide for
the provision by Seller or a Seller Affiliate of M.E.M.S. or C.A.P.S. or
maintenance with respect thereto (collectively, 'Computer Support'), Seller
shall propose to the other parties to such contracts alternate arrangements
mutually satisfactory to, and approved by, Seller and Buyer, with respect to the
provision of such software or services from and after Closing. Notwithstanding
anything to the contrary set forth herein, to the extent the third parties to
any such Assumed Contracts included in the Assets do not accept any such
proposed alternate arrangements, KCI and Seller shall, from and after Closing,
remain liable for performance of the portions of such Assumed Contracts
pertaining to Computer Support and the obligations of Seller
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or a Seller Affiliate under such Assumed Contracts with respect to Computer
Support shall constitute Excluded Liabilities hereunder.
9.11 Intercreditor and Subordination Agreements. (a) If Buyer refinances
its indebtedness to Congress Financial Corporation incurred pursuant to the
commitment letter described in Section 5.5, KCI and Seller will execute and
deliver an intercreditor and subordination agreement with the new lender on
terms substantially the same as those of the Congress Intercreditor Agreement.
(b) If MHM refinances its indebtedness to NationsBank, N.A., KCI and
Seller will execute and deliver a subordination agreement with the new
lender on terms substantially the same as those of the MHM Subordination
Agreement.
(c) Subsections (a) and (b) shall apply to successive refinancings of
the indebtedness described therein.
(d) Notwithstanding the foregoing, Seller and KCI shall not be
required to subordinate to an amount greater than the outstanding amount of
the Term Loan plus up to $15,000,000 of the revolving credit to which the
Congress Intercreditor Agreement applies or to more than the outstanding
amount to which the MHM Subordination Agreement applies.
(e) Notwithstanding the foregoing, Seller and KCI shall not be
required to subordinate to any refinancing of the indebtedness mentioned in
subsection (a) if either Note in the form of Exhibit IA or IC is
outstanding or if the refinanced indebtedness requires cash payments of
principal and interest in any fiscal year during which the Notes in the
form of Exhibit 1B are scheduled to be outstanding in an aggregate amount
greater than the scheduled principal and interest payments for such fiscal
year on the term loan portion of the indebtedness mentioned in subsection
(a).
SECTION 10. TERMINATION AND ABANDONMENT
10.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(a) by Buyer and MEDIQ if the conditions precedent to their
obligations set forth in Section 7 have not been fulfilled on or prior to
December 2, 1994;
(b) by Seller and KCI if the conditions precedent to their obligations
as set forth in Section 8 have not been fulfilled on or prior to December
2, 1994; or
(c) by mutual consent of Buyer and Seller;
10.2 Procedure for Termination. A party terminating this Agreement pursuant
to Section 10.1 shall give written notice thereof to each other party hereto,
whereupon this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by any party. Seller, KCI,
Buyer and MEDIQ and their respective directors, and officers shall not have any
liability to the other for costs, expenses, loss of anticipated profits or
otherwise if the transactions contemplated by this Agreement are abandoned
pursuant to Section 10.1 above. Nothing in the preceding sentence relieves any
party from liability on account of its failure to complete the Closing in breach
of its obligation to do so.
SECTION 11. INDEMNIFICATION.
11.1 Indemnification by Seller and KCI. Subject to Section 11.5, Seller and
KCI shall jointly and severally indemnify and hold Buyer and its officers,
directors and shareholders harmless against and in respect of any and all
losses, costs, expenses, claims, damages, obligations and liabilities, including
interest, penalties and reasonable attorneys fees and disbursements, net of any
recoveries under insurance policies, indemnities or recoveries from third
parties or tax benefits to Buyer resulting from such damage (collectively,
'Damages'), which Buyer or any such person may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of: (a) any inaccuracy in
or breach of any
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representation or warranty of Seller made in Sections 4.2, 4.3, 4.6, 4.7,
4.8(a), 4.12, 4.14, 4.15, 4.16(c), 4.16(d), 4.17 or 4.20 of this Agreement; (b)
any breach or nonfulfillment of Section 9.3 of this Agreement or any other
covenant of Seller or KCI contained in this Agreement or any Seller Transaction
Documents to be performed at or after Closing; (c) any Excluded Liability; (d)
any liability or obligation incurred by Buyer as a result of the failure of
Seller and/or Buyer to comply with applicable bulk sales or bulk transfer laws;
(e) any customer credit or discount relating to any billing error of Seller or
KCI with respect to any period ending on or before the Closing Date (provided,
in the case of clause (e), that Buyer shall have referred the customer to Seller
for resolution of the claimed credit or discount and Seller shall not, within 90
days of such referral, have certified to Buyer in writing (and provided
supporting documentation) that such claimed customer credit or discount does not
arise from any billing error); and (f) Assumed Liabilities described in Section
2.2(e) other than the first $20,000 of such Assumed Liabilities.
11.2 Indemnification by Buyer and MEDIQ. Subject to Section 11.5, Buyer,
Holdings and MEDIQ shall jointly and severally indemnify and hold Seller, KCI
and Seller's and KCI's officers, directors and shareholders harmless against and
in respect of any and all Damages which Seller, KCI or any such person may
suffer, incur or become subject to arising out of, based upon or otherwise in
respect of: (a) any inaccuracy in or breach of any representation or warranty of
Buyer made in Sections 5.2, 5.3, 5.4 and 5.7(a) of this Agreement; (b) any
inaccuracy in or breach of any representation or warranty of Buyer made in
Section 5.6 of this Agreement or any breach or nonfulfillment of any covenant or
obligation of Buyer, Holdings or MEDIQ contained in this Agreement or any Buyer
Transaction Document to be performed at or after Closing; (c) the Assumed
Liabilities (other than Assumed Liabilities described in Section 11.1(f) above);
and (d) any and all liabilities and obligations of Buyer related to the Medical
Services Business first arising after the Closing Date, including, without
limitation, liabilities and obligations which first arise after the Closing Date
with respect to Transferred Employees.
11.3 Inter-Party Claims. Any party seeking indemnification pursuant to this
Section (an 'Indemnified Party') shall notify the other party or parties from
whom such indemnification is sought (an 'Indemnifying Party') of the Indemnified
Party's assertion of such claim for indemnification, specifying the basis of
such claim.
11.4 Third Party Claims.
(a) Each Indemnified Party shall promptly notify the Indemnifying
Party of the assertion by any third party of any claim with
respect to which the indemnification set forth in this Section relates
(which shall also constitute the notice required by Section 11.3). The
Indemnifying Party shall have the right, upon notice to the Indemnified
Party within twenty (20) days after the receipt of any such notice, to
undertake the defense of or, with the consent of the Indemnified Party
(which consent shall not unreasonably be withheld), to settle or
compromise such claim. The failure of the Indemnifying Party to give
such notice and to undertake the defense of or to settle or compromise
such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 11.4(a) and shall preclude the Indemnifying
Party from disputing the manner in which the Indemnified Party may
conduct the defense of such claim or the reasonableness of any amount
paid by the Indemnified Party in satisfaction of such claim.
(b) The election by the Indemnifying Party, pursuant to Section
11.4(a), to undertake the defense of a third-party claim shall not preclude
the party against which such claim has been made also from participating or
continuing to participate in such defense, so long as such party bears its
own legal fees and expenses for so doing.
11.5 Limitations and Requirements. No party hereto shall have any
obligation to indemnify any other party hereto or any other person against
Damages pursuant to Section 11.1(a) (in the case of Seller and KCI) or Section
11.2(a) (in the case of Buyer, Holdings and MEDIQ) arising out of or based upon
any inaccuracy in or breach of any representation or warranty made in or
pursuant to this Agreement or any Transaction Document unless and until the
aggregate of all such Damages suffered or incurred by the Indemnified Parties
under this Agreement exceeds $750,000 (the 'Basket'); in which event such
Indemnified Parties shall be entitled to indemnification only for the amount of
all
33
<PAGE>
Damages suffered or incurred in excess of the Basket; provided, however, that
the above limitation shall not be applicable to any claim for Damages pursuant
to Sections 11.1 (b) through (f) (in the case of Seller and KCI) or Section
11.2(b) through (d) (in the case of Buyer, Holdings and MEDIQ) or based upon a
breach of any representation or warranty made in or pursuant to Sections 4.20 or
5.4 of this Agreement. The aggregate amount of all Damages for which Buyer may
be indemnified pursuant to Section 11.1(a) of this Agreement shall not exceed
$10,000,000, and the aggregate amount of all Damages for which Buyer may be
indemnified hereunder shall not exceed the sum of $81,300,000 and the Highline
Buy-Out Amount. It is specifically understood and agreed that in the event a
misrepresentation or breach of warranty or covenant is discovered by Buyer and
asserted by it after the Closing, the remedy of Buyer shall be limited to
indemnification as set forth in this Section 11, and Buyer shall not be entitled
to a rescission of this Agreement. Notwithstanding anything to the contrary in
this Agreement, in seeking indemnification for Damages solely under Section
11.1(a) of this Agreement, Buyer's sole and exclusive remedy shall be to set off
certain of the payments to be made to Seller pursuant to the promissory notes
delivered to Seller attached hereto as Exhibit IB (the 'IB Notes') in accordance
with Section 11.6 of this Agreement; provided, however, that in the event the IB
Notes are pre-paid, in whole or in part, and the aggregate amount of Damages
under Section 11.1(a) for which Buyer is entitled to indemnification (subject to
the limitations set forth in this Section 11.5) exceeds the aggregate
outstanding principal balance of and accrued but unpaid interest under the IB
Notes, Buyer shall be entitled to recover such excess Damages first by setting
off, in accordance with Section 11.6, remaining payments to be made to Seller
under the Note in the form of Exhibit IC hereto; second by setting off, in
accordance with Section 11.6, remaining payments to be made to Seller under the
Note in the form of Exhibit IA hereto; and third (to the extent any excess
Damages have not been recovered through set off as aforementioned) by receiving
cash from Seller or KCI. To the extent that any claim for indemnification may
properly be made under Section 11.1 (a) or Section 11.2(a) and any other
provision of this Agreement, then such claim shall be deemed for all purposes of
this Section 11.5 to have arisen only under such other provision and not under
such Section 11.1(a) or Section 11.2(a), as the case may be. Each Indemnified
Party shall notify the Indemnifying Party of a claim under Section 11.1(a) or
11.2(a) within the nine (9) month period referenced in Section 12.1(a), in
accordance with Section 11.3.
11.6 Right of Set-Off. Subject to the limitations in Section 11.5, Buyer
shall have the right to set-off, against any amount which may be owed by Buyer
or any Affiliate of MEDIQ to Seller pursuant to the Notes, any Damages owed by
Seller or KCI to Buyer under this Agreement, plus interest at a rate of 10% per
annum on such Damages accruing from the date that Buyer receives notice of claim
for such Damages. The exercise of such right of set-off by Buyer and the
consequent failure of Buyer or a MEDIQ Affiliate to pay amounts otherwise due
and payable under the Notes shall not constitute an event of default under the
Notes if: (a) Buyer shall have given Seller written notice of Buyer's intended
exercise of such set-off at least 30 days prior to the time amounts otherwise
due and payable under a Note (but for the exercise of such right of set-off)
would be due and payable under the terms of such Note and such notice shall have
specified (i) the aggregate amount that Buyer intends to set-off based on such
written notice (the 'Aggregate Set-Off Amount'), (ii) the Note or Notes against
which Buyer intends to effect some or all of the set-off contemplated in such
written notice and (iii) the identity of the banking institution (having assets
of at least $500 million) (the 'Selected Depository') at which Buyer will
establish an interest-bearing escrow account for deposit of the Contested Amount
(as hereinafter defined) in accordance with the following subclause; and (b)
after the Uncontested Amount (as hereinafter defined) has been set-off, Buyer
shall have deposited the Contested Amount into such escrow account in one or
more installments, each such installment to have been deposited in such escrow
account no later than the time the corresponding amount otherwise due and
payable under a Note (but for such set-off) would be payable under the terms of
such Note. At the time Buyer establishes the aforementioned escrow account, the
Selected Depository shall be instructed to (i) hold all amounts deposited into
escrow by Buyer in accordance with this Section 11.6, and interest earnings
attributable thereto, in escrow until such time as either (A) Buyer and Seller
deliver joint instructions to such banking institution regarding the disposition
of such funds or (B) a court of competent jurisdiction directs the disposition
of such funds out of escrow. 'Contested Amount' means the amount, if any, of
34
<PAGE>
the Aggregate Set-Off Amount which Seller asserts, in a written notice delivered
to Buyer no later than 20 days after the date of Buyer's exercise notice, Buyer
is not entitled to set off in accordance with this Agreement, provided that if
at any time prior to the deposit of some or all of the Contested Amount into
escrow Seller withdraws its previous objection with respect to some or all of
the Aggregate Set-Off Amount, the Contested Amount shall be reduced by the
amount with respect to which Seller has withdrawn its objection. 'Uncontested
Amount' means an amount equal to the Aggregate Set-Off Amount minus the
Contested Amount. Buyer shall be entitled to give more than one written notice
pursuant to this Section 11.6.
SECTION 12. MISCELLANEOUS.
12.1 Survival of Representations and Warranties.
(a) The representations and warranties set forth in Sections 4.2, 4.3,
4.6, 4.7, 4.8(a), 4.11(b), 4.12, 4.14, 4.15, 4.16(c), 4.16(d), 4.17, 4.20,
5.2, 5.3, 5.4 and 5.7(a) made by the parties in this Agreement and in the
certificates, documents and schedules delivered pursuant hereto shall
survive the consummation of the transactions herein contemplated for a
period of nine (9) months (and thereafter during the time a claim with
respect thereto brought prior to the end of such nine (9) month period is
pending). The representations and warranties set forth in Section 5.6 shall
survive until all amounts owed under the Notes have been paid in full. The
representations and warranties set forth in Section 4.9 shall survive for
the period described in such Section 4.9. The remaining representations and
warranties made by the parties shall not survive the Closing of the
transactions herein contemplated. Anything in this Agreement to the
contrary notwithstanding, the representations and warranties of Seller and
KCI hereunder, and the right of Buyer to indemnification for breach
thereof, shall not be affected by any investigation of Seller, KCI or the
Medical Service Business made before or after the date hereof by Buyer,
MEDIQ or their agents or representatives.
(b) In the event of any inconsistency between the statements made in
the body of this Agreement and those contained in the Disclosure Statement
(other than an express exception to a specifically identified statement),
those in this Agreement shall control.
12.2 Further Assurances. Each party hereto shall use best efforts to comply
with all requirements imposed hereby on such party and to cause the transactions
contemplated hereby to be consummated as contemplated hereby and shall, from
time to time and without further consideration, either before or after the
Closing, execute such further instruments and take such other actions as any
other party hereto shall reasonably request in order to fulfill its obligations
under this Agreement and to effectuate the purposes of this Agreement and to
provide for the orderly and efficient transition of the Medical Services
Business to Buyer. Seller and KCI shall, for five years after the Closing,
retain their various books and records relating to the Medical Services Business
and shall, upon prior notice, provide Buyer and its authorized representatives
reasonable access thereto, and in any event shall not dispose of any of them
without first offering them to Buyer. Each party shall promptly notify the other
parties of any event or circumstance known to such party that could prevent or
delay the consummation of the transactions contemplated hereby or which would
indicate a breach or non-compliance with any of the terms, conditions,
representations, warranties or agreements of any of the parties to this
Agreement.
12.3 Bulk Sales. The parties hereto waive compliance with all applicable
bulk sales laws, including, without limitation, the Uniform Commercial Code Bulk
Transfer provisions.
12.4 Costs and Expenses. Except as otherwise expressly provided herein,
each party shall bear its own expenses in connection herewith. Any and all
transfer, sales, use, documentary and similar taxes and recording and filing
fees incurred in connection with the transactions contemplated herein shall be
borne by Buyer.
12.5 Public Announcements. Upon execution and delivery of this Agreement,
Seller, KCI, Buyer and MEDIQ shall each issue a press release reasonably
satisfactory to Seller and Buyer. Otherwise, neither Seller, KCI, Buyer, nor
MEDIQ shall, prior to the Closing, make any public announcement or
35
<PAGE>
disclosure relating to the transactions contemplated herein without the prior
agreement of each other party hereto, provided that each party shall use best
efforts to consult with the other in advance of any disclosure required by law,
but the agreement of the other parties hereto shall not be required.
12.6 Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
To Buyer, Holdings or MEDIQ:
MEDIQ/PRN Life Support Services-I, Inc.
c/o MEDIQ Incorporated
1 MEDIQ Plaza
Pennsauken, New Jersey 08110
Telecopy (609) 665-2391
Attention: Bernard J. Korman and Michael F. Sandler and Alan S.
Einhorn, Esq.
With a copy to:
DRINKER BIDDLE & REATH
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Michael B. Jordan, Esq.
To Seller or KCI:
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230
(210) 524-9000
Telecopy (210) 308-3993
Attention: James R. Leininger, M.D. and Dennis E. Noll, Esq.
With a copy to:
Cox & Smith Incorporated
112 E. Pecan Street, Suite 2000
San Antonio, Texas 78205
Telecopy (210) 226-8395
Attention: Stephen D. Seidel, Esq.
12.7 Assignment and Benefit.
(a) Buyer may assign this Agreement in whole or in part (including,
without limitation, its rights with respect to some or all of the Assets
under Section 1.1 hereof) to any corporation which is a direct or indirect
majority-owned subsidiary of MEDIQ or to any person which becomes a
successor in interest (by purchase of assets or stock, or by merger or
otherwise) to Buyer; but no such assignment shall, without the written
consent of Seller, relieve Buyer, Holdings and MEDIQ of their respective
obligations hereunder. Seller shall not assign this Agreement or any rights
hereunder, or delegate any obligations hereunder, without prior written
consent of Buyer. Buyer agrees that it will not unreasonably withhold its
consent to the assignment by Seller of all or a portion of its rights and
the delegation of all or a portion of its duties under this Agreement (and
the transfer, subject to Buyer's rights under this Agreement, of all or a
portion of the Assets and
36
<PAGE>
the Assumed Liabilities) to a Person wholly-owned, directly or indirectly,
by KCI, and if Buyer so consents, Buyer will accept the conveyance of such
portion of the Assets from such Person; but no such assignment or
delegation shall, without the written consent of Buyer, relieve Seller or
KCI of their respective obligations hereunder. Buyer may condition its
agreement to such an assignment on Seller's and KCI's agreement to furnish
pursuant to Section 9.6 any additional financial statements required for
the purposes stated in that Section, and Seller shall be responsible for
the additional expenses in preparing the statements required by Section 9.6
resulting from such assignment. No such assignment by Seller shall be made
unless Congress Financial Corporation consents thereto. Subject to the
foregoing, this Agreement and the rights and obligations set forth herein
shall inure to the benefit of, and be binding upon, the parties hereto, and
each of their respective successors and assigns. In accordance with the
foregoing, Buyer intends prior to Closing to assign to First PRN Buyer's
rights under Section 1.1 with respect to the Assets described in Section
1.1(a)(ii) hereof and the customer contracts which constitute Assumed
Contracts (in which case Seller will transfer such Assets directly to First
PRN and not to Buyer at Closing).
(b) This Agreement shall not be construed as giving any person, other
than the parties hereto and their permitted successors and assigns, any
legal or equitable right, remedy or claim under or in respect of this
Agreement or any of the provisions herein contained, this Agreement and all
provisions and conditions hereof being intended to be, and being, for the
sole and exclusive benefit of such parties, and permitted successors and
assigns and for the benefit of no other person or entity.
12.8 Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect. Any such amendment, or modification shall be in
writing. The waiver by a party of any breach of any provision of this Agreement
shall not constitute or operate as a waiver of any other breach of such
provision or of any other provision hereof, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other provision
hereof.
12.9 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of Delaware
(and United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.
12.10 Section Headings and Defined Terms. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement. The terms defined herein and in
any agreement executed in connection herewith include the plural as well as the
singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
12.11 Severability. Subject to Section 9.3, the invalidity or
unenforceability of any particular provision, or part of any provision, of this
Agreement shall not affect the other provisions or parts hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provisions or parts were omitted.
12.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
12.13 Entire Agreement. This Agreement, together with the Disclosure
Statement, the agreements, exhibits, schedules and certificates referred to
herein or delivered pursuant hereto and the Confidentiality Agreement,
constitute the entire agreement between the parties hereto with respect to the
purchase and sale of the Assets and assumption of the Assumed Liabilities and
supersede all prior agreements and understandings. The submission of a draft of
this Agreement or portions or summaries
37
<PAGE>
thereof does not constitute an offer to purchase or sell the Assets, it being
understood and agreed that Buyer, MEDIQ, Seller or KCI shall not be legally
obligated with respect to such a purchase or sale or to any other terms or
conditions set forth in such draft or portion or summary unless and until this
Agreement has been duly executed and delivered by all parties.
12.14 Guaranty. KCI hereby guarantees all of the obligations of Seller
pursuant to this Agreement and shall be deemed a beneficiary of the terms of
this Agreement in consideration therefor. MEDIQ hereby guarantees all of the
obligations of Buyer and Holdings pursuant to this Agreement (the terms of
MEDIQ's guaranty with respect to amounts payable under the Notes are as set
forth in the Guaranty Agreement), and in consideration therefor shall be deemed
a beneficiary of this Agreement. Holdings hereby guarantees all of the
obligations of Buyer pursuant to this Agreement (the terms of Holdings' guaranty
with respect to amounts payable under the Notes with respect to which Holdings
is not maker are as set forth in the Guaranty Agreement) and in consideration
therefor shall be deemed a beneficiary of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
KINETIC CONCEPTS, INC.
By: __________________________________
Robert A. Wehrmeyer, Jr.,
Senior Vice President
KCI THERAPEUTIC SERVICES, INC.
By: __________________________________
Robert A. Wehrmeyer, Jr.,
Vice President
MEDIQ/PRN LIFE SUPPORT SERVICES-I,
INC.
By: __________________________________
Michael F. Sandler,
Vice President
PRN HOLDINGS, INC.
By: __________________________________
Michael F. Sandler,
Vice President
MEDIQ INCORPORATED
By: __________________________________
Michael F. Sandler,
Senior Vice President -- Finance
38
<PAGE>
APPENDIX
LIST OF DEFINED TERMS
<TABLE>
<S> <C>
TERM PAGE
- - ---- -----
1934 Act................................................................................................... 24
A material adverse effect.................................................................................. 28
Affiliate.................................................................................................. 36
Aggregate Set-Off Amount................................................................................... 43
Agreement.................................................................................................. 1
Assets..................................................................................................... 3
Assumed Capital Leases..................................................................................... 2
Assumed Contracts.......................................................................................... 2
Assumed Liabilities........................................................................................ 4
Basket..................................................................................................... 42
Bill of Sale............................................................................................... 32
Buyer...................................................................................................... 1
Buyer Transaction Documents................................................................................ 22
Buyer's Auditors........................................................................................... 7
CERCLA..................................................................................................... 6
Closing.................................................................................................... 32
Closing Date............................................................................................... 32
Closing Payment............................................................................................ 3
Closing Statement.......................................................................................... 7
Code....................................................................................................... 19
Collateral Transfer........................................................................................ 31
Computer Support........................................................................................... 39
Confidentiality Agreement.................................................................................. 27
Congress Intercreditor Agreement........................................................................... 29
Consideration.............................................................................................. 3
Control.................................................................................................... 36
Damages.................................................................................................... 40
Disclosure Statement....................................................................................... 5
Division................................................................................................... 1
Environmental Laws......................................................................................... 6
ERISA...................................................................................................... 19
Escrow..................................................................................................... 9
Escrow Agent............................................................................................... 9
Escrow Agreement........................................................................................... 9
Escrow Payment............................................................................................. 9
Estoppel Certificate....................................................................................... 31
Excluded Liabilities....................................................................................... 5
February Statement......................................................................................... 14
First PRN.................................................................................................. 3
GAAP....................................................................................................... 7
Guaranty Agreement......................................................................................... 32
Hazardous Substances....................................................................................... 20
Highline Agreement......................................................................................... 4
Highline Buy-Out Amount.................................................................................... 4
Holdings................................................................................................... 1
HSR Act.................................................................................................... 14
IB Notes................................................................................................... 42
Indemnified Party.......................................................................................... 41
Indemnifying Party......................................................................................... 41
IRS........................................................................................................ 6
</TABLE>
39
<PAGE>
<TABLE>
<S> <C>
KCI........................................................................................................ 1
KCITS Business............................................................................................. 1
Laws....................................................................................................... 13
Marketing Agreement........................................................................................ 31
Medical Services Business.................................................................................. 1
MEDIQ...................................................................................................... 1
MEDIQ Group................................................................................................ 24
MHM........................................................................................................ 24
MHM Note................................................................................................... 24
MHM Subordination Agreement................................................................................ 24
Names...................................................................................................... 3
Negative Covenants Agreement............................................................................... 31
Net Asset Value............................................................................................ 8
Notes...................................................................................................... 4
Pension Plan............................................................................................... 19
Plant Closing Laws......................................................................................... 4
RCRA....................................................................................................... 6
Real Property.............................................................................................. 16
Remedial Action............................................................................................ 20
Removal.................................................................................................... 20
Response................................................................................................... 20
Sadock Amount.............................................................................................. 10
SEC........................................................................................................ 24
SEC Reports................................................................................................ 24
Selected Depository........................................................................................ 43
Seller..................................................................................................... 1
Seller Affiliate........................................................................................... 36
Seller Transaction Documents............................................................................... 12
Seller's Auditors.......................................................................................... 7
Senior Management.......................................................................................... 17
Subordinated Note.......................................................................................... 42
Transfer Taxes............................................................................................. 6
Transferred Employees...................................................................................... 9
WARN Act................................................................................................... 4
Welfare Plan............................................................................................... 19
</TABLE>
40
<PAGE>
SCHEDULE 1.1.1
<TABLE>
<S> <C>
A. Central Supply
1. Bassinets; Infant
2. Compression Devices
3. Compressors; Medical Air
4. Continuous Passive Motion (CPM)
5. Defibrillator
6. Enteral Feeding Pumps
7. Hypo/Hypothermia
8. Phototherapy
9. Suction Devices
B. Monitoring
1. Monitors; Adult
2. Monitors; Fetal
3. Monitors; Infant
4. Monitors; Neonatal
5. Monitors; Pulse Oximetry
6. Monitors; Respiratory
7. Monitors; Vital Signs
C. Respiratory
1. Ventilators; Adult
2. Ventilators; Infant
3. Ventilators; Portable Adult
4. Ventilators; Supports
5. Warmers; Blood
6. Warmers; Infant Warming
D. Infusion
1. Infusion; Dual Channel
2. Infusion; General
3. Infusion; Micro
4. Infusion; PCA
5. Infusion; Secondary
6. Infusion; Syringe
7. Infusion; TPN
8. Intravenous Poles
</TABLE>
41
<PAGE>
The following schedules/exhibits have been omitted from this filing:
<TABLE>
<S> <C>
Schedule 1.1.2 Transferred Computer Assets
Schedule 1.1.3 Assumed Capital Leases
Schedule 1.1.4 Assumed Contracts
Schedule 1.1.5 Motor Vehicles
Schedule 2.4 Allocation of Aggregate Consideration
Schedule 3.4 Agreed Upon Procedures for Accounts Receivable
Schedule 9.7 Bug-Out Procedures
Exhibit IA Form of Promissory Note (#1)
Exhibit IB Form of Promissory Note (#2)
Exhibit IC Form of Promissory Note (#3)
Exhibit II Escrow Agreement
Exhibit III Certain Personnel Policies of Buyer
Exhibit IV Form of Opinion of Cox & Smith Incorporated
Exhibit V Marketing Agreement
Exhibit VI Form of Opinion of Drinker Biddle & Reath
Exhibit VII Form of Negative Covenants Agreement
Exhibit VIII Form of Guaranty Agreement
Exhibit IX Form of General Assignment and Bill of Sale
Exhibit X Form of Assumption Agreement
Exhibit XI Form of Collateral Transfer of Note (Security Agreement)
</TABLE>
The Registrant will furnish supplementally a copy of any omitted
schedule/exhibit to the Securities and Exchange Commission upon request.
42
AMENDMENT NO. 1
TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT is
dated as of September 30, 1994 by and among Kinetic Concepts,
Inc., KCI Therapeutic Services, Inc., MEDIQ Incorporated, PRN
Holdings, Inc. and MEDIQ/PRN Life Support Services-I, Inc.
BACKGROUND
The parties hereto are parties to the Asset Purchase
Agreement dated as of August 23, 1994 (the "Asset Purchase
Agreement"). In accordance with Section 12.8 of the Asset
Purchase Agreement, the parties desire to amend certain
provisions of the Asset Purchase Agreement immediately prior to
the consummation of the Closing under the Asset Purchase
Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and agreements
set forth herein and in the Asset Purchase Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Capitalized terms used herein, unless separately
defined herein, shall have the meanings ascribed to such terms in
the Asset Purchase Agreement.
2. If the liabilities or obligations of Seller under
the first Assumed Capital Lease referred to on Schedule 1.1.3 to
the Asset Purchase Agreement (the Master Lease between Citicorp
North America, Inc. and Seller, as successor by merger to
Medirec, as amended and waived through and including as of
September 30, 1994 (the "Citicorp Lease")), are accelerated as a
result of any breach or default thereunder occurring on or after
the Closing Date pursuant to Paragraph 16(B), (C) or (D) of the
Citicorp Lease, then (i) Seller will immediately pay all
obligations and liabilities under the Citicorp Lease resulting
from such acceleration, and (ii) Buyer will pay to Seller the
payments that would have been payable under the Citicorp Lease as
and when such payments would have been due if no such breach or
default had occurred.
3. In the event of a default under the Citicorp Lease
under Paragraphs 16(B), (C) or (D) thereof, Seller and KCI shall,
upon request of Buyer, cooperate with Buyer and use all
reasonable efforts to promptly obtain a waiver of such default
from the Lessor thereunder.
4. (a) Section 11.1 of the Asset Purchase Agreement
is hereby amended by the insertion of the words "(including,
without limitation, Holdings and MEDIQ)" immediately after the
word "shareholders" appearing in such section.
(b) Schedule 2.4 to the Asset Purchase Agreement
is hereby deleted and replaced in its entirety with Exhibit A
hereto.
(c) Section 12.4 of the Asset Purchase Agreement
is hereby amended and restated in its entirety as follows:
"12.4 Costs and Expenses. Except as otherwise
expressly provided herein, each party shall bear its
own expenses in connection herewith. Any and all
transfer, sales, use, documentary and similar taxes and
recording and filing fees incurred in connection with
the transactions contemplated herein shall be borne by
Buyer. Notwithstanding the fact that Buyer, First PRN,
MEDIQ or any other Affiliate of MEDIQ may, in order to
facilitate the delivery of consents to assignments of
Assumed Contracts and Assumed Capital Leases, agree
with third parties to pay costs and expenses of such
third parties in connection with the assignment of
Assumed Contracts and Assumed Capital Leases hereunder,
Seller and KCI jointly and severally shall indemnify
and hold Buyer, First PRN, MEDIQ and any other
Affiliate of MEDIQ harmless from and against all such
costs and expenses of third parties who are parties to
an Assumed Contract or an Assumed Capital Lease in
connection with the assignment and assumption of the
Assumed Contracts and Assumed Capital Leases in
connection with the consummation of the transactions
contemplated herein (but, in all cases other than with
respect to the assignment and assumption of the
Citicorp Lease, only to the extent such Assumed
Contract or Assumed Capital Lease obligates Seller to
pay such costs and expenses)."
(d) Clause (i) of the fourth sentence of
Section 3.3(a) of the Asset Purchase Agreement is amended by changing
"amount" to "amounts".
5. Except as specifically amended hereby, the Asset
Purchase Agreement and all other documents, instruments and
agreements executed and/or delivered in connection therewith
shall remain in full force and effect and are hereby ratified and
confirmed in all respects. The Asset Purchase Agreement and this
Amendment shall be read, taken and construed as one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first above written.
KINETIC CONCEPTS, INC.
By: ______________________________ ______________________________
Name:
Title:
KCI THERAPEUTIC SERVICES, INC.
By: ______________________________ ______________________________
Name:
Title:
MEDIQ INCORPORATED
By: ______________________________ ______________________________
Name:
Title:
PRN HOLDINGS, INC.
By: ______________________________ ______________________________
Name:
Title:
MEDIQ/PRN LIFE SUPPORT
SERVICES-I, INC.
By: ______________________________ ______________________________
Name:
Title:
<PAGE>
Exhibit "A"
SCHEDULE 2.4
ALLOCATION OF CONSIDERATION
<TABLE>
<S> <C>
Cash Demand Deposits N/A
and Similar Accounts
Certificates of Deposit N/A
U.S. Government Securities,
Readily Marketable Stock or
Securities, Foreign Currency
Tangible Assets, not listed above $45,050,000 (including all
Promissory Notes not listed
below)
Intangible Assets, not listed above -0-
and not including goodwill and going
concern value
Goodwill and Going Concern Value $5,000,000 Promissory Note
in the form of Exhibit 1B,
plus remainder of
consideration
Covenant Not to Compete $2,000,000 Promissory Note
as Set Forth in Section 9.3 in the form of Exhibit 1B
</TABLE>
<PAGE>
EXHIBIT 4.1
PROMISSORY NOTE
$2,000,000
PENNSAUKEN, NEW JERSEY
September 30, 1994
FOR VALUE RECEIVED, PRN HOLDINGS, INC., a Delaware corporation ('Maker'),
hereby unconditionally promises to pay to the order of KCI THERAPEUTIC SERVICES,
INC., a Delaware corporation ('Payee'), as hereinafter provided, the principal
amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000), together with interest on
the unpaid principal balance from time to time outstanding at the rate of ten
percent (10%) per annum beginning on March 31, 1996 (the 'Interest Start Date').
All past due principal hereof and accrued unpaid interest thereon shall bear
interest from the maturity thereof until paid at the lesser of the Default Rate
(as hereinafter defined) and the maximum rate of interest per annum permitted by
applicable law. Prior to the Interest Start Date no interest shall accrue on
those portions of the outstanding principal balance hereof which are not then
past due. Interest shall be calculated on the basis of a 365 or 366 day calendar
year, as the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
'Default Rate' shall mean the sum of the Prime Rate in effect from day to
day plus five percent (5%) per annum.
'Prime Rate' shall mean the rate of interest per annum established from
time to time by Bank of America National Trust and Savings Association in San
Francisco, California ('BOA'), and designated as its reference rate of interest,
which may not necessarily be the lowest interest rate charged by BOA. In the
event that BOA does not have a rate designated by it as its reference rate, then
the Prime Rate under this Note shall be deemed to be the variable rate of
interest per annum which is the rate designated by BOA as its 'prime rate',
'base rate' or other similar rate and that Payee determines to be comparable to
the Prime Rate as described above. In the event that BOA shall cease to announce
any of the rates described in the preceding sentence, then the Prime Rate shall
be calculated using that variable rate of interest per annum established by
NationsBank of Texas, N.A., San Antonio, Texas, or such other financial
institution satisfactory to Payee, which institution may be chosen by Payee, in
its sole discretion, and changed by Payee, in its sole discretion exercised in
good faith, from time to time, any such change to become effective on the date
of such change.
This Note shall be repaid as follows:
(a) Interest, calculated on a daily basis, shall be due and payable
quarterly in arrears commencing on the 30th day of September, 1996, and
thereafter continuing regularly and quarterly on the same day of each
December, March, June, and September until September 30, 1999 (the
'Maturity Date').
(b) The outstanding principal balance hereof and any and all accrued
but unpaid interest thereon shall be due and payable in full on the
Maturity Date or upon earlier maturity hereof, whether by acceleration or
otherwise.
Payments of principal and interest shall be made in lawful money of the
United States of America by wire transfer of immediately available funds or cash
or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230 or at
such other place as Payee shall designate to Maker in writing.
Payee expressly agrees that Maker shall be entitled to offset against the
last to mature portion of the indebtedness evidenced hereby, any and all
payments owed by Payee or any of its Affiliates (as defined in the Asset
Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support Services-I,
Inc. ('PRN-I') pursuant to Section 11.1 of that certain Asset Purchase Agreement
(the 'Asset Purchase Agreement') dated August 23, 1994, as amended by Amendment
No. 1 to Asset Purchase Agreement dated as of September 30, 1994, by and among
MEDIQ Incorporated, a Delaware
<PAGE>
corporation ('MEDIQ'), PRN-I, Maker, Kinetic Concepts, Inc. ('KCI') and Payee.
Any check, draft, money order or other instrument given in payment of all or any
portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Maker may prepay this Note in whole or in part at any time without premium
or penalty. All prepayments hereunder shall be applied first to accrued but
unpaid interest, then to discharge any expenses for which Payee may be entitled
to receive reimbursement under the terms of this Note, and, lastly, to principal
due hereunder. Maker shall be required to prepay this Note in whole or in part
to the full extent of any Prepayment Offering Proceeds (as defined herein) which
may be realized from time to time from any Subsidiary Equity Offering (as
hereinafter defined) or any MEDIQ Equity Offering (as hereinafter defined). For
purposes hereof, 'Prepayment Offering Proceeds' shall mean (i) with respect to a
Subsidiary Equity Offering, an amount equal to fifty percent (50%) of the Net
Proceeds (as hereinafter defined) equal to or less than $20,000,000, or (ii)
with respect to a MEDIQ Equity Offering, an amount equal to the product obtained
by multiplying (x) an amount equal to fifty percent (50%) of the Net Proceeds
equal to or less than $20,000,000, by (y) a fraction having a numerator equal to
the total pro-forma combined gross revenues for the previous four (4) fiscal
quarters of the Subsidiaries (as defined herein) on a consolidated basis and a
denominator equal to the sum of the pro-forma unconsolidated gross revenues for
the previous four (4) fiscal quarters of MEDIQ, plus, without duplication, (a)
the sum of the products derived by multiplying (i) the pro-forma unconsolidated
gross revenues for the previous four (4) fiscal quarters of each of the
Subsidiaries by (ii) the daily average percentage of capital stock directly or
indirectly owned by MEDIQ in the respective Subsidiary over the same period,
plus (b) the sum of the products of the pro-forma unconsolidated gross revenues
for the previous four (4) fiscal quarters of each company in which, at any time
during the relevant period, twenty percent (20%) or more of the capital stock of
such company was directly or indirectly owned by MEDIQ multiplied by the daily
average percentage of capital stock directly or indirectly owned by MEDIQ in
such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ('GAAP'), other than
principles of consolidation. Notwithstanding anything contained in this Note to
the contrary, if, in connection with any MEDIQ Equity Offering, if the fraction
derived from the calculation described in clause (y) above is less than 1/2, no
mandatory prepayment shall be due. Any such mandatory prepayment will be due
five (5) business days after the Prepayment Offering Proceeds are realized by
the party entitled thereto. For purposes hereof, 'Net Proceeds' shall mean an
amount equal to the cumulative gross proceeds resulting from any and all
Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after the date
hereof, minus (x) any underwriter's fees, discounts and commissions and other
reasonable and customary fees and expenses incurred in connection with such
offerings, (y) any success fee paid to Congress Financial Corporation in
connection with such offerings, but not to exceed one-half of one percent (.5%)
of the gross proceeds resulting from such offerings, and (z) any unpaid portion
of any closing fee paid to Congress Financial Corporation, but not to exceed
$75,000 in the aggregate. For purposes hereof, a 'Subsidiary Equity Offering'
shall mean a primary or secondary offering and sale of Equity Securities (as
defined herein) of any of the Subsidiaries for cash. A 'MEDIQ Equity Offering'
shall mean a primary offering and sale of Equity Securities of MEDIQ for cash.
For purposes hereof 'Equity Securities' shall mean any (i) capital stock or
other equity interests, (ii) other right(s) with respect to any such capital
stock or other equity interests, (iii) offers, options (other than employee
stock options), obligations, warrants, rights, subscriptions, agreements, claims
of any character, or commitments of any kind (contingent or otherwise) relating
to the issuance, conversion, exchange, registration, voting, sale or transfer of
any such capital stock or equity interests, or (iv) any debenture, bond, note or
other instrument that may be converted into or exchanged for any capital stock
or other equity instrument. For purposes hereof 'Subsidiaries' or 'Subsidiary'
means Maker, MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
('PRN'), PRN-I and/or any other entity that is wholly or partially owned or
controlled by Maker. For purposes hereof an entity is 'controlled by' another
person or entity if such other person or entity is in possession, direct or
indirect, of the power to direct or cause the direction of, the management and
policies of the entity,
1
<PAGE>
whether by ownership, contract or otherwise. For purposes hereof 'pro-forma'
revenues for any entity means for any relevant period (a) the actual revenues of
said entity over the relevant period plus (b) the actual revenues during the
relevant period of any business acquired by the entity during the relevant
period, as accounted for in accordance with GAAP and Regulation S-X promulgated
by the Securities and Exchange Commission under the Securities Act of 1933. As
an example and without limiting the generality of the foregoing, the revenues of
PRN-I shall include the revenues of Payee from the Division (as defined in the
Asset Purchase Agreement) for that portion of the relevant period that precedes
the effective time of the sale of the assets under the Asset Purchase Agreement.
Any prepayment required to be made under this paragraph and the corresponding
provisions of Holdings Note 2 and Holdings Note 3 (as hereinafter defined) shall
be applied first to Holdings Note 2 and Holdings Note 3 in accordance with the
terms of Holdings Note 2 and Holdings Note 3 before being applied to this Note.
The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ pursuant to the terms of that certain Guaranty
Agreement dated of even date herewith in favor of Payee (the 'Guaranty').
The occurrence of any of the following shall constitute an Event of Default
hereunder:
(a) default in any payment by Maker hereunder when due or a default in
Maker's obligations to escrow any disputed offset amounts pursuant to the
terms of the Section 11.6 of the Asset Purchase Agreement and such default
continues uncured for five (5) days after the date any such payment or
escrow was due; provided, however, that if in any consecutive twelve (12)
month period Maker defaults two times in making payments when due hereunder
and/or timely making any required escrow deposits pursuant to the Asset
Purchase Agreement, any such subsequent default shall immediately
constitute an Event of Default hereunder without the passage of any grace
period; (b) any other default occurs under this Note and such default
remains uncured for thirty (30) days after the delivery of notice from
Payee to Maker; (c) default occurs under the Guaranty; (d) any failure by
PRN-I, Maker or MEDIQ as the case may be, to perform and carry out, each
and every of the respective agreements and undertakings of such entities as
set forth in that certain Negative Covenants Agreement (so called herein)
dated of even date herewith and entered into by and among PRN-I, Maker,
MEDIQ, KCI and Payee; (e) any failure by MEDIQ to perform and carry out
each and every of its agreements, covenants and undertakings as set forth
in that certain Collateral Transfer of Note (Security Agreement) (so called
herein) dated of even date herewith and executed by MEDIQ in favor of
Payee; (f) sale of all or substantially all of any of PRN-I's, PRN's,
Maker's or MEDIQ's assets, or any formal action in contemplation of the
dissolution, liquidation or termination of any of PRN-I's, PRN's, Maker's,
or MEDIQ's existence; (g) institution of any proceedings by or against any
of PRN-I, PRN, Maker or MEDIQ under any law relating to bankruptcy,
insolvency, reorganization or other form of debtor relief or any of
PRN-I's, PRN's Maker's or MEDIQ's making an assignment for the benefit of
creditors, or the appointment of a receiver, trustee, conservator or other
judicial representative for any of PRN-I, PRN, Maker or MEDIQ or any of
PRN-I's, PRN's, Maker's or MEDIQ's property, unless, in the case of any
such proceeding or appointment not instituted by any of PRN-I, PRN, Maker,
or MEDIQ, such proceeding or appointment is dismissed within sixty (60)
days; (h) the occurrence of any Change of Control (as hereinafter defined)
without the prior written consent of Payee; or (i) the failure of any
Subsidiary to make any payment when due under any indebtedness of any
Subsidiary in excess of $3,000,000.00 or the occurrence of any breach,
default or event of default under any such indebtedness that results in the
acceleration of the maturity of any such indebtedness.
Upon the occurrence of any Event of Default, the unpaid principal balance
hereof, together with accrued unpaid interest thereon, shall, at the option of
Payee, immediately become due and payable without presentment, protest, demand,
notice of intention to accelerate, notice of acceleration, notice of
non-payment, notice of protest, or other notice of any kind, all of which are
hereby expressly waived by Maker. If this Note is not paid at maturity, however
such maturity may be brought about, and the same is placed in the hands of an
attorney for collection, and/or if this Note is collected by suit or
2
<PAGE>
through bankruptcy, or other legal proceedings, the Maker agrees to pay all
reasonable attorney's fees, court costs and other expenses incurred by Payee in
connection with such collection efforts.
Payee agrees that this Note is subject to the terms and provisions of the
Subordination and Standstill Agreement executed by and among Congress Financial
Corporation, Maker and Payee dated of even date herewith.
No failure or delay on the part of Payee to insist on strict performance of
Maker's obligations hereunder or to exercise any remedy shall constitute a
waiver of Payee's rights in that or any other instance. No waiver of any of
Payee's rights shall be effective unless in writing, and any waiver of any
default or any instance of non-compliance shall be limited to its express terms
and shall not extend to any other default or instance of non-compliance.
Any notice or communication required or permitted hereunder shall be in
writing and shall be sent either by (a) personal delivery service with charges
therefor billed to shipper, (b) expedited delivery service with charges therefor
billed to shipper, (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by expedited
delivery service or by mail in the manner previously described) addressed to
Maker or Payee, as the case may be, at the address set forth in the Asset
Purchase Agreement, or at such other address as Maker or Payee may have
designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date of
deposit in a post office or other official depository under the care and custody
of the United States Postal Service, if sent by United States Mail, or (iii) on
the date of delivery to any expedited delivery service.
Notwithstanding anything contained herein to the contrary, the term 'Payee'
shall mean the party so defined as Payee in the first paragraph of this Note for
so long as such party is the holder of this Note and, thereafter, shall mean, at
any time, the then holder of this Note. Maker and any and all sureties,
guarantors and endorsers of this Note and all other parties now or hereafter
liable hereon, severally waive grace, demand, presentment for payment, protest,
notice of any kind (including, but not limited to, notice of dishonor, notice of
protest, notice of intention to accelerate and notice of acceleration) and
diligence in collecting and bringing suit against any party hereto and agree (i)
to all extensions and partial payments, with or without notice, before or after
maturity, (ii) to any substitution, exchange or release of any security now or
hereafter given for this Note, (iii) to the release of any party primarily or
secondarily liable hereon, and (iv) that it will not be necessary for Payee, in
order to enforce payment of this Note, to first institute or exhaust Payee's
remedies against Maker or any other party liable therefor or against any
security for this Note.
Notwithstanding anything to the contrary contained in this Note or in any
other agreement entered into in connection herewith or securing the indebtedness
evidenced hereby, whether now existing or hereafter arising and whether written
or oral, it is agreed that the aggregate of all interest and any other charges
constituting interest, or adjudicated as constituting interest, and contracted
for, chargeable or receivable under this Note or otherwise in connection with
the debt evidenced hereby, shall under no circumstances exceed the maximum
amount of interest permitted by applicable law. In the event the maturity of
this Note is accelerated by reason of an election by the holder hereof resulting
from a default hereunder or under any other document executed as security
herefor or in connection herewith, or by voluntary prepayment by Maker or
otherwise, then earned interest may never include more than the maximum rate of
interest permitted by applicable law. If from any circumstance any holder of
this Note shall ever receive interest or any other charges constituting
interest, or adjudicated as constituting interest, the amount, if any, of which
would exceed the maximum rate of interest permitted by applicable law (the
'Excess Interest'), then the Excess Interest shall be applied to the reduction
of the principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal hereof
and such other indebtedness, then that portion of the Excess Interest which
exceeds the unpaid balance of principal hereof and such other indebtedness shall
be refunded to Maker.
3
<PAGE>
All sums paid or agreed to be paid to the holder of this Note for the use,
forbearance or detention of the indebtedness of Maker to the holder of this Note
shall be amortized, prorated, allocated and spread throughout the full term of
such indebtedness until payment in full so that the actual rate of interest on
account of such indebtedness is uniform throughout the term thereof.
Any provision hereof found to be illegal, invalid or unenforceable for any
reason whatsoever shall not affect the validity, legality or enforceability of
the remainder hereof.
This Note shall be binding upon Maker's successors and assigns and shall
inure to the benefit of Payee and its successors and permitted assigns; provided
that Payee may not transfer or assign this Note or any right or interest herein
to any person or entity without Maker's prior written consent.
Maker recognizes and acknowledges that contemporaneously herewith (i) Maker
has delivered to Payee that certain other Promissory Note ('Holdings Note 2')
dated of even date herewith, being in the original principal amount of
$5,000,000 to Payee, (ii) Maker has delivered to Payee that certain other
Promissory Note ('Holdings Note 3'), dated of even date herewith, being in the
original principal amount of $3,000,000 to Payee, (iii) PRN has delivered to
Payee that certain Promissory Note ('Acquisition Note') in the original
principal amount of $5,835,707 and payable to the order of Payee and (iv) PRN-I
has delivered that certain Promissory Note ('$2,956,957 Note') dated of even
date herewith, in the original principal amount of $2,956,957 and being payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under, or with respect to Holdings Note 2, Holdings Note 3, the Acquisition
Note, and/or the $2,956,957 Note, or under any other instruments relating
thereto, shall also constitute an Event of Default hereunder, entitling Payee to
pursue all rights, remedies and recourses available to it, including
acceleration of this Note and foreclosure of any liens securing repayment
hereof.
This Note shall be construed and interpreted in accordance with, and all
issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the validity and/or enforceability of this Note
or any portion of this Note) shall be governed by, the laws of the State of
Delaware (other than the conflict of law rules of the State of Delaware), except
as otherwise required by mandatory provisions of applicable law and except to
the extent that remedies provided by the laws of any state other than Delaware
are governed by the laws of said state.
The following definitions shall apply with respect to the provisions set
forth above:
'Change of Control' means (a) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) by (i) any Person (as hereinafter defined) (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d) (3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of MEDIQ such that, as a result of
such acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, a
majority of MEDIQ's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of MEDIQ or (B) otherwise
has the ability to elect, directly or indirectly, a majority of the members of
MEDIQ's Board of Directors, or (b) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13(d)(3) under the Exchange Act) by (i) any Person (other than a Permitted
Holder) or (ii) any Persons who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Permitted Holders), in either
case, of any securities of any Subsidiary such that, as a result of such
acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13(d)(3) under the Exchange Act), directly or indirectly, a
majority of such Subsidiary's then outstanding voting securities entitled to
vote on a regular basis for a majority of the Board of Directors of such
Subsidiary or (B) otherwise has the ability to elect, directly or indirectly, a
majority of the members of such Subsidiary's of Board of Directors.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Permitted Holder' means (i) with respect to MEDIQ, the current
executive officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual
Report on Form 10-K for the fiscal year
4
<PAGE>
ended September 30, 1993 (the 'Executive Officers'), (ii) with respect to
Maker, the Executive Officers and/or MEDIQ, and (iii) with respect to PRN
and PRN-I, the Executive Officers, MEDIQ and/or Maker and (iv) with respect
to MEDIQ, PRN, PRN-I and Maker, Persons identified under the caption
'Security Ownership of Certain Beneficial Owners and Management' in MEDIQ's
1994 Proxy Statement.
'Person' shall include an individual, a corporation, a joint venture, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
duly executed and delivered this instrument.
PRN HOLDINGS, INC.,
a Delaware corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
5
<PAGE>
EXHIBIT 4.2
PROMISSORY NOTE
$3,000,000
Pennsauken, New Jersey
September 30, 1994
FOR VALUE RECEIVED, PRN HOLDINGS, INC., a Delaware corporation ('Maker'),
hereby unconditionally promises to pay to the order of KCI THERAPEUTIC SERVICES,
INC., a Delaware corporation ('Payee'), as hereinafter provided, the principal
amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000), together with interest
on the unpaid principal balance from time to time outstanding at the rate of ten
percent (10%) per annum beginning on March 31, 1996 (the 'Interest Start Date').
All past due principal hereof and accrued unpaid interest thereon shall bear
interest from the maturity thereof until paid at the lesser of the Default Rate
(as hereinafter defined) and the maximum rate of interest per annum permitted by
applicable law. Prior to the Interest Start Date no interest shall accrue on
those portions of the outstanding principal balance hereof which are not then
past due. Interest shall be calculated on the basis of a 365 or 366 day calendar
year, as the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
'Default Rate' shall mean the sum of the Prime Rate in effect from day to
day plus five percent (5%) per annum.
'Prime Rate' shall mean the rate of interest per annum established from
time to time by Bank of America National Trust and Savings Association in San
Francisco, California ('BOA'), and designated as its reference rate of interest,
which may not necessarily be the lowest interest rate charged by BOA. In the
event that BOA does not have a rate designated by it as its reference rate, then
the Prime Rate under this Note shall be deemed to be the variable rate of
interest per annum which is the rate designated by BOA as its 'prime rate',
'base rate' or other similar rate and that Payee determines to be comparable to
the Prime Rate as described above. In the event that BOA shall cease to announce
any of the rates described in the preceding sentence, then the Prime Rate shall
be calculated using that variable rate of interest per annum established by
NationsBank of Texas, N.A., San Antonio, Texas, or such other financial
institution satisfactory to Payee, which institution may be chosen by Payee, in
its sole discretion, and changed by Payee, in its sole discretion exercised in
good faith, from time to time, any such change to become effective on the date
of such change.
This Note shall be repaid as follows:
(a) Interest, calculated on a daily basis, shall be due and payable
quarterly in arrears commencing on the 30th day of September, 1996, and
thereafter continuing regularly and quarterly on the same day of each
December, March, June, and September until September 30, 1999 (the
'Maturity Date').
(b) The outstanding principal balance hereof and any and all accrued
but unpaid interest thereon shall be due and payable in full on the
Maturity Date or upon earlier maturity hereof, whether by acceleration or
otherwise.
Payments of principal and interest shall be made in lawful money of the
United States of America by wire transfer of immediately available funds or cash
or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230 or at
such other place as Payee shall designate to Maker in writing.
Payee expressly agrees that Maker shall be entitled to offset against the
last to mature portion of the indebtedness evidenced hereby, any and all
payments owed by Payee or any of its Affiliates (as defined in the Asset
Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support Services-I,
Inc. ('PRN-I') pursuant to Section 11.1 of that certain Asset Purchase Agreement
(the 'Asset Purchase Agreement') dated August 23, 1994, as amended by Amendment
No. 1 to Asset Purchase Agreement dated as of September 30, 1994, by and among
MEDIQ Incorporated, a Delaware corporation ('MEDIQ'), PRN-I, Maker, Kinetic
Concepts, Inc. ('KCI') and Payee.
<PAGE>
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Maker may prepay this Note in whole or in part at any time without premium
or penalty. All prepayments hereunder shall be applied first to accrued but
unpaid interest, then to discharge any expenses for which Payee may be entitled
to receive reimbursement under the terms of this Note, and, lastly, to principal
due hereunder. Maker shall be required to prepay this Note in whole or in part
to the full extent of any Prepayment Offering Proceeds (as defined herein) which
may be realized from time to time from any Subsidiary Equity Offering (as
hereinafter defined) or any MEDIQ Equity Offering (as hereinafter defined). For
purposes hereof, 'Prepayment Offering Proceeds' shall mean (i) with respect to a
Subsidiary Equity Offering, an amount equal to fifty percent (50%) of the Net
Proceeds (as hereinafter defined) equal to or less than $20,000,000, or (ii)
with respect to a MEDIQ Equity Offering, an amount equal to the product obtained
by multiplying (x) an amount equal to fifty percent (50%) of the Net Proceeds
equal to or less than $20,000,000, by (y) a fraction having a numerator equal to
the total pro-forma combined gross revenues for the previous four (4) fiscal
quarters of the Subsidiaries (as defined herein) on a consolidated basis and a
denominator equal to the sum of the pro-forma unconsolidated gross revenues for
the previous four (4) fiscal quarters of MEDIQ, plus, without duplication, (a)
the sum of the products derived by multiplying (i) the pro-forma unconsolidated
gross revenues for the previous four (4) fiscal quarters of each of the
Subsidiaries by (ii) the daily average percentage of capital stock directly or
indirectly owned by MEDIQ in the respective Subsidiary over the same period,
plus (b) the sum of the products of the pro-forma unconsolidated gross revenues
for the previous four (4) fiscal quarters of each company in which, at any time
during the relevant period, twenty percent (20%) or more of the capital stock of
such company was directly or indirectly owned by MEDIQ multiplied by the daily
average percentage of capital stock directly or indirectly owned by MEDIQ in
such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ('GAAP'), other than
principles of consolidation. Notwithstanding anything contained in this Note to
the contrary, if, in connection with any MEDIQ Equity Offering, if the fraction
derived from the calculation described in clause (y) above is less than 1/2, no
mandatory prepayment shall be due. Any such mandatory prepayment will be due
five (5) business days after the Prepayment Offering Proceeds are realized by
the party entitled thereto. For purposes hereof, 'Net Proceeds' shall mean an
amount equal to the cumulative gross proceeds resulting from any and all
Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after the date
hereof, minus (x) any underwriter's fees, discounts and commissions and other
reasonable and customary fees and expenses incurred in connection with such
offerings, (y) any success fee paid to Congress Financial Corporation in
connection with such offerings, but not to exceed one-half of one percent (.5%)
of the gross proceeds resulting from such offerings, and (z) any unpaid portion
of any closing fee paid to Congress Financial Corporation, but not to exceed
$75,000 in the aggregate. For purposes hereof, a 'Subsidiary Equity Offering'
shall mean a primary or secondary offering and sale of Equity Securities (as
defined herein) of any of the Subsidiaries for cash. A 'MEDIQ Equity Offering'
shall mean a primary offering and sale of Equity Securities of MEDIQ for cash.
For purposes hereof 'Equity Securities' shall mean any (i) capital stock or
other equity interests, (ii) other right(s) with respect to any such capital
stock or other equity interests, (iii) offers, options (other than employee
stock options), obligations, warrants, rights, subscriptions, agreements, claims
of any character, or commitments of any kind (contingent or otherwise) relating
to the issuance, conversion, exchange, registration, voting, sale or transfer of
any such capital stock or equity interests, or (iv) any debenture, bond, note or
other instrument that may be converted into or exchanged for any capital stock
or other equity instrument. For purposes hereof 'Subsidiaries' or 'Subsidiary'
means Maker, MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
('PRN'), PRN-I and/or any other entity that is wholly or partially owned or
controlled by Maker. For purposes hereof an entity is 'controlled by' another
person or entity if such other person or entity is in possession, direct or
indirect, of the power to direct or cause the direction of, the management and
policies of the entity, whether by ownership, contract or otherwise. For
purposes hereof 'pro-forma' revenues for any entity
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means for any relevant period (a) the actual revenues of said entity over the
relevant period plus (b) the actual revenues during the relevant period of any
business acquired by the entity during the relevant period, as accounted for in
accordance with GAAP and Regulation S-X promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. As an example and without
limiting the generality of the foregoing, the revenues of PRN-I shall include
the revenues of Payee from the Division (as defined in the Asset Purchase
Agreement) for that portion of the relevant period that precedes the effective
time of the sale of the assets under the Asset Purchase Agreement. A prepayment
required to be made under this paragraph and the corresponding provisions of
Holdings Note 2 (as hereinafter defined) shall be applied first to Holdings Note
2 in accordance with the terms of Holdings Note 2 before being applied to this
Note.
The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ pursuant to the terms of that certain Guaranty
Agreement dated of even date herewith in favor of Payee (the 'Guaranty').
The occurrence of any of the following shall constitute an Event of Default
hereunder: (a) default in any payment by Maker hereunder when due or a default
in Maker's obligations to escrow any disputed offset amounts pursuant to the
terms of the Section 11.6 of the Asset Purchase Agreement and such default
continues uncured for five (5) days after the date any such payment or escrow
was due; provided, however, that if in any consecutive twelve (12) month period
Maker defaults two times in making payments when due hereunder and/or timely
making any required escrow deposits pursuant to the Asset Purchase Agreement,
any such subsequent default shall immediately constitute an Event of Default
hereunder without the passage of any grace period; (b) any other default occurs
under this Note and such default remains uncured for thirty (30) days after the
delivery of notice from Payee to Maker; (c) default occurs under the Guaranty;
(d) any failure by PRN-I, Maker or MEDIQ as the case may be, to perform and
carry out, each and every of the respective agreements and undertakings of such
entities as set forth in that certain Negative Covenants Agreement (so called
herein) dated of even date herewith and entered into by and among PRN-I, Maker,
MEDIQ, KCI and Payee; (e) any failure by MEDIQ to perform and carry out each and
every of its agreements, covenants and undertakings as set forth in that certain
Collateral Transfer of Note (Security Agreement) (so called herein) dated of
even date herewith and executed by MEDIQ in favor of Payee; (f) sale of all or
substantially all of any of PRN-I's, PRN's, Maker's or MEDIQ's assets, or any
formal action in contemplation of the dissolution, liquidation or termination of
any of PRN-I's, PRN's, Maker's, or MEDIQ's existence; (g) institution of any
proceedings by or against any of PRN-I, PRN, Maker or MEDIQ under any law
relating to bankruptcy, insolvency, reorganization or other form of debtor
relief or any of PRN-I's, PRN's Maker's or MEDIQ's making an assignment for the
benefit of creditors, or the appointment of a receiver, trustee, conservator or
other judicial representative for any of PRN-I, PRN, Maker or MEDIQ or any of
PRN-I's, PRN's, Maker's or MEDIQ's property, unless, in the case of any such
proceeding or appointment not instituted by any of PRN-I, PRN, Maker, or MEDIQ,
such proceeding or appointment is dismissed within sixty (60) days; (h) the
occurrence of any Change of Control (as hereinafter defined) without the prior
written consent of Payee; or (i) the failure of any Subsidiary to make any
payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default under
any such indebtedness that results in the acceleration of the maturity of any
such indebtedness.
Upon the occurrence of any Event of Default, the unpaid principal balance
hereof, together with accrued unpaid interest thereon, shall, at the option of
Payee, immediately become due and payable without presentment, protest, demand,
notice of intention to accelerate, notice of acceleration, notice of
non-payment, notice of protest, or other notice of any kind, all of which are
hereby expressly waived by Maker. If this Note is not paid at maturity, however
such maturity may be brought about, and the same is placed in the hands of an
attorney for collection, and/or if this Note is collected by suit or through
bankruptcy, or other legal proceedings, the Maker agrees to pay all reasonable
attorney's fees, court costs and other expenses incurred by Payee in connection
with such collection efforts. Payee agrees that this Note is subject to the
terms and provisions of the Subordination and Standstill
2
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Agreement executed by and among Congress Financial Corporation, Maker and Payee
dated of even date herewith.
No failure or delay on the part of Payee to insist on strict performance of
Maker's obligations hereunder or to exercise any remedy shall constitute a
waiver of Payee's rights in that or any other instance. No waiver of any of
Payee's rights shall be effective unless in writing, and any waiver of any
default or any instance of non-compliance shall be limited to its express terms
and shall not extend to any other default or instance of non-compliance.
Any notice or communication required or permitted hereunder shall be in
writing and shall be sent either by (a) personal delivery service with charges
therefor billed to shipper, (b) expedited delivery service with charges therefor
billed to shipper, (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by expedited
delivery service or by mail in the manner previously described) addressed to
Maker or Payee, as the case may be, at the address set forth in the Asset
Purchase Agreement, or at such other address as Maker or Payee may have
designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date of
deposit in a post office or other official depository under the care and custody
of the United States Postal Service, if sent by United States Mail, or (iii) on
the date of delivery to any expedited delivery service.
Notwithstanding anything contained herein to the contrary, the term 'Payee'
shall mean the party so defined as Payee in the first paragraph of this Note for
so long as such party is the holder of this Note and, thereafter, shall mean, at
any time, the then holder of this Note.
Maker and any and all sureties, guarantors and endorsers of this Note and
all other parties now or hereafter liable hereon, severally waive grace, demand,
presentment for payment, protest, notice of any kind (including, but not limited
to, notice of dishonor, notice of protest, notice of intention to accelerate and
notice of acceleration) and diligence in collecting and bringing suit against
any party hereto and agree (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for Payee, in order to enforce payment of this Note, to
first institute or exhaust Payee's remedies against Maker or any other party
liable therefor or against any security for this Note.
Notwithstanding anything to the contrary contained in this Note or in any
other agreement entered into in connection herewith or securing the indebtedness
evidenced hereby, whether now existing or hereafter arising and whether written
or oral, it is agreed that the aggregate of all interest and any other charges
constituting interest, or adjudicated as constituting interest, and contracted
for, chargeable or receivable under this Note or otherwise in connection with
the debt evidenced hereby, shall under no circumstances exceed the maximum
amount of interest permitted by applicable law. In the event the maturity of
this Note is accelerated by reason of an election by the holder hereof resulting
from a default hereunder or under any other document executed as security
herefor or in connection herewith, or by voluntary prepayment by Maker or
otherwise, then earned interest may never include more than the maximum rate of
interest permitted by applicable law. If from any circumstance any holder of
this Note shall ever receive interest or any other charges constituting
interest, or adjudicated as constituting interest, the amount, if any, of which
would exceed the maximum rate of interest permitted by applicable law (the
'Excess Interest'), then the Excess Interest shall be applied to the reduction
of the principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal hereof
and such other indebtedness, then that portion of the Excess Interest which
exceeds the unpaid balance of principal hereof and such other indebtedness shall
be refunded to Maker. All sums paid or agreed to be paid to the holder of this
Note for the use, forbearance or detention of the indebtedness of Maker to the
holder of this Note shall be amortized, prorated, allocated and spread
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throughout the full term of such indebtedness until payment in full so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term thereof.
Any provision hereof found to be illegal, invalid or unenforceable for any
reason whatsoever shall not affect the validity, legality or enforceability of
the remainder hereof.
This Note shall be binding upon Maker's successors and assigns and shall
inure to the benefit of Payee and its successors and permitted assigns; provided
that Payee may not transfer or assign this Note or any right or interest herein
to any person or entity without Maker's prior written consent.
Maker recognizes and acknowledges that contemporaneously herewith (i) Maker
has delivered to Payee that certain other Promissory Note ('Holdings Note 2')
dated of even date herewith, being in the original principal amount of
$5,000,000 to Payee, (ii) Maker has delivered to Payee that certain other
Promissory Note ('Holdings Note 3'), dated of even date herewith, being in the
original principal amount of $2,000,000 to Payee, (iii) PRN has delivered to
Payee that certain Promissory Note ('Acquisition Note') in the original
principal amount of $5,835,707 and payable to the order of Payee and (iv) PRN-I
has delivered that certain Promissory Note ('$2,956,957 Note') dated of even
date herewith, in the original principal amount of $2,956,957 and being payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under, or with respect to Holdings Note 2, Holdings Note 3, the Acquisition
Note, and/or the $2,956,957 Note, or under any other instruments relating
thereto, shall also constitute an Event of Default hereunder, entitling Payee to
pursue all rights, remedies and recourses available to it, including
acceleration of this Note and foreclosure of any liens securing repayment
hereof.
This Note shall be construed and interpreted in accordance with, and all
issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the validity and/or enforceability of this Note
or any portion of this Note) shall be governed by, the laws of the State of
Delaware (other than the conflict of law rules of the State of Delaware), except
as otherwise required by mandatory provisions of applicable law and except to
the extent that remedies provided by the laws of any state other than Delaware
are governed by the laws of said state.
The following definitions shall apply with respect to the provisions set
forth above:
'Change of Control' means (a) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) by (i) any Person (as hereinafter defined) (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d) (3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of MEDIQ such that, as a result of
such acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, a
majority of MEDIQ's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of MEDIQ or (B) otherwise
has the ability to elect, directly or indirectly, a majority of the members of
MEDIQ's Board of Directors, or (b) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13(d)(3) under the Exchange Act) by (i) any Person (other than a Permitted
Holder) or (ii) any Persons who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Permitted Holders), in either
case, of any securities of any Subsidiary such that, as a result of such
acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13(d)(3) under the Exchange Act), directly or indirectly, a
majority of such Subsidiary's then outstanding voting securities entitled to
vote on a regular basis for a majority of the Board of Directors of such
Subsidiary or (B) otherwise has the ability to elect, directly or indirectly, a
majority of the members of such Subsidiary's of Board of Directors.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Permitted Holder' means (i) with respect to MEDIQ, the current executive
officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 (the 'Executive Officers'), (ii)
with respect to Maker, the Executive Officers and/or MEDIQ, and (iii) with
respect to PRN and PRN-I, the Executive Officers, MEDIQ and/or Maker and
4
<PAGE>
(iv) with respect to MEDIQ, PRN, PRN-I and Maker, Persons identified under the
caption 'Security Ownership of Certain Beneficial Owners and Management' in
MEDIQ's 1994 Proxy Statement.
'Person' shall include an individual, a corporation, a joint venture, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
duly executed and delivered this instrument.
PRN HOLDINGS, INC.,
a Delaware corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
5
<PAGE>
EXHIBIT 4.3
PROMISSORY NOTE
$5,000,000
Pennsauken, New Jersey
September 30, 1994
FOR VALUE RECEIVED, PRN HOLDINGS, INC., a Delaware corporation ('Maker'),
hereby unconditionally promises to pay to the order of KCI THERAPEUTIC SERVICES,
INC., a Delaware corporation ('Payee'), as hereinafter provided, the principal
amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000), together with interest
on the unpaid principal balance from time to time outstanding at the rate of ten
percent (10%) per annum beginning on March 31, 1996 (the 'Interest Start Date').
All past due principal hereof and accrued unpaid interest thereon shall bear
interest from the maturity thereof until paid at the lesser of the Default Rate
(as hereinafter defined) and the maximum rate of interest per annum permitted by
applicable law. Prior to the Interest Start Date no interest shall accrue on
those portions of the outstanding principal balance hereof which are not then
past due. Interest shall be calculated on the basis of a 365 or 366 day calendar
year, as the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
'Default Rate' shall mean the sum of the Prime Rate in effect from day to
day plus five percent (5%) per annum.
'Prime Rate' shall mean the rate of interest per annum established from
time to time by Bank of America National Trust and Savings Association in San
Francisco, California ('BOA'), and designated as its reference rate of interest,
which may not necessarily be the lowest interest rate charged by BOA. In the
event that BOA does not have a rate designated by it as its reference rate, then
the Prime Rate under this Note shall be deemed to be the variable rate of
interest per annum which is the rate designated by BOA as its 'prime rate',
'base rate' or other similar rate and that Payee determines to be comparable to
the Prime Rate as described above. In the event that BOA shall cease to announce
any of the rates described in the preceding sentence, then the Prime Rate shall
be calculated using that variable rate of interest per annum established by
NationsBank of Texas, N.A., San Antonio, Texas, or such other financial
institution satisfactory to Payee, which institution may be chosen by Payee, in
its sole discretion, and changed by Payee, in its sole discretion exercised in
good faith, from time to time, any such change to become effective on the date
of such change.
This Note shall be repaid as follows:
(a) Interest, calculated on a daily basis, shall be due and payable
quarterly in arrears commencing on the 30th day of September, 1996, and
thereafter continuing regularly and quarterly on the last day of each
December, March, June, and September until September 30, 1999 (the
'Maturity Date').
(b) The outstanding principal balance hereof and any and all accrued
but unpaid interest thereon shall be due and payable in full on the
Maturity Date or upon earlier maturity hereof, whether by acceleration or
otherwise.
Payments of principal and interest shall be made in lawful money of the
United States of America by wire transfer of immediately available funds or cash
or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230 or at
such other place as Payee shall designate to Maker in writing.
Payee expressly agrees that Maker shall be entitled to offset against the
last to mature portion of the indebtedness evidenced hereby, any and all
payments owed by Payee or any of its Affiliates (as defined in the Asset
Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support Services-I,
Inc. ('PRN-I') pursuant to Section 11.1 of that certain Asset Purchase Agreement
(the 'Asset Purchase Agreement') dated August 23, 1994, as amended by Amendment
No. 1 to Asset Purchase Agreement dated as of September 30, 1994, by and among
MEDIQ Incorporated, a Delaware corporation ('MEDIQ'), PRN-I, Maker, Kinetic
Concepts, Inc. ('KCI') and Payee.
<PAGE>
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Maker may prepay this Note in whole or in part at any time without premium
or penalty. All prepayments hereunder shall be applied first to accrued but
unpaid interest, then to discharge any expenses for which Payee may be entitled
to receive reimbursement under the terms of this Note, and, lastly, to principal
due hereunder. Maker shall be required to prepay this Note in whole or in part
to the full extent of any Prepayment Offering Proceeds (as defined herein) which
may be realized from time to time from any Subsidiary Equity Offering (as
hereinafter defined) or any MEDIQ Equity Offering (as hereinafter defined). For
purposes hereof, 'Prepayment Offering Proceeds' shall mean (i) with respect to a
Subsidiary Equity Offering, an amount equal to fifty percent (50%) of the Net
Proceeds (as hereinafter defined) equal to or less than $20,000,000, or (ii)
with respect to a MEDIQ Equity Offering, an amount equal to the product obtained
by multiplying (x) an amount equal to fifty percent (50%) of the Net Proceeds
equal to or less than $20,000,000, by (y) a fraction having a numerator equal to
the total pro-forma combined gross revenues for the previous four (4) fiscal
quarters of the Subsidiaries (as defined herein) on a consolidated basis and a
denominator equal to the sum of the pro-forma unconsolidated gross revenues for
the previous four (4) fiscal quarters of MEDIQ, plus, without duplication, (a)
the sum of the products derived by multiplying (i) the pro-forma unconsolidated
gross revenues for the previous four (4) fiscal quarters of each of the
Subsidiaries by (ii) the daily average percentage of capital stock directly or
indirectly owned by MEDIQ in the respective Subsidiary over the same period,
plus (b) the sum of the products of the pro-forma unconsolidated gross revenues
for the previous four (4) fiscal quarters of each company in which, at any time
during the relevant period, twenty percent (20%) or more of the capital stock of
such company was directly or indirectly owned by MEDIQ multiplied by the daily
average percentage of capital stock directly or indirectly owned by MEDIQ in
such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ('GAAP'), other than
principles of consolidation. Notwithstanding anything contained in this Note to
the contrary, if, in connection with any MEDIQ Equity Offering, if the fraction
derived from the calculation described in clause (y) above is less than 1/2, no
mandatory prepayment shall be due. Any such mandatory prepayment will be due
five (5) business days after the Prepayment Offering Proceeds are realized by
the party entitled thereto. For purposes hereof, 'Net Proceeds' shall mean an
amount equal to the cumulative gross proceeds resulting from any and all
Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after the date
hereof, minus (x) any underwriter's fees, discounts and commissions and other
reasonable and customary fees and expenses incurred in connection with such
offerings, (y) any success fee paid to Congress Financial Corporation in
connection with such offerings, but not to exceed one-half of one percent (.5%)
of the gross proceeds resulting from such offerings, and (z) any unpaid portion
of any closing fee paid to Congress Financial Corporation, but not to exceed
$75,000 in the aggregate. For purposes hereof, a 'Subsidiary Equity Offering'
shall mean a primary or secondary offering and sale of Equity Securities (as
defined herein) of any of the Subsidiaries for cash. A 'MEDIQ Equity Offering'
shall mean a primary offering and sale of Equity Securities of MEDIQ for cash.
For purposes hereof 'Equity Securities' shall mean any (i) capital stock or
other equity interests, (ii) other right(s) with respect to any such capital
stock or other equity interests, (iii) offers, options (other than employee
stock options), obligations, warrants, rights, subscriptions, agreements, claims
of any character, or commitments of any kind (contingent or otherwise) relating
to the issuance, conversion, exchange, registration, voting, sale or transfer of
any such capital stock or equity interests, or (iv) any debenture, bond, note or
other instrument that may be converted into or exchanged for any capital stock
or other equity instrument. For purposes hereof 'Subsidiaries' or 'Subsidiary'
means Maker, MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
('PRN'), PRN-I and/or any other entity that is wholly or partially owned or
controlled by Maker. For purposes hereof an entity is 'controlled by' another
person or entity if such other person or entity is in possession, direct or
indirect, of the power to direct or cause the direction of, the management and
policies of the entity, whether by ownership, contract or otherwise. For
purposes hereof 'pro-forma' revenues for any entity
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means for any relevant period (a) the actual revenues of said entity over the
relevant period plus (b) the actual revenues during the relevant period of any
business acquired by the entity during the relevant period, as accounted for in
accordance with GAAP and Regulation S-X promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. As an example and without
limiting the generality of the foregoing, the revenues of PRN-I shall include
the revenues of Payee from the Division (as defined in the Asset Purchase
Agreement) for that portion of the relevant period that precedes the effective
time of the sale of the assets under the Asset Purchase Agreement.
The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ pursuant to the terms of that certain Guaranty
Agreement dated of even date herewith in favor of Payee (the 'Guaranty').
The occurrence of any of the following shall constitute an Event of Default
hereunder: (a) default in any payment by Maker hereunder when due or a default
in Maker's obligations to escrow any disputed offset amounts pursuant to the
terms of the Section 11.6 of the Asset Purchase Agreement and such default
continues uncured for five (5) days after the date any such payment or escrow
was due; provided, however, that if in any consecutive twelve (12) month period
Maker defaults two times in making payments when due hereunder and/or timely
making any required escrow deposits pursuant to the Asset Purchase Agreement,
any such subsequent default shall immediately constitute an Event of Default
hereunder without the passage of any grace period; (b) any other default occurs
under this Note and such default remains uncured for thirty (30) days after the
delivery of notice from Payee to Maker; (c) default occurs under the Guaranty;
(d) any failure by PRN-I, Maker or MEDIQ as the case may be, to perform and
carry out, each and every of the respective agreements and undertakings of such
entities as set forth in that certain Negative Covenants Agreement (so called
herein) dated of even date herewith and entered into by and among PRN-I, Maker,
MEDIQ, KCI and Payee; (e) any failure by MEDIQ to perform and carry out each and
every of its agreements, covenants and undertakings as set forth in that certain
Collateral Transfer of Note (Security Agreement) (so called herein) dated of
even date herewith and executed by MEDIQ in favor of Payee; (f) sale of all or
substantially all of any of PRN-I's, PRN's, Maker's or MEDIQ's assets, or any
formal action in contemplation of the dissolution, liquidation or termination of
any of PRN-I's, PRN's, Maker's, or MEDIQ's existence; (g) institution of any
proceedings by or against any of PRN-I, PRN, Maker or MEDIQ under any law
relating to bankruptcy, insolvency, reorganization or other form of debtor
relief or any of PRN-I's, PRN's Maker's or MEDIQ's making an assignment for the
benefit of creditors, or the appointment of a receiver, trustee, conservator or
other judicial representative for any of PRN-I, PRN, Maker or MEDIQ or any of
PRN-I's, PRN's, Maker's or MEDIQ's property, unless, in the case of any such
proceeding or appointment not instituted by any of PRN-I, PRN, Maker, or MEDIQ,
such proceeding or appointment is dismissed within sixty (60) days; (h) the
occurrence of any Change of Control (as hereinafter defined) without the prior
written consent of Payee; or (i) the failure of any Subsidiary to make any
payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default under
any such indebtedness that results in the acceleration of the maturity of any
such indebtedness.
Upon the occurrence of any Event of Default, the unpaid principal balance
hereof, together with accrued unpaid interest thereon, shall, at the option of
Payee, immediately become due and payable without presentment, protest, demand,
notice of intention to accelerate, notice of acceleration, notice of
non-payment, notice of protest, or other notice of any kind, all of which are
hereby expressly waived by Maker. If this Note is not paid at maturity, however
such maturity may be brought about, and the same is placed in the hands of an
attorney for collection, and/or if this Note is collected by suit or through
bankruptcy, or other legal proceedings, the Maker agrees to pay all reasonable
attorney's fees, court costs and other expenses incurred by Payee in connection
with such collection efforts.
Payee agrees that this Note is subject to the terms and provisions of the
Subordination and Standstill Agreement executed by and among Congress Financial
Corporation, Maker and Payee dated of even date herewith. No failure or delay on
the part of Payee to insist on strict performance of Maker's obligations
hereunder or to exercise any remedy shall constitute a waiver of Payee's rights
in that or any other instance. No waiver of any of Payee's rights shall be
effective unless in writing, and
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<PAGE>
any waiver of any default or any instance of non-compliance shall be limited to
its express terms and shall not extend to any other default or instance of
non-compliance.
Any notice or communication required or permitted hereunder shall be in
writing and shall be sent either by (a) personal delivery service with charges
therefor billed to shipper, (b) expedited delivery service with charges therefor
billed to shipper, (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by expedited
delivery service or by mail in the manner previously described) addressed to
Maker or Payee, as the case may be, at the address set forth in the Asset
Purchase Agreement, or at such other address as Maker or Payee may have
designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date of
deposit in a post office or other official depository under the care and custody
of the United States Postal Service, if sent by United States Mail, or (iii) on
the date of delivery to any expedited delivery service.
Notwithstanding anything contained herein to the contrary, the term 'Payee'
shall mean the party so defined as Payee in the first paragraph of this Note for
so long as such party is the holder of this Note and, thereafter, shall mean, at
any time, the then holder of this Note.
Maker and any and all sureties, guarantors and endorsers of this Note and
all other parties now or hereafter liable hereon, severally waive grace, demand,
presentment for payment, protest, notice of any kind (including, but not limited
to, notice of dishonor, notice of protest, notice of intention to accelerate and
notice of acceleration) and diligence in collecting and bringing suit against
any party hereto and agree (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for Payee, in order to enforce payment of this Note, to
first institute or exhaust Payee's remedies against Maker or any other party
liable therefor or against any security for this Note.
Notwithstanding anything to the contrary contained in this Note or in any
other agreement entered into in connection herewith or securing the indebtedness
evidenced hereby, whether now existing or hereafter arising and whether written
or oral, it is agreed that the aggregate of all interest and any other charges
constituting interest, or adjudicated as constituting interest, and contracted
for, chargeable or receivable under this Note or otherwise in connection with
the debt evidenced hereby, shall under no circumstances exceed the maximum
amount of interest permitted by applicable law. In the event the maturity of
this Note is accelerated by reason of an election by the holder hereof resulting
from a default hereunder or under any other document executed as security
herefor or in connection herewith, or by voluntary prepayment by Maker or
otherwise, then earned interest may never include more than the maximum rate of
interest permitted by applicable law. If from any circumstance any holder of
this Note shall ever receive interest or any other charges constituting
interest, or adjudicated as constituting interest, the amount, if any, of which
would exceed the maximum rate of interest permitted by applicable law (the
'Excess Interest'), then the Excess Interest shall be applied to the reduction
of the principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal hereof
and such other indebtedness, then that portion of the Excess Interest which
exceeds the unpaid balance of principal hereof and such other indebtedness shall
be refunded to Maker. All sums paid or agreed to be paid to the holder of this
Note for the use, forbearance or detention of the indebtedness of Maker to the
holder of this Note shall be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term thereof.
Any provision hereof found to be illegal, invalid or unenforceable for any
reason whatsoever shall not affect the validity, legality or enforceability of
the remainder hereof.
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This Note shall be binding upon Maker's successors and assigns and shall
inure to the benefit of Payee and its successors and permitted assigns; provided
that Payee may not transfer or assign this Note or any right or interest herein
to any person or entity without Maker's prior written consent.
Maker recognizes and acknowledges that contemporaneously herewith (i) Maker
has delivered to Payee that certain other Promissory Note ('Holdings Note 2')
dated of even date herewith, being in the original principal amount of
$3,000,000 to Payee, (ii) Maker has delivered to Payee that certain other
Promissory Note ('Holdings Note 3'), dated of even date herewith, being in the
original principal amount of $2,000,000 to Payee, (iii) PRN has delivered to
Payee that certain Promissory Note ('Acquisition Note') in the original
principal amount of $5,835,707 and payable to the order of Payee and (iv) PRN-I
has delivered that certain Promissory Note ('$2,956,957 Note') dated of even
date herewith, in the original principal amount of $2,956,957 and being payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under, or with respect to Holdings Note 2, Holdings Note 3, the Acquisition
Note, and/or the $2,956,957 Note, or under any other instruments relating
thereto, shall also constitute an Event of Default hereunder, entitling Payee to
pursue all rights, remedies and recourses available to it, including
acceleration of this Note and foreclosure of any liens securing repayment
hereof.
This Note shall be construed and interpreted in accordance with, and all
issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the validity and/or enforceability of this Note
or any portion of this Note) shall be governed by, the laws of the State of
Delaware (other than the conflict of law rules of the State of Delaware), except
as otherwise required by mandatory provisions of applicable law and except to
the extent that remedies provided by the laws of any state other than Delaware
are governed by the laws of said state.
The following definitions shall apply with respect to the provisions set
forth above:
'Change of Control' means (a) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) by (i) any Person (as hereinafter defined) (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d) (3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of MEDIQ such that, as a result of
such acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, a
majority of MEDIQ's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of MEDIQ or (B) otherwise
has the ability to elect, directly or indirectly, a majority of the members of
MEDIQ's Board of Directors, or (b) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13(d)(3) under the Exchange Act) by (i) any Person (other than a Permitted
Holder) or (ii) any Persons who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Permitted Holders), in either
case, of any securities of any Subsidiary such that, as a result of such
acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13(d)(3) under the Exchange Act), directly or indirectly, a
majority of such Subsidiary's then outstanding voting securities entitled to
vote on a regular basis for a majority of the Board of Directors of such
Subsidiary or (B) otherwise has the ability to elect, directly or indirectly, a
majority of the members of such Subsidiary's of Board of Directors.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Permitted Holder' means (i) with respect to MEDIQ, the current executive
officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 (the 'Executive Officers'), (ii)
with respect to Maker, the Executive Officers and/or MEDIQ, and (iii) with
respect to PRN and PRN-I, the Executive Officers, MEDIQ and/or Maker and (iv)
with respect to MEDIQ, PRN, PRN-I and Maker, Persons identified under the
caption 'Security Ownership of Certain Beneficial Owners and Management' in
MEDIQ's 1994 Proxy Statement.
'Person' shall include an individual, a corporation, a joint venture, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
duly executed and delivered this instrument.
PRN HOLDINGS, INC.,
a Delaware corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
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EXHIBIT 4.4
PROMISSORY NOTE
$2,956,957.00
Pennsauken, New Jersey
September 30, 1994
FOR VALUE RECEIVED, MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC., a Delaware
corporation ('Maker'), hereby unconditionally promises to pay to the order of
KCI THERAPEUTIC SERVICES, INC., a Delaware corporation ('Payee'), in
installments as hereinafter provided, the principal amount of TWO MILLION NINE
HUNDRED FIFTY SIX THOUSAND NINE HUNDRED FIFTY SEVEN AND NO/100 DOLLARS
($2,956,957), together with interest from the date hereof on the principal
amount from time to time remaining unpaid, at the lesser of the rate of eight
percent (8%) per annum and the maximum rate of interest per annum permitted by
applicable law. All past due principal hereof and accrued unpaid interest
thereon shall bear interest from the maturity thereof until paid at the lesser
of the Default Rate (hereinafter defined) and the maximum rate of interest per
annum permitted by applicable law. Interest shall be calculated on the basis of
a 365 or 366 day calendar year, as the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
'Default Rate' shall mean the sum of the Prime Rate in effect from day
to day plus five percent (5%) per annum.
'Prime Rate' shall mean the rate of interest per annum established
from time to time by Bank of America National Trust and Savings Association
in San Francisco, California ('BOA'), and designated as its reference rate
of interest, which may not necessarily be the lowest interest rate charged
by BOA. In the event that BOA does not announce a rate designated by it as
its reference lending rate, then the Prime Rate under this Note shall be
deemed to be the variable rate of interest per annum which is the general
reference rate designated by BOA as its 'prime rate', 'base rate' or other
similar rate and which Payee determines to be comparable to the Prime Rate
as described above. In the event that BOA shall cease to have any of the
rates described in the preceding sentence, then the Prime Rate shall be
calculated using that variable rate of interest per annum established by
Nations Bank of Texas, N.A., San Antonio, Texas, or such other financial
institution satisfactory to Payee, which institution may be chosen by
Payee, or any subsequent holder hereof, in its sole discretion and changed
by Payee, or any subsequent holder hereof, in its sole discretion exercised
in good faith, from time to time, any such change to become effective on
the date of such change.
The principal amount hereof shall be repaid in equal monthly installments
of principal and interest of $310,748.17 with the first such monthly installment
being due and payable on December 31, 1994 and continuing regularly and monthly
on the last day of each successive calendar month thereafter until September 30,
1995 (the 'Maturity Date'), on which date the entire outstanding unpaid
principal balance hereof, together with all accrued and unpaid interest thereon,
shall be due and payable.
Payments of principal and interest, shall be made in lawful money of the
United States of America by wire transfer of immediately available funds or cash
or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230 or at
such other place as Payee shall designate to Maker in writing.
Payee expressly agrees that Maker shall be entitled to offset against the
last to mature portion of the indebtedness evidenced hereby, any and all
payments owed by Payee or any of its Affiliates (as defined in the Asset
Purchase Agreement (hereinafter defined)) to Maker pursuant to Section 11.1 of
that certain Asset Purchase Agreement (the 'Asset Purchase Agreement') dated
August 23, 1994, as amended by Amendment No. 1 to Asset Purchase Agreement dated
as of September 30, 1994, by and among MEDIQ Incorporated, a Delaware
corporation ('MEDIQ'), Maker, PRN Holdings, Inc. ('Holdings'), Kinetic Concepts,
Inc. ('KCI') and Payee.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not
<PAGE>
constitute payment hereunder or diminish any rights of Payee except to the
extent that actual cash proceeds of such instrument are unconditionally received
by Payee.
Maker may prepay this Note in whole or in part at any time without premium
or penalty. All prepayments hereunder shall be applied first to accrued but
unpaid interest, then to discharge any expenses for which Payee may be entitled
to receive reimbursement under the terms of this Note, and lastly, to
installments of principal due hereunder in the inverse order of their maturity.
Subject to the subordination contained herein, Maker shall be required to prepay
this Note in whole or in part to the full extent of any Prepayment Offering
Proceeds (as hereinafter defined ) which may be realized from time to time from
any Subsidiary Equity Offering as defined herein) or any MEDIQ Equity Offering
(as hereinafter defined). For purposes hereof 'Prepayment Offering Proceeds'
shall mean (i) with respect to a Subsidiary Equity Offering, an amount equal to
fifty percent (50%) of the Net Proceeds (as hereinafter defined) equal to or
less than $20,000,000 or (ii) with respect to a MEDIQ Equity Offering, an amount
equal to the product obtained by multiplying (x) an amount equal to fifty
percent (50%) of the Net Proceeds equal to or less than $20,000,000 by (y) a
fraction having a numerator equal to the total pro forma combined gross revenues
for the previous four (4) fiscal quarters of the Subsidiaries (as defined
herein) on a consolidated basis and a denominator equal to the sum of the
pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of MEDIQ, plus, without duplication, (a) the sum of the products
derived by multiplying (i) the pro-forma unconsolidated gross revenues for the
previous four (4) fiscal quarters of each of the Subsidiaries by (ii) the daily
average percentage of capital stock directly or indirectly owned by MEDIQ in the
respective Subsidiary over the same period, plus (b) the sum of the products of
the pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of each company in which, at any time during the relevant period,
twenty percent (20%) or more of the capital stock of such company was directly
or indirectly owned by MEDIQ multiplied by the daily average percentage of
capital stock directly or indirectly owned by MEDIQ in such company during the
relevant period, all as determined using generally accepted accounting
principles consistently applied ('GAAP'), other than principles of
consolidation. Notwithstanding anything contained in this Note to the contrary,
if, in connection with any MEDIQ Equity Offering, if the fraction derived from
the calculation described in clause (y) above is less than 1/2, no mandatory
prepayment shall be due. Any such mandatory prepayment will be due five (5)
business days after the Prepayment Offering Proceeds are realized by the party
entitled thereto. For purposes hereof, 'Net Proceeds' shall mean an amount equal
to the cumulative gross proceeds resulting from any and all Subsidiary Equity
Offerings and MEDIQ Equity Offerings, from and after the date hereof, minus (x)
any underwriter's fees, discounts and commissions and other reasonable and
customary fees and expenses incurred in connection with such offerings, (y) any
success fee paid to Congress Financial Corporation in connection with such
offerings, but not to exceed one-half of one percent (.5%) of the gross proceeds
resulting from such offerings, and (z) any unpaid portion of any closing fee
paid to Congress Financial Corporation, but not to exceed $75,0000 in the
aggregate. For purposes hereof, a 'Subsidiary Equity Offering' shall mean a
primary or secondary offering and sale of Equity Securities (as defined herein)
of any of the Subsidiaries for cash. A 'MEDIQ Equity Offering' shall mean a
primary offering and sale of Equity Securities of MEDIQ for cash. For purposes
hereof 'Equity Securities' shall mean any (i) capital stock or other equity
interests, (ii) other right(s) with respect to any such capital stock or other
equity interests, (iii) offers, options (other than employee stock options),
obligations, warrants, rights, subscriptions, agreements, claims of any
character, or commitments of any kind (contingent or otherwise) relating to the
issuance, conversion, exchange, registration, voting, sale or transfer of any
such capital stock or equity interests, or (iv) any debenture, bond, note or
other instrument that may be converted into or exchanged for any capital stock
or other equity instrument. For purposes hereof 'Subsidiaries' or 'Subsidiary'
means Holdings, MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
('PRN'), Maker, and/or any other entity that is wholly or partially owned or
controlled by Holdings. For purposes hereof an entity is 'controlled by' another
person or entity if such other person or entity is in possession, direct or
indirect, of the power to direct or cause the direction of, the management and
policies of the entity, whether by ownership, contract or otherwise. For
purposes hereof 'pro-forma' revenues for any entity means for any relevant
period (a) the actual revenues of said entity over the relevant period plus (b)
the
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<PAGE>
actual revenues during the relevant period of any business acquired by the
entity during the relevant period, as accounted for in accordance with GAAP and
Regulation S-X promulgated by the Securities and Exchange Commission under the
Securities Act of 1933. As an example and without limiting the generality of the
foregoing, the revenues of Maker shall include the revenues of Payee from the
Division (as defined in the Asset Purchase Agreement) for that portion of the
relevant period that precedes the effective time of the sale of the assets under
the Asset Purchase Agreement. Notwithstanding anything contained herein to the
contrary, the mandatory prepayment provisions set forth herein are and shall at
all times be subordinate to the repayment of the Holdings Notes (each as
hereinafter defined) and Maker shall have no obligation to make any mandatory
prepayments to the extent, but only to the extent, that there remains any unpaid
principal and/or interest under the Holdings Notes at the time any Prepayment
Offering Proceeds are realized by the party entitled to such proceeds; provided,
however, that the foregoing shall not apply in the event that at the time any
Prepayment Offering Proceeds are realized payment of the Holdings Notes is
prohibited or restricted.
The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ and Holdings pursuant to the terms of two (2)
certain Guaranty Agreements dated of even date herewith, in favor of Payee and
executed by MEDIQ and Holdings, respectively, (respectively, the 'MEDIQ
Guaranty' and the 'Holdings Guaranty').
The occurrence of any of the following shall constitute an Event of Default
hereunder: (a) default in any payment by Maker hereunder when due or a default
in Maker's obligations to escrow any disputed offset amounts pursuant to the
terms of the Section 11.6 of the Asset Purchase Agreement and such default
continues uncured for five (5) days after the date any such payment or escrow
was due; provided, however, that if in any consecutive twelve (12) month period
Maker defaults two times in making payments when due hereunder and/or timely
making any required escrow deposits pursuant to the Asset Purchase Agreement,
any such subsequent default shall immediately constitute an Event of Default
hereunder without the passage of any grace period; (b) any other default occurs
under this Note and such default remains uncured for thirty (30) days after the
delivery of notice from Payee to Maker; (c) default occurs under the MEDIQ
Guaranty or the Holdings Guaranty; (d) any failure by Maker, Holdings, or MEDIQ
as the case may be, to fully perform and carry out, in any material respect,
each and every of the respective agreements and undertakings of such entities as
set forth in that certain Negative Covenants Agreement (so called herein) dated
of even date herewith and entered into by and among Maker, Holdings, MEDIQ, KCI
and Payee (e) any failure by MEDIQ to perform and carry out each and every of
its agreements, covenants and undertakings as set forth in that certain
Collateral Transfer of Note (Security Agreement) (so called herein) dated of
even date herewith and executed by MEDIQ in favor of Payee; (f) sale of all or
substantially all of any of Maker's, Holdings', PRN's or MEDIQ's assets, or any
formal action in contemplation of the dissolution, liquidation or termination of
any of Maker's, Holdings', PRN's or MEDIQ's existence; (g) institution of any
proceedings by or against any of Maker, Holdings, PRN or MEDIQ under any law
relating to bankruptcy, insolvency, reorganization or other form of debtor
relief or any of Maker's, Holdings', PRN's or MEDIQ's making an assignment for
the benefit of creditors, or the appointment of a receiver, trustee, conservator
or other judicial representative for any of Maker, Holdings, PRN or MEDIQ or any
of Maker's, Holdings', PRN's or MEDIQ's property, unless, in the case of any
such proceeding or appointment not instituted by any of Maker, Holdings, PRN or
MEDIQ, such proceeding or appointment is dismissed within sixty (60) days, (h)
the occurrence of any Change of Control (as hereinafter defined) without the
prior written consent of Payee; or (i) the failure of any Subsidiary to make any
payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default under
any such indebtedness that results in the acceleration of the maturity of any
such indebtedness; or (j) if at any time during the term of this Note the amount
equal to the sum of the Tangible Equity of MEDIQ plus the debt of MEDIQ, on an
unconsolidated basis, that is subordinate in right of payment to the MEDIQ
Guaranty is less than $50,000,000 (for purposes of the foregoing the Tangible
Equity (hereinafter defined) of MEDIQ means an amount equal to the difference
between the shareholders' equity in MEDIQ and the goodwill (net of amortization)
of MEDIQ other than goodwill arising from the transactions contemplated by the
Asset Purchase
2
<PAGE>
Agreement, all as determined in accordance with generally accepted accounting
principles consistently applied).
Upon the occurrence of any Event of Default, the unpaid principal balance
hereof, together with accrued unpaid interest thereon, shall, at the option of
Payee, immediately become due and payable without presentment, protest, demand,
notice of intention to accelerate, notice of acceleration, notice of
non-payment, notice of protest, or other notice of any kind, all of which are
hereby expressly waived by Maker. If this Note is not paid at maturity, however
such maturity may be brought about, and the same is placed in the hands of an
attorney for collection, and/or if this Note is collected by suit or through
bankruptcy, probate, or other legal proceedings, the Maker agrees to pay all
reasonable attorney's fees, court costs and other expenses incurred by Payee in
connection with such collection efforts.
Payee agrees that this Note is subject to the terms and provisions of the
Subordination and Standstill Agreement executed by and among Congress Financial
Corporation, Maker and Payee dated of even date herewith.
No failure or delay on the part of Payee to insist on strict performance of
Maker's obligations hereunder or to exercise any remedy shall constitute a
waiver of Payee's rights in that or any other instance. No waiver of any of
Payee's rights shall be effective unless in writing, and any waiver of any
default or any instance of non-compliance shall be limited to its express terms
and shall not extend to any other default or instance of non-compliance.
Any notice or communication required or permitted hereunder shall be in
writing and shall be sent either by (a) personal delivery service with charges
therefor billed to shipper, (b) expedited delivery service with charges therefor
billed to shipper, (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by expedited
delivery service or by mail in the manner previously described) addressed to
Maker or Payee, as the case may be, at the address set forth in the Asset
Purchase Agreement, or at such other address as Maker or Payee may have
designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date of
deposit in a post office or other official depository under the care and custody
of the United States Postal Service, if sent by United States Mail, or (iii) on
the date of delivery to any expedited delivery service.
Notwithstanding anything contained herein to the contrary, the term 'Payee'
shall mean the party so defined as Payee in the first paragraph of this Note for
so long as such party is the holder of this Note and, thereafter, shall mean, at
any time, the then holder of this Note.
Maker and any and all sureties, guarantors and endorsers of this Note and
all other parties now or hereafter liable hereon, severally waive grace, demand,
presentment for payment, protest, notice of any kind (including, but not limited
to, notice of dishonor, notice of protest, notice of intention to accelerate and
notice of acceleration) and diligence in collecting and bringing suit against
any party hereto and agree (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for Payee, in order to enforce payment of this Note, to
first institute or exhaust Payee's remedies against Maker or any other party
liable therefor or against any security for this Note.
Notwithstanding anything to the contrary contained in this Note or in any
other agreement entered into in connection herewith or securing the indebtedness
evidenced hereby, whether now existing or hereafter arising and whether written
or oral, it is agreed that the aggregate of all interest and any other charges
constituting interest, or adjudicated as constituting interest, and contracted
for, chargeable or receivable under this Note or otherwise in connection with
the debt evidenced hereby, shall under no circumstances exceed the maximum
amount of interest permitted by applicable law. In the event the maturity of
this Note is accelerated by reason of an election by the holder hereof resulting
from a
3
<PAGE>
default hereunder or under any other document executed as security herefor or in
connection herewith, or by voluntary prepayment by Maker or otherwise, then
earned interest may never include more than the maximum rate of interest
permitted by applicable law. If from any circumstance any holder of this Note
shall ever receive interest or any other charges constituting interest, or
adjudicated as constituting interest, the amount, if any, of which would exceed
the maximum rate of interest permitted by applicable law (the 'Excess
Interest'), then the Excess Interest shall be applied to the reduction of the
principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal hereof
and such other indebtedness, then that portion of the Excess Interest which
exceeds the unpaid balance of principal hereof and such other indebtedness shall
be refunded to Maker. All sums paid or agreed to be paid to the holder of this
Note for the use, forbearance or detention of the indebtedness of Maker to the
holder of this Note shall be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term thereof. Any provision hereof found to be illegal, invalid or
unenforceable for any reason whatsoever shall not affect the validity, legality
or enforceability of the remainder hereof.
This Note shall be binding upon Maker's successors and assigns and shall
inure to the benefit of Payee and its successors and permitted assigns; provided
that Payee may not transfer or assign this Note or any right or interest herein
to any person or entity without Maker's prior written consent.
Maker recognizes and acknowledges that contemporaneously herewith (i)
Holdings has delivered those three (3) certain Promissory Notes (collectively
the 'Holdings Notes'), each dated of even date herewith, one in the original
principal amount of $5,000,000.00, the second in the original principal amount
of $3,000,000 and the other in the original principal amount of $2,000,000.00,
and each being payable to the order of Payee, and (ii) PRN has delivered that
certain Promissory Note (the '$5,835,707 Note') dated of even date herewith,
being in the original principal amount of $5,835,707 and payable to the order of
Payee. Maker covenants and agrees that any Event of Default under or with
respect to the $5,835,707 Note and/or any or all of the Holdings Notes, or under
any other instruments relating thereto, shall also constitute an Event of
Default hereunder, entitling Payee to pursue all rights, remedies and recourses
available to it, including, without limitation, acceleration of this Note and
foreclosure of any liens securing repayment hereof.
This Note shall be construed and interpreted in accordance with, and all
issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the validity and/or enforceability of this Note
or any portion of this Note) shall be governed by, the laws of the State of
Delaware (other than the conflict of law rules of the State of Delaware), except
as otherwise required by mandatory provisions of applicable law and except to
the extent that remedies provided by the laws of any state other than Delaware
are governed by the laws of said state.
The following definitions shall apply with respect to the provisions set
forth above:
'Change of Control' means (a) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) by (i) any Person (as hereinafter defined) (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d) (3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of MEDIQ such that, as a result of
such acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, a
majority of MEDIQ's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of MEDIQ or (B) otherwise
has the ability to elect, directly or indirectly, a majority of the members of
MEDIQ's Board of Directors, or (b) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13(d)(3) under the Exchange Act) by (i) any Person (other than a Permitted
Holder) or (ii) any Persons who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Permitted Holders), in either
case, of any securities of any Subsidiary such that, as a result of such
acquisition, such Person or group either (A) beneficially owns (within the
meaning of
4
<PAGE>
Rule 13(d)(3) under the Exchange Act), directly or indirectly, a majority of
such Subsidiary's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of such Subsidiary or (B)
otherwise has the ability to elect, directly or indirectly, a majority of the
members of such Subsidiary's of Board of Directors.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Permitted Holder' means (i) with respect to MEDIQ, the current executive
officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 (the 'Executive Officers'), (ii)
with respect to Holdings, the Executive Officers and/or MEDIQ, (iii) with
respect to Maker and PRN, the Executive Officers, MEDIQ and/or Holdings and (iv)
with respect to MEDIQ, Holdings, PRN and Maker, Persons identified under the
caption 'Security Ownership of Certain Beneficial Owners and Management' in
MEDIQ's 1994 Proxy Statement.
'Person' shall include an individual, a corporation, a joint venture, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
duly executed and delivered this instrument.
MEDIQ/PRN LIFE SUPPORT SERVICES-I,
INC.,
a Delaware corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
5
<PAGE>
EXHIBIT 4.5
PROMISSORY NOTE
$5,835,707.00
Pennsauken, New Jersey
September 30, 1994
FOR VALUE RECEIVED, MEDIQ/PRN LIFE SUPPORT SERVICES, INC., a Delaware
corporation ('Maker'), hereby unconditionally promises to pay to the order of
KCI THERAPEUTIC SERVICES, INC., a Delaware corporation ('Payee'), in
installments as hereinafter provided, the principal amount of FIVE MILLION EIGHT
HUNDRED THIRTY-FIVE THOUSAND SEVEN HUNDRED SEVEN AND NO/100 DOLLARS
($5,835,707). All past due principal hereof shall bear interest from the
maturity thereof until paid at the lesser of the Default Rate (hereinafter
defined) and the maximum rate of interest per annum permitted by applicable law.
As used in this Note, the following terms shall have the respective
meanings indicated below:
'Default Rate' shall mean the sum of the Prime Rate in effect from day to
day plus five percent (5%) per annum.
'Prime Rate' shall mean the rate of interest per annum established from
time to time by Bank of America National Trust and Savings Association in San
Francisco, California ('BOA'), and designated as its reference lending rate of
interest, which may not necessarily be the lowest interest rate charged by BOA.
In the event that BOA does not announce a rate designated by it as its reference
rate, then the Prime Rate under this Note shall be deemed to be the variable
rate of interest per annum which is the general reference rate designated by BOA
as its 'prime rate', 'base rate' or other similar rate and which Payee or any
subsequent holder hereof determines to be comparable to the Prime Rate as
described above. In the event that BOA shall cease to have any of the rates
described in the preceding sentence, then the Prime Rate shall be calculated
using that variable rate of interest per annum established by NationsBank of
Texas, N.A., San Antonio, Texas, or such other financial institution
satisfactory to Payee, which institution may be chosen by Payee, or any
subsequent holder hereof, in its sole discretion and changed by Payee, or any
subsequent holder hereof, in its sole discretion exercised in good faith, from
time to time, any such change to become effective on the date of such change.
The principal amount hereof shall be repaid in ten (10) equal monthly
installments of $583,570.70, with the first such monthly installment being due
and payable on December 31, 1994 and continuing regularly and monthly thereafter
on the last day of each successive calendar month until September 30, 1995 (the
'Maturity Date') on which date the entire outstanding unpaid principal balance
and interest hereof shall be due and payable.
Payments of principal and interest, if applicable, shall be made in lawful
money of the United States of America by wire transfer of immediately available
funds or cash or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas
78230 or at such other place as Payee shall designate to Maker in writing.
Payee expressly agrees that Maker shall be entitled to offset against the
last to mature portion of the indebtedness evidenced hereby, any and all
payments owed by Payee or any of its Affiliates (as defined in the Asset
Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support Services-I,
Inc., a Delaware corporation ('PRN-I') pursuant to Section 11.1 of that certain
Asset Purchase Agreement (the 'Asset Purchase Agreement') dated August 23, 1994,
as amended by Amendment No. 1 to Asset Purchase Agreement dated as of September
30, 1994, by and among MEDIQ Incorporated, a Delaware corporation ('MEDIQ'),
PRN-I, PRN Holdings, Inc. ('Holdings') (Maker, MEDIQ, Holdings, and PRN-I are
sometimes collectively referred to herein as the 'MEDIQ Group'), Kinetic
Concepts, Inc. ('KCI') and Payee.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
<PAGE>
Maker may prepay this Note in whole or in part at any time without premium
or penalty. All prepayments hereunder shall be applied first to accrued but
unpaid interest, then to discharge any expenses for which Payee may be entitled
to receive reimbursement under the terms of this Note, and lastly, to
installments of principal due hereunder in the inverse order of their maturity.
Subject to the subordination contained herein, Maker shall be required to prepay
this Note in whole or in part to the full extent of any Prepayment Offering
Proceeds (as defined herein) which may be realized from time to time from any
Subsidiary Equity Offering (as hereinafter defined) or any MEDIQ Equity Offering
(as hereinafter defined). For purposes hereof 'Prepayment Offering Proceeds'
shall mean (i) with respect to a Subsidiary Equity Offering, an amount equal to
fifty percent (50%) of the Net Proceeds (as hereinafter defined) equal to or
less than $20,000,000, or (ii) with respect to a MEDIQ Equity Offering, an
amount equal to the product obtained by multiplying (x) an amount equal to fifty
percent (50%) of the Net Proceeds equal to or less than $20,000,000, by (y) a
fraction having a numerator equal to the total pro-forma combined gross revenues
for the previous four (4) fiscal quarters of the Subsidiaries (as defined
herein) on a consolidated basis and a denominator equal to the sum of the
pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of MEDIQ, plus, without duplication, (a) the sum of the products
derived by multiplying (i) the pro-forma unconsolidated gross revenues for the
previous four (4) fiscal quarters of each of the Subsidiaries by (ii) the daily
average percentage of capital stock directly or indirectly owned by MEDIQ in the
respective Subsidiary over the same period, plus (b) the sum of the products of
the pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of each company in which, at any time during the relevant period,
twenty percent (20%) or more of the capital stock of such company was directly
or indirectly owned by MEDIQ multiplied by the daily average percentage of
capital stock directly or indirectly owned by MEDIQ in such company during the
relevant period, all as determined using generally accepted accounting
principles consistently applied ('GAAP'), other than principles of
consolidation. Notwithstanding anything contained in this Note to the contrary,
in connection with any MEDIQ Equity Offering, if the fraction derived from the
calculation described in clause (y) above is less than 1/2, no mandatory
prepayment shall be due. Any such mandatory prepayment will be due five (5)
business days after the Prepayment Offering Proceeds are realized by the party
entitled thereto. For purposes hereof, 'Net Proceeds' shall mean an amount equal
to the cumulative gross proceeds resulting from any and all Subsidiary Equity
Offerings and MEDIQ Equity Offerings, from and after the date hereof, minus (x)
any underwriter's fees, discounts and commissions and other reasonable and
customary fees and expenses incurred in connection with such offerings, (y) any
success fee paid to Congress Financial Corporation in connection with such
offerings, but not to exceed one-half of one percent (.5%) of the gross proceeds
resulting from such offerings, and (z) any unpaid portion of any closing fee
paid to Congress Financial Corporation, but not to exceed $75,000 in the
aggregate. For purposes hereof, a 'Subsidiary Equity Offering' shall mean a
primary or secondary offering and sale of Equity Securities (as defined herein)
of any of the Subsidiaries for cash. A 'MEDIQ Equity Offering' shall mean a
primary offering and sale of Equity Securities of MEDIQ for cash. For purposes
hereof 'Equity Securities' shall mean any (i) capital stock or other equity
interests, (ii) other right(s) with respect to any such capital stock or other
equity interests, (iii) offers, options (other than employee stock options),
obligations, warrants, rights, subscriptions, agreements, claims of any
character, or commitments of any kind (contingent or otherwise) relating to the
issuance, conversion, exchange, registration, voting, sale or transfer of any
such capital stock or equity interests, or (iv) any debenture, bond, note or
other instrument that may be converted into or exchanged for any capital stock
or other equity instrument. For purposes hereof 'Subsidiaries' or 'Subsidiary'
means Holdings, PRN-I, Maker, and/or any other entity that is wholly or
partially owned or controlled by Holdings. For purposes hereof an entity is
'controlled by' another person or entity if such other person or entity is in
possession, direct or indirect, of the power to direct or cause the direction
of, the management and policies of the entity, whether by ownership, contract or
otherwise. For purposes hereof 'pro-forma' revenues for any entity means for any
relevant period (a) the actual revenues of said entity over the relevant period
plus (b) the actual revenues during the relevant period of any business acquired
by the entity during the relevant period, as accounted for in accordance with
GAAP and Regulation S-X promulgated by the Securities and Exchange Commission
under the Securities Act of 1933. As an example and without limiting the
generality of the foregoing, the revenues of Maker
1
<PAGE>
shall include the revenues of Payee from the Division (as defined in the Asset
Purchase Agreement) for that portion of the relevant period that precedes the
effective time of the sale of the assets under the Asset Purchase Agreement.
Notwithstanding anything contained herein to the contrary, the mandatory
prepayment provisions set forth herein are and shall at all times be subordinate
to the repayment of the Holdings Notes and the $2,956,957 Note (each as
hereinafter defined) and Maker shall have no obligation to make any mandatory
prepayments to the extent, but only to the extent, that there remains any unpaid
principal and/or interest under the Holdings Notes or the $2,956,957 Note at the
time any Prepayment Offering Proceeds are realized by the party entitled to such
proceeds; provided, however, that the foregoing shall not apply with respect to
the Holdings Notes in the event that at the time any Prepayment Offering
Proceeds are realized payment of the Holdings Notes is prohibited or restricted.
The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ and Holdings pursuant to the terms of those two
(2) certain Guaranty Agreements dated of even date herewith, being in favor of
Payee and executed by MEDIQ and Holdings, respectively (respectively, the 'MEDIQ
Guaranty' and the 'Holdings Guaranty').
The occurrence of any of the following shall constitute an Event of Default
hereunder: (a) default in any payment by Maker hereunder when due or a default
by any member of the MEDIQ Group of its respective obligations to escrow any
disputed offset amounts pursuant to the terms of the Section 11.6 of the Asset
Purchase Agreement and such default continues uncured for five (5) days after
the date any such payment or escrow was due; provided, however, that if in any
consecutive twelve (12) month period Maker defaults two times in making payments
when due hereunder and/or any member or members of the MEDIQ Group defaults two
times in making any required escrow deposits pursuant to the Asset Purchase
Agreement, any such subsequent default shall immediately constitute an Event of
Default hereunder without the passage of any grace period; (b) any other default
occurs under this Note and such default remains uncured for thirty (30) days
after the delivery of notice from Payee to Maker; (c) default occurs under the
MEDIQ Guaranty and/or the Holdings Guaranty; (d) any failure by PRN-I, Holdings
or MEDIQ to fully perform and carry out, in any material respect, each and every
of the respective agreements and undertakings of such entities as set forth, in
that certain Negative Covenants Agreement (so called herein) dated of even date
herewith and entered into by and among Holdings, MEDIQ, PRN-I, KCI and Payee;
(e) any failure by MEDIQ to perform and carry out each and every of its
agreements, covenants and undertakings as set forth in that certain Collateral
Transfer of Note (Security Agreement) (so called herein) dated of even date
herewith and executed by MEDIQ in favor of Payee; (f) sale of all or
substantially all of any of Maker's, Holdings', PRN-I's or MEDIQ's assets, or
any formal action in contemplation of the dissolution, liquidation or
termination of any of Maker's, Holdings', PRN-I's or MEDIQ's existence; (g)
institution of any proceedings by or against any of Maker, Holdings, PRN-I or
MEDIQ under any law relating to bankruptcy, insolvency, reorganization or other
form of debtor relief or any of Maker's, Holdings', PRN-I's or MEDIQ's making an
assignment for the benefit of creditors, or the appointment of a receiver,
trustee, conservator or other judicial representative for any of Maker,
Holdings, PRN-I or MEDIQ or any of Maker's, Holdings', PRN-I's or MEDIQ's
property, unless, in the case of any such proceeding or appointment not
instituted by any of Maker, Holdings, PRN-I or MEDIQ, such proceeding or
appointment is dismissed within sixty (60) days; (h) the occurrence of any
Change of Control (as hereinafter defined) without the prior written consent of
Payee; (i) the failure of any Subsidiary to make any payment when due under any
indebtedness of any Subsidiary in excess of $3,000,000.00 or the occurrence of
any breach, default or event of default under any such indebtedness that results
in the acceleration of the maturity of any such indebtedness; or (j) if at any
time during the term of this Note the amount equal to the sum of the Tangible
Equity (hereinafter defined) of MEDIQ plus the debt of MEDIQ, on an
unconsolidated basis, that is subordinate in right of payment to the MEDIQ
Guaranty is less than $50,000,000 (for purposes of the foregoing the Tangible
Equity of MEDIQ means an amount equal to the difference between the
shareholders' equity in MEDIQ and the goodwill (net of amortization) of MEDIQ
other than goodwill arising from the transactions contemplated by the Asset
Purchase Agreement, all as determined in accordance with generally accepted
accounting principles consistently applied).
2
<PAGE>
Upon the occurrence of any Event of Default, the unpaid principal balance
hereof, together with accrued unpaid interest thereon, shall, at the option of
Payee, immediately become due and payable without presentment, protest, demand,
notice of intention to accelerate, notice of acceleration, notice of
non-payment, notice of protest, or other notice of any kind, all of which are
hereby expressly waived by Maker. If this Note is not paid at maturity, however
such maturity may be brought about, and the same is placed in the hands of an
attorney for collection, and/or if this Note is collected by suit or through
bankruptcy, probate, or other legal proceedings, the Maker agrees to pay all
reasonable attorney's fees, court costs and other expenses incurred by Payee in
connection with such collection efforts.
Payee agrees that this Note is subject to the terms and provisions of the
Standstill Agreement executed by and among Congress Financial Corporation, Maker
and Payee dated of even date herewith.
No failure or delay on the part of Payee to insist on strict performance of
Maker's obligations hereunder or to exercise any remedy shall constitute a
waiver of Payee's rights in that or any other instance. No waiver of any of
Payee's rights shall be effective unless in writing, and any waiver of any
default or any instance of non-compliance shall be limited to its express terms
and shall not extend to any other default or instance of non-compliance.
Any notice or communication required or permitted hereunder shall be in
writing and shall be sent either by (a) personal delivery service with charges
therefor billed to shipper, (b) expedited delivery service with charges therefor
billed to shipper, (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by expedited
delivery service or by mail in the manner previously described) addressed to
Maker or Payee, as the case may be, at the address set forth in the Asset
Purchase Agreement, or at such other address as Maker or Payee may have
designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date of
deposit in a post office or other official depository under the care and custody
of the United States Postal Service, if sent by United States Mail, or (iii) on
the date of delivery to any expedited delivery service.
Notwithstanding anything contained herein to the contrary, the term 'Payee'
shall mean the party so defined as Payee in the first paragraph of this Note for
so long as such party is the holder of this Note and, thereafter, shall mean, at
any time, the then holder of this Note.
Maker and any and all sureties, guarantors and endorsers of this Note and
all other parties now or hereafter liable hereon, severally waive grace, demand,
presentment for payment, protest, notice of any kind (including, but not limited
to, notice of dishonor, notice of protest, notice of intention to accelerate and
notice of acceleration) and diligence in collecting and bringing suit against
any party hereto and agree (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for Payee, in order to enforce payment of this Note, to
first institute or exhaust Payee's remedies against Maker or any other party
liable therefor or against any security for this Note.
Notwithstanding anything to the contrary contained in this Note or in any
other agreement entered into in connection herewith or securing the indebtedness
evidenced hereby, whether now existing or hereafter arising and whether written
or oral, it is agreed that the aggregate of all interest and any other charges
constituting interest, or adjudicated as constituting interest, and contracted
for, chargeable or receivable under this Note or otherwise in connection with
the debt evidenced hereby, shall under no circumstances exceed the maximum
amount of interest permitted by applicable law. In the event the maturity of
this Note is accelerated by reason of an election by the holder hereof resulting
from a default hereunder or under any other document executed as security
herefor or in connection herewith, or by voluntary prepayment by Maker or
otherwise, then earned interest may never include more than the maximum rate of
interest permitted by applicable law. If from any circumstance any holder of
this
3
<PAGE>
Note shall ever receive interest or any other charges constituting interest, or
adjudicated as constituting interest, the amount, if any, of which would exceed
the maximum rate of interest permitted by applicable law (the 'Excess
Interest'), then the Excess Interest shall be applied to the reduction of the
principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal hereof
and such other indebtedness, then that portion of the Excess Interest which
exceeds the unpaid balance of principal hereof and such other indebtedness shall
be refunded to Maker. All sums paid or agreed to be paid to the holder of this
Note for the use, forbearance or detention of the indebtedness of Maker to the
holder of this Note shall be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term thereof.
Any provision hereof found to be illegal, invalid or unenforceable for any
reason whatsoever shall not affect the validity, legality or enforceability of
the remainder hereof.
This Note shall be binding upon Maker's successors and assigns and shall
inure to the benefit of Payee and its successors and permitted assigns; provided
that Payee may not transfer or assign this Note or any right or interest herein
to any person or entity without Maker's prior written consent.
Maker recognizes and acknowledges that contemporaneously herewith (i)
Holdings has delivered those three (3) certain Promissory Notes (collectively
the 'Holdings Notes'), each dated of even date herewith, one in the original
principal amount of $5,000,000.00, the second in the original principal amount
of $3,000,000 and the other in the original principal amount of $2,000,000.00
and each being payable to the order of Payee, and (ii) PRN-I has delivered that
certain Promissory Note (the '$2,956,957 Note') dated of even date herewith,
being in the original principal amount of $2,956,957 and payable to the order of
Payee. Maker covenants and agrees that any Event of Default under or with
respect to the $2,956,957 Note and/or any or all of the Holdings Notes, or under
any other instruments relating thereto, shall also constitute an Event of
Default hereunder, entitling Payee to pursue all rights, remedies and recourses
available to it, including, without limitation, acceleration of this Note and
foreclosure of any liens securing repayment hereof.
This Note shall be construed and interpreted in accordance with, and all
issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the validity and/or enforceability of this Note
or any portion of this Note) shall be governed by, the laws of the State of
Delaware (other than the conflict of law rules of the State of Delaware), except
as otherwise required by mandatory provisions of applicable law and except to
the extent that remedies provided by the laws of any state other than Delaware
are governed by the laws of said state.
The following definitions shall apply with respect to the provisions set
forth above:
'Change of Control' means (a) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) by (i) any Person (as hereinafter defined) (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d) (3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of MEDIQ such that, as a result of
such acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, a
majority of MEDIQ's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of MEDIQ or (B) otherwise
has the ability to elect, directly or indirectly, a majority of the members of
MEDIQ's Board of Directors, or (b) the acquisition after the date of this Note,
in one or more transactions, of beneficial ownership (with the meaning of Rule
13(d)(3) under the Exchange Act) by (i) any Person (other than a Permitted
Holder) or (ii) any Persons who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Permitted Holders), in either
case, of any securities of any Subsidiary such that, as a result of such
acquisition, such Person or group either (A) beneficially owns (within the
meaning of Rule 13(d)(3) under the Exchange Act), directly or indirectly, a
majority of such Subsidiary's then outstanding voting securities entitled to
vote on a regular basis for a majority of the Board of Directors
4
<PAGE>
of such Subsidiary or (B) otherwise has the ability to elect, directly or
indirectly, a majority of the members of such Subsidiary's of Board of
Directors.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Permitted Holder' means (i) with respect to MEDIQ, the current executive
officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 (the 'Executive Officers'), (ii)
with respect to Holdings, the Executive Officers and/or MEDIQ, (iii) with
respect to Maker and PRN-I, the Executive Officers, MEDIQ and/or Holdings and
(iv) with respect to MEDIQ, Holdings, PRN-I and Maker, Persons identified under
the caption 'Security Ownership of Certain Beneficial Owners and Management' in
MEDIQ's 1994 Proxy Statement.
'Person' shall include an individual, a corporation, a joint venture, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
duly executed and delivered this instrument.
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
5
<PAGE>
NEGATIVE COVENANTS AGREEMENT
This Negative Covenants Agreement (this 'Agreement') is made as of the 30th
day of September, 1994, by and among MEDIQ INCORPORATED, a Delaware corporation
('MEDIQ'), MEDIQ/PRN Life Support Services-I, Inc., a Delaware corporation
(PRN-I), PRN Holdings, Inc., a Delaware corporation ('Holdings'), (MEDIQ, PRN-I
and Holdings are sometimes herein collectively referred to as the 'MEDIQ
Group'). Kinetic Concepts, Inc., a Delaware corporation ('KCI'), and KCI
Therapeutic Services, Inc., a Delaware corporation ('KCITS') (KCI and KCITS are
collectively referred to herein as 'Lender').
RECITALS:
WHEREAS, in connection with the sale of certain assets of KCITS to
MEDIQ/PRN Life Support Services, Inc. ('PRN') and PRN-I, KCITS has agreed to
make available to PRN, PRN-I and Holdings certain acquisition financing (the
'Acquisition Financing') evidenced by two Promissory Notes of even date
herewith, one in the original principal amount of TWO MILLION NINE HUNDRED FIFTY
SIX THOUSAND NINE HUNDRED FIFTY SEVEN AND NO/100 DOLLARS ($2,956,957.00)
executed by PRN-I (the '$2,956,957 Note'), and the other in the original
principal amount of FIVE MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND SEVEN
HUNDRED SEVEN AND NO/100 DOLLARS ($5,835,707.00) executed by PRN ('the
$5,835,707 Note'), and by three Promissory Notes of even date herewith
(collectively, the 'Holdings Notes'), one in the original principal amount of
FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00), one the original principal
amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000) and the other in the
original principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00) each
executed by Holdings (the $2,966,957 Note, the $5,835,707 Note and the Holdings
Notes being herein referred collectively as the 'Notes');
WHEREAS, payment of all the Notes is guaranteed by MEDIQ and payment of the
$2,956,957 Note and the $5,835,707 Note is guaranteed by Holdings pursuant to
the terms of certain Guaranty Agreements (the 'Guaranties') executed by MEDIQ
and Holdings, respectively, and dated of even date with the Notes and being in
favor of KCITS; and
WHEREAS, as a condition to the extension of the Acquisition Financing,
Lender has required that the MEDIQ Group enter into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises, and in consideration of
the extension of the Acquisition Financing and the mutual covenants contained in
the transaction documents for the transaction to which the Acquisition Financing
relates, MEDIQ, PRN-I and Holdings each hereby agrees to comply with each of the
following covenants, as applicable, so long as any amounts remain unpaid and
outstanding under any of the Notes:
1. Negative Pledge. Neither Holdings nor PRN-I will create or suffer to
exist any mortgage, pledge, security interest, conditional sale or other title
retention agreement, charge, encumbrance or other Lien (whether such interest is
based on common law, statute, other law or contract) upon any of their property
or assets, now owned or hereafter acquired, except for Permitted Liens. Neither
Holdings nor PRN-I will sell, assign, transfer, exchange, convey or otherwise
hypothecate outside the ordinary course of any such corporation's business a
material portion of any such corporation's properties or assets, whether now
owned or hereafter acquired, without the prior written consent of Lender.
2. Limitation on Investments. Without the prior written consent of Lender,
which consent shall not be unreasonably withheld, conditioned or delayed,
neither Holdings nor PRN-I shall directly or indirectly, make any loans or
advance money or property to any Person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the stock or indebtedness or
all or a substantial part of the assets or property of any Person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the indebtedness, performance, obligations or dividends of any Person or agree
to do any of the foregoing, except: (a) the endorsement of instruments for
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collection or deposit in the ordinary course of business; (b) investments in:
(i) short-term direct obligations of the United States Government, (ii)
negotiable certificates of deposit issued by any bank satisfactory to Lender,
payable to the order of Holdings, PRN-I or to bearer, and (iii) commercial paper
rated A1 or P1; and (c) guarantees executed by Holdings or PRN-I (i) in favor of
Congress Financial Corporation ('Congress') in connection with the $43,000,000
term promissory note (the 'PRN-I Congress Note') executed by PRN-I, payable to
the order of Congress and dated of even date herewith, including any refinancing
thereof, provided that such refinancing satisfies the requirements of Section
9.11 of the Asset Purchase Agreement (hereinafter defined); (ii) in favor of
Congress in connection with the $15,000,000 revolving credit facility (the
'Congress Revolver') made available to PRN by Congress and evidenced by a
promissory note executed by PRN, payable to the order of Congress and dated of
even date herewith, including any refinancing thereof, provided that such
refinancing satisfies the requirements of Section 9.11 of the Asset Purchase
Agreement (hereinafter defined); (iii) in favor of KCI and/or KCITS; and (iv) in
connection with the Assumed Liabilities, as defined in the Asset Purchase
Agreement (the 'Asset Purchase Agreement') dated August 23, 1994, as amended by
Amendment No. 1 to Asset Purchase Agreement dated as of September 30, 1994, by
and among MEDIQ, PRN-I, Holdings, KCI and KCITS; and (d) Holdings may make loans
to, advance money or property to, and/or invest in (i) PRN-I to the extent
necessary to enable PRN-I to make the payments owing by it under the $2,956,957
Note and the PRN-I Congress Note, but only to the extent necessary to make such
payments, and (ii) PRN to the extent necessary to enable PRN to make the
payments owing by it under the $5,835,707 Note and the Congress Revolver, but
only to the extent necessary to make such payments.
3. Limitation on Restricted Payments. Neither Holdings nor PRN-I shall
directly or indirectly, make any Restricted Payment if, at the time of such
Restricted Payment, or after giving effect thereto (a) a Default or an Event of
Default shall have occurred and be continuing, or (b) the aggregate amount
expended for all Restricted Payments, including such Restricted Payment (the
amount of any Restricted Payment, if other than cash, to be the fair market
value thereof at the date of payment as determined in good faith by the Board of
Directors of such corporation) subsequent to the date of this Agreement shall
exceed the sum of (i) 50% of the aggregate Consolidated Net Income of such
corporation (or if such aggregate Consolidated Net Income of such corporation is
a loss, minus 100% of such loss) earned subsequent to the date of this Agreement
and on or prior to the date that the Restricted Payment occurs (the 'Reference
Date') and (ii) that portion of the aggregate Net Proceeds received by such
corporation from any Person (other than a subsidiary of the particular
corporation) from the issuance and sale (including upon exchange or conversion
for other securities of such corporation), subsequent to the date of this
Agreement and on or prior to the Reference Date, of capital stock of such
corporation that is not required to be prepaid under any of the Notes to the
Payee (as defined in the respective Note) (excluding (A) capital stock paid as a
dividend on any capital stock of such corporation or as interest on any
indebtedness and (B) any Net Proceeds from issuances and sales of capital stock
of such corporation financed directly or indirectly using funds borrowed from
such corporation or any of its subsidiaries until and to the extent such
borrowing is repaid); provided, however, that the foregoing provisions are not
intended to, nor shall the same be construed to, modify the provisions of the
Notes relating to mandatory prepayments thereunder; and, further provided that
notwithstanding any of the foregoing provisions to the contrary PRN-I may make a
Restricted Payment to Holdings.
4. Subordination. If, for any reason whatsoever, Holdings and/or PRN-I, is
now or hereafter becomes indebted to MEDIQ: (a) all Affiliated Party Debt
Payments in respect thereof and all liens, security interests and rights now or
hereafter existing with respect to property of Holdings or PRN-I securing same
shall, at all times, be subordinate in all respects to the Notes and to all
liens, security interests and rights now or hereafter existing to secure the
Notes; (b) other than payments to MEDIQ by Holdings or PRN-I of any indebtedness
of Holdings or PRN-I, as the case may be, to MEDIQ incurred by Holdings or
PRN-I, as the case may be, to enable such company to make the payments due and
owing under the Notes or due and owing to Congress under the PRN-I Congress
Note, MEDIQ shall not be entitled to enforce or receive any Affiliated Party
Debt Payment, directly or indirectly, until the Notes have been fully and
finally paid; provided, however, that after the occurrence and
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during the continuance of a Default or Event of Default the payments permitted
in this subsection (b) shall be prohibited; (c) all promissory notes, accounts
receivable ledgers or other evidences, now or hereafter held by MEDIQ, of
obligations of Holdings to MEDIQ and PRN-I to MEDIQ shall contain a specific
written notice thereon that the indebtedness evidenced thereby is subordinated
under and subject to the terms of this Agreement.
5. Event of Default. Each of MEDIQ, Holdings and PRN-I hereby expressly
acknowledges and agrees that any breach of, or default under, the terms,
covenants and provisions of this Agreement shall constitute an 'Event of
Default' hereunder and an Event of Default under each of the Notes and
Guaranties, and in which event the Payee (as defined in the respective Notes)
under each of the Notes shall be entitled to exercise all rights and remedies
available to Payee under the Notes and Guaranties, including, without
limitation, immediately accelerating the maturity of such Notes.
6. Financial Statements; Reports. MEDIQ covenants to Lender that, for so
long as either the $5,835,707 Note or the $2,956,957 Note remain unpaid, unless
Lender shall otherwise consent in writing, (i) within one hundred five (105)
days after the close of each fiscal year of MEDIQ, MEDIQ will deliver to Lender
copies of (a) the consolidated balance sheet of MEDIQ and its subsidiaries as of
the end of such fiscal year, and (b) the consolidated statements of income, cash
flows, and shareholders' equity of MEDIQ and its Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding figures
of the previous annual audit, all in reasonable detail, prepared in accordance
with GAAP consistently applied throughout the periods involved, and certified,
on an unqualified basis, by independent certified public accountants acceptable
to the Lender in its reasonable discretion; and (ii) within sixty (60) days
after the close of each quarter of each fiscal year of MEDIQ, MEDIQ shall
deliver to Lender copies of the consolidated balance sheet of MEDIQ and its
subsidiaries as of the end of such quarter, and the consolidated statement of
income of MEDIQ and its subsidiaries for such quarter, setting forth in each
case in comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, all in reasonable detail, prepared in accordance
with GAAP consistently applied throughout the periods involved and certified,
subject to year-end audit and adjustment by the chief financial officer of
MEDIQ.
7. Glossary of Defined Terms. The following definitions shall apply with
respect to the negative covenants set forth above.
a. 'Affiliated Party Debt Payment' means any payment other than
Permitted Payments of any principal, interest, fees, liabilities or other
obligations with respect to any indebtedness owed to MEDIQ or any of its
Affiliates (as defined in the Asset Purchase Agreement); provided, however,
that, after a Default or Event of Default, payments to MEDIQ under the
Services Agreement shall be excluded from Permitted Payments for the
purposes of this definition.
b. 'Consolidated Net Income' with respect to any Person for any
period, means the aggregate of the net income (or loss) of such Person and
its subsidiaries for such period, on a consolidated basis, determined in
accordance with Generally Accepted Accounting Principles consistently
applied ('GAAP'); provided that there shall be excluded therefrom (to the
extent otherwise included therein) (a) the net income of any other Person
in which such Person or any of its subsidiaries has an interest (which
interest does not cause the net income of such other Person to be
consolidated with the net income of such Person and its subsidiaries in
accordance with GAAP) except to the extent of the amount of dividends or
distributions actually paid to such Person or such subsidiary by such other
Person in such period; (b) the net income of any subsidiary of such Person
that is subject to any Payment Restriction to the extent such Payment
Restriction actually prevented the payment of an amount that otherwise
could have been paid to, or received by, such Person or a subsidiary of
such Person not subject to any Payment Restriction; and (c) (i) the net
income (or loss) of any other Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) all
gains and losses realized on any asset sale, (iii) all gains realized upon
or in connection with or as a consequence of the issuance or sale of the
capital stock of such Person or any of its subsidiaries and any gains on
pension reversions received by such Person or any of its subsidiaries, (iv)
all gains and losses
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realized on the purchase or other acquisition by such Person or any of its
subsidiaries of any securities of such Person or any of its subsidiaries,
(v) all gains and losses resulting from the cumulative effect of any
accounting change pursuant to the application of Accounting Principles
Board Opinion No. 20, as amended, and (vi) all other extraordinary gains
and losses.
c. 'Default' or 'Event of Default' means any default, event or
default, Default or Event of Default, as the case may be, under any of the
Notes and/or the Guaranties.
d. 'Lien' shall mean any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or
any other interests in property designated to secure the repayment of
indebtedness, whether arising by agreement or under any statute or law, or
otherwise.
e. 'Net Proceeds' means in the case of any issuance and sale by any
Person of capital stock, the aggregate net proceeds received by such Person
after payment of expenses, taxes, underwriter's fees and commissions and
the like incurred in connection therewith, whether such proceeds are in
cash or in property (valued at the fair market value thereof at the time of
receipt, as determined, in good faith by the Board of Directors of such
Person, which determination shall be evidenced by a board resolution
certified by the corporate secretary of such company).
f. 'Payment Restriction' means, with respect to a subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of
the terms of its charter or by reason of any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation, on the
ability of (i) such subsidiary to (a) pay dividends or make other
distributions on its capital stock or make payments on any obligation,
liability or indebtedness owed to such Person or any other subsidiary of
such Person, (b) make loans or advances to such Person or any other
subsidiary of such Person or (c) transfer any of its properties or assets
to such Person or any other subsidiary of such Person, or (ii) such Person
or any other subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances or (c) transfer
of properties or assets.
g. 'Permitted Liens' shall mean (i) pledges or deposits made to secure
payment of Worker's Compensation (or to participate in any fund in
connection with Worker's Compensation), unemployment insurance, pensions or
social security programs; (ii) Liens imposed by mandatory provision of law
such as for materialmen's, mechanics, warehousemen's and other like Liens
arising in the ordinary course of business, securing indebtedness whose
payment is not yet due; (iii) Liens for taxes, assessments and governmental
charges or levies imposed upon a person or upon such Person's income or
profits or property, if the same are not yet due and payable or if the same
are being contested in good faith and as to which adequate reserves have
been provided; (iv) good faith deposits in connection with leases, real
estate bids or contracts (other than contracts involving the borrowing of
money), pledges or deposits to secure public or statutory obligations,
deposits to secure (or in lieu of) surety, stay, appeal or customs bonds
and deposits to secure the payment of taxes, assessments, customs duties or
other similar charges; (v) encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real property, provided that
such do not impair the use of such property for the uses intended, (vi)
purchase money security interests (including those in the nature of capital
leases) arising in the ordinary course of business consistent with past
practices, (vii) liens securing the PRN-I Congress Note and the Congress
Revolver, and liens securing any refinancing thereof that satisfies the
requirements of Section 9.11 of the Asset Purchase Agreement and covering
the same collateral securing such credit facilities, and (viii) the Assumed
Capital Leases, as defined in the Asset Purchase Agreement. For purposes of
the preceding sentence, 'purchase money security interest' means a security
interest (including the interest of a lessor under a capital lease) in any
assets securing indebtedness incurred at the time of the acquisition of
such asset or within one year thereafter provided that the amount of such
indebtedness does not exceed the cost of such assets and that the security
interest does not extend to property other than such assets.
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h. 'Permitted Payments' means any payment by any member of the MEDIQ
Group (i) to MEDIQ pursuant to the Services Agreement (the 'Services
Agreement'), dated as of the date hereof, among the members of the MEDIQ
Group, for certain management, financial, accounting, legal and other
administrative services consistent with past practice, as such Services
Agreement may be amended from time to time; provided, however, that any
such amendment shall in no event alter the methodology utilized to compute
the payment obligations of any member of the MEDIQ Group under such
Services Agreement if such amendment would cause the payment obligations of
any member of the MEDIQ Group to be more than such obligations would have
been under the methodology utilized on the date hereof; provided further
that payments under the Services Agreement shall be limited to $50,000, in
the aggregate, per fiscal year; (ii) pursuant to the Tax Sharing Agreement,
dated as of the date hereof, among the members of the MEDIQ Group, as such
Tax Sharing Agreement may be amended from time to time, so long as the
payment thereunder by any member of the MEDIQ Group shall not exceed the
amount of taxes such member would be required to pay if it were the filing
Person for all applicable taxes; (iii) to MEDIQ pursuant to the Insurance
Agreement, dated as of the date hereof, among the members of the MEDIQ
Group, as such Insurance Agreement may be amended from time to time;
provided, however, that any such amendment shall in no event alter the
methodology utilized to compute the payment obligations under such
Insurance Agreement if such amendment would cause such obligations to be
more than such obligations would have been than under the methodology
utilized on the date hereof; and (iv) to MEDIQ pursuant to the
Reimbursement Agreement, dated as of the date hereof, among the members of
the MEDIQ Group, as such Reimbursement Agreement may be amended from time
to time; provided, however, that any such amendment shall in no event alter
the methodology utilized to compute the payment obligations of any member
of the MEDIQ Group under such Reimbursement Agreement if such amendment
would cause such payment obligations to be more than such obligations would
have been under the methodology utilized on the date hereof.
i. 'Person' shall include any individual, corporation, joint venture,
partnership, limited liability company, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
j. 'Restricted Debt Payment' means any payment, purchase, redemption,
defeasance (including, but not limited to, in substance or legal
defeasance) or other acquisition or retirement for value, directly or
indirectly, by any of Holdings and PRN-I, prior to the scheduled maturity
or prior to any scheduled repayment of principal or sinking fund payment,
as the case may be, in respect of any indebtedness of said company that is
subordinate in right of payment to the Notes.
k. 'Restricted Payment' means any (i) Stock Payment, (ii) Restricted
Debt Payment, (iv) Affiliated Party Debt Payment.
l. 'Stock Payment' means, with respect to any Person, (a) the
declaration or payment by such person, either in cash or in property, of
any dividend on (except dividends payable solely in capital stock which
does not result in a Change of Control (as defined in the Notes), or the
making by such person or any of its subsidiaries of any other distribution
in respect of, such Person's capital stock or any warranties, rights or
options to purchase or acquire shares of any class or such capital stock
(other than exchangeable or convertible indebtedness of such Person) or (b)
the redemption, repurchase, retirement or other acquisition for value by
such Person or any of its subsidiaries, directly or indirectly, of such
Person's capital stock (and, in the case of a subsidiary, the capital stock
of any corporation that controls, directly or indirectly, such subsidiary)
or any warrants, rights or options to purchase or acquire shares of any
class of such capital stock (other than exchangeable or convertible
indebtedness of such Person).
7. Miscellaneous.
(a) Waiver. Any failure of any of the parties hereto to comply with
any of the covenants, terms and provisions hereof may be waived only in
writing by the party or parties for whose benefit such obligation covenant,
term or provision was made.
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(b) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given two (2) days after
deposit in a regularly maintained receptacle of the United States Postal
Service, certified mail, return receipt requested, addressed as set forth
below, upon receipt of confirmation of delivery by telecopy to the telecopy
number set forth below, or upon personal delivery as follows:
If to any of the MEDIQ Group:
MEDIQ/PRN Life Support Services-I, Inc.
c/o MEDIQ Incorporated
1 MEDIQ Plaza
Pennsauken, New Jersey 08110
Telecopy (609) 665-2391
Attention: Bernard J. Korman, Michael F. Sandler
and
Alan Einhorn, Esq.
With a copy to:
DRINKER BIDDLE & REATH
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Michael B. Jordan, Esq.
To Lender:
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230
(210) 524-9000
Telecopy (210) 308-3993
Attention: James R. Leininger, M.D.
and Dennis E. Noll, Esq.
With a copy to:
Cox & Smith Incorporated
112 E. Pecan Street, Suite 2000
San Antonio, Texas 78205
Telecopy (210) 226-8395
Attention: Stephen D. Seidel, Esq.
(c) Joint Venture, Partnership and Agency. Nothing contained in this
Agreement shall be deemed to create a joint venture, partnership or agency
relationship between Lender and any of the MEDIQ Group.
(d) Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same
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instrument. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for any of the other
counterparts.
(f) Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Entire Agreement. This Agreement, together with the Exhibits
hereto, if any, and the documents referred to herein, embodies the entire
agreement and understanding between the parties hereto relating to the
subject matter hereof and supersedes any prior agreements and
understandings.
(h) Amendment and Modification. This Agreement may be amended or
modified only by written agreement executed by Lender and each of the MEDIQ
Group.
(i) Binding Effect; Benefits. Subject to the provisions of Subsection
7(k) below, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
Nothing in this Agreement, express or implied, is intended to confer on any
person other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
(j) Legal Invalidity. If any part or provision of this Agreement is or
shall be deemed violative of any applicable laws, rules or regulations,
such legal invalidity shall not void the Agreement or affect the remaining
terms and provisions of this Agreement, and the Agreement shall be
construed and interpreted to comport with all such laws, rules or
regulations to the maximum extent possible. (k) Assignability. This
Agreement shall not be assignable by any party hereto without the prior
written consent of the other parties hereto.
EXECUTED this ______ day of ______________, 1994.
MEDIQ INCORPORATED,
a Delaware corporation
By:
Title:
MEDIQ/PRN LIFE SUPPORT SERVICES-I,
INC., a Delaware corporation
By:
Title:
PRN HOLDINGS, INC., a Delaware
corporation
By:
Title:
KINETIC CONCEPTS, INC.
By:
Title:
KCI THERAPEUTIC SERVICES, INC.
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By:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made by PRN HOLDINGS, INC., a Delaware
corporation, whose address is One MEDIQ Plaza, Pennsauken, New Jersey 08110
('Guarantor'), in favor of KCI THERAPEUTIC SERVICES, INC., a Delaware
corporation ('KCIT');
W I T N E S S E T H:
WHEREAS, in connection with the sale to MEDIQ/PRN Life Support Services-I,
Inc. ('Borrower') by KCIT of certain assets of KCIT pursuant to the terms of
that certain Asset Purchase Agreement (so called herein) dated August 23, 1994,
as amended by Amendment No. 1 to Asset Purchase Agreement dated as of September
30, 1994, by and among Kinetic Concepts, Inc., a Texas corporation ('KCI'),
KCIT, Guarantor, MEDIQ Incorporated ('MEDIQ') and Borrower, KCIT has made
available to Borrower, MEDIQ/PRN Life Support Services, Inc. ('PRN') and/or
Guarantor, as the case may be, several seller financing loans (collectively the
'Loan') being evidenced by the following: (i) a Promissory Note (the '$2,956,957
Note') dated the date hereof, in the original principal amount of $2,956,957,
executed by Borrower and made payable to the order of KCIT, (ii) a Promissory
Note (the '$5,835,707 Note') dated the date hereof, in the original principal
amount of $5,835,707, executed by PRN and made payable to the order of KCIT;
(iii) a Promissory Note ('Holdings Note-I') dated the date hereof, in the
original principal amount of $5,000,000 executed by Guarantor and payable to the
order of KCIT; (iv) a Promissory Note ('Holdings Note-II') dated the date hereof
in the original principal amount of $3,000,000 executed by Guarantor and payable
to the order of KCIT; and (v) a Promissory Note ('Holdings Note-III') dated the
date hereof, in the original principal amount of $2,000,000 executed by
Guarantor and payable to the order of KCIT (the $2,956,957 Note and the
$5,835,707 Note, are herein collectively called the 'Guaranteed Notes' and
Holdings Note-I, Holdings Note-II and Holdings Note-III are herein collectively
called the 'Holdings Notes'), the Guaranteed Notes and the Holdings Notes being
entitled to the benefit of a Negative Covenants Agreement executed by Borrower,
MEDIQ and Guarantor in favor of KCI and KCIT (such Negative Covenants Agreement,
being herein called the 'Negative Covenants Agreement' and the Asset Purchase
Agreement being herein called the 'Acquisition Agreement'), and;
WHEREAS, KCIT has made it a condition precedent to KCIT making the Loan
available to Borrower, PRN and Guarantor that Guarantor guaranty payment of the
Guaranteed Notes on the terms and conditions set forth in this Guaranty
Agreement;
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and as a material inducement to KCIT
to extend credit to Borrower, PRN and Guarantor, Guarantor hereby guaranties to
KCIT the prompt and full payment of the Indebtedness described in Section 1
below in this Guaranty (collectively called the 'Guaranteed Obligations'), this
Guaranty being upon the following terms and conditions:
1. Guaranty of Payment. Guarantor hereby unconditionally and irrevocably
guarantees to KCIT the punctual payment when due, whether by lapse of time, by
acceleration of maturity, or otherwise, and at all times thereafter, of all
principal, interest (including interest accruing after the commencement of any
bankruptcy or insolvency proceeding by or against Borrower or PRN as the case
may be, whether or not allowed in such proceeding), costs, expenses, and other
sums of money now or hereafter due and owing pursuant to (i) the terms of the
Guaranteed Notes, and (ii) all renewals, extensions, refinancings,
modifications, supplements or amendments of such indebtedness or any part
thereof (the indebtedness described in clauses (i) and (ii) above in this
Section 1 is herein collectively called the 'Indebtedness'). This Guaranty
covers the Indebtedness, whether presently outstanding or arising subsequent to
the date hereof. The guaranty of Guarantor as set forth in this Section 1 is a
continuing guaranty of payment and not a guaranty of collection.
2. Primary Liability of Guarantor.
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(a) This Guaranty is an absolute, irrevocable and unconditional
guaranty of payment. Guarantor shall be liable for the payment of the
Guaranteed Obligations, as set forth in this Guaranty, as a primary
obligor. This Guaranty shall be effective as a waiver of, and Guarantor
hereby expressly waives, any and all rights to which Guarantor may
otherwise have been entitled under any suretyship laws in effect from time
to time.
(b) In the event of default by Borrower and/or PRN, in payment of the
Guaranteed Obligations, or any part thereof, when such indebtedness becomes
due, either by its terms or as the result of the exercise of any power to
accelerate, Guarantor shall, on demand and without presentment, protest,
notice of acceptance of this Guaranty, protest, further notice of
nonpayment or of dishonor or of default or nonperformance, or notice of
acceleration or of intent to accelerate, or any other notice whatsoever,
make payment in respect of or fully perform, as the case may be, the
Guaranteed Obligations. Further, it shall not be necessary for KCIT, in
order to enforce such payment by Guarantor, first to institute suit or
pursue or exhaust any rights or remedies against Borrower, PRN or others
liable on such indebtedness, or to enforce any rights against any security
that shall ever have been given to secure such indebtedness, or to join
Borrower, PRN or any others liable for the payment of the Guaranteed
Obligations or any part thereof in any action to enforce this Guaranty, or
to resort to any other means of obtaining payment or performance of the
Guaranteed Obligations.
(c) Suit may be brought or demand may be made against all parties who
have signed this Guaranty or any other guaranty covering all or any part of
the Guaranteed Obligations, or against any one or more of them, separately
or together, without impairing the rights of KCIT against any party hereto.
At any time that KCIT is entitled to exercise its rights or remedies
hereunder, it may in its discretion elect to demand payment.
3. Certain Agreements and Waivers by Guarantor. (a) Guarantor hereby agrees
that neither KCIT's rights or remedies nor Guarantor's obligations under the
terms of this Guaranty shall be released, diminished, impaired, reduced or
affected by any one or more of the following events, actions, facts, or
circumstances, and the liability of Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any limitation of liability or recourse in any other document
relating to the Guaranteed Obligations or arising under any law;
(ii) the taking or accepting of any other security or guaranty for
any or all of the Guaranteed Obligations;
(iii) any release, surrender, abandonment, exchange, alteration,
sale or other disposition, subordination, deterioration, waste, failure
to protect or preserve, impairment, or loss of, or any failure to create
or perfect any lien or security interest with respect to, or any other
dealings with, any collateral or security at any time existing or
purported, believed or expected to exist in connection with any or all
of the Guaranteed Obligations;
(iv) whether express or by operation of law, any partial release of
the liability of Guarantor hereunder, or if one or more other guaranties
are now or hereafter obtained by KCIT covering all or any part of the
Guaranteed Obligations, any complete or partial release of any one or
more of such guarantors under any such other guaranty, or any complete
or partial release of Borrower, PRN or any other party liable, directly
or indirectly, for the payment or performance of any or all of the
Guaranteed Obligations;
(v) the insolvency, bankruptcy, disability, dissolution,
liquidation, termination, receivership, reorganization, merger,
consolidation, change of form, structure or ownership, sale of all
assets, or lack of corporate, partnership or other power of Borrower,
PRN or any other party at any time liable for the payment of any or all
of the Guaranteed Obligations;
(vi) either with or without notice to or consent of Guarantor: any
renewal, extension, modification or rearrangement of the terms of any or
all of the Guaranteed Obligations
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(including the Guaranteed Notes), including, without limitation,
material alterations of the terms of payment (including changes in
maturity date(s) and interest rate(s)) or performance or any other terms
thereof, or any waiver, termination, or release of, or consent to
departure from, the Guaranteed Notes or any other guaranty of any or all
of the Guaranteed Obligations, or any adjustment, indulgence,
forbearance, or compromise that may be granted from time to time by KCIT
to Borrower, PRN, Guarantor, and/or any other party at any time liable
for the payment of any or all of the Guaranteed Obligations;
(vii) any neglect, lack of diligence, delay, omission, failure, or
refusal of KCIT to (a) take or prosecute (or in taking or prosecuting)
any action for the collection or enforcement of any of the Guaranteed
Obligations, or (b) foreclose or take or prosecute any action to
foreclose (or in foreclosing or taking or prosecuting any action to
foreclose) upon any security therefor, or (c) exercise (or in
exercising) any other right or power with respect to any security
therefor, or (d) take or prosecute (or in taking or prosecuting) any
action in connection with any document relating to the Guaranteed
Obligations,
(viii) any failure to sell or otherwise dispose of in a
commercially reasonable manner any collateral securing any or all of the
Guaranteed Obligations.
(ix) any failure of KCIT to notify Guarantor of any creation,
renewal, extension, rearrangement, modification, supplement, or
assignment of the Guaranteed Obligations or any part thereof, or of the
Guaranteed Notes, or of any release of or change in any security or of
any other action taken or refrained from being taken by KCIT against
Borrower, PRN or any security, it being understood that KCIT shall not
be required to give Guarantor any notice of any kind under any
circumstances with respect to or in connection with the Guaranteed
Obligations, and any and all rights to notice that Guarantor may have
otherwise had being hereby waived by Guarantor;
(x) KCIT being required to refund any payment by Borrower to
Borrower or by PRN to PRN, as the case may be, or any other party liable
for the payment of any or all of the Guaranteed Obligations;
(xi) the existence of any claim, set-off, or other right that
Guarantor may at any time have against Borrower or PRN whether or not
arising in connection with this Guaranty or the Guaranteed Notes
(provided, that nothing contained herein shall prevent the assertion of
any such claim by separate suit or compulsory counterclaim); or
(xii) the unenforceability of all or any part of the Guaranteed
Obligations against Borrower or PRN, whether because the Guaranteed
Obligations exceed the amount permitted by law or violate any usury law,
or because the act of creating the Guaranteed Obligations, or any part
thereof, is ultra vires, or because the officers or persons creating
same acted in excess of their authority, or because of a lack of
validity or enforceability of or defect or deficiency in the Guaranteed
Notes, or because of the subordination of, or moratorium on, payments
due and owing under the Guaranteed Notes at such times as the same would
otherwise become due and owing under the Guaranteed Notes but for such
subordination or moratorium, regardless of the party or parties,
including, without limitation, Congress Financial Corporation, intended
to be benefited by such subordination or moratorium or because
Borrower's or PRN's obligation ceases to exist by operation of law, or
because of any other reason or circumstance, it being agreed that
Guarantor shall remain liable hereon regardless of whether Borrower, PRN
or any other person be found not liable on the Guaranteed Obligations,
or any part thereof, for any reason (and regardless of any joinder of
Borrower, PRN or any other party in any action to obtain payment of any
or all of the Guaranteed Obligations); provided, however, that if any
part of the Guaranteed Obligations is not enforceable against Borrower
or PRN, as the case may be, because of the proper exercise of any right
of set-off against the Guaranteed Notes pursuant to the terms of the
Acquisition Agreement, that such part of the Guaranteed Obligations
shall not be enforceable against Guarantor.
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(b) In the event any payment by Borrower, PRN or any other party to
KCIT is held to constitute a preference, fraudulent transfer or other
voidable payment under any bankruptcy, insolvency or similar law, or if for
any other reason KCIT is required to refund such payment or pay the amount
thereof to any other party, such payment by Borrower, PRN or any other
party to KCIT shall not constitute a release of Guarantor from any
liability hereunder, and this Guaranty shall continue to be effective or
shall be reinstated (notwithstanding any prior release or discharge by KCIT
of this Guaranty or of Guarantor), as the case may be, with respect to, and
this Guaranty shall apply to, any and all amounts so refunded by KCIT or
paid by KCIT to another party, together with any interest paid by KCIT and
any attorneys' fees, costs and expenses paid or incurred by KCIT in
connection with any such event (all of which amounts shall constitute part
of the Guaranteed Obligations). It is the intent of Guarantor and KCIT that
the obligations and liabilities of Guarantor hereunder are absolute and
unconditional under any and all circumstances and that until the Guaranteed
Obligations are fully and finally paid, and not subject to refund or
disgorgement, the obligations and liabilities of Guarantor hereunder shall
not be discharged or released, in whole or in part, by any act or
occurrence that might, but for the provisions of this Guaranty, be deemed a
legal or equitable discharge or release of a guarantor. KCIT shall be
entitled to continue to hold this Guaranty in its possession for a period
of one year from the date the Guaranteed Obligations are paid and performed
in full and for so long thereafter as may be necessary to enforce any
obligation of Guarantor hereunder and/or to exercise any right or remedy of
KCIT hereunder.
(c) If acceleration of the time for payment of any amount payable by
Borrower and/or PRN under the Guaranteed Notes is stayed or delayed by any
law or tribunal, all such amounts shall nonetheless be payable by Guarantor
on demand by KCIT.
4. Other Liability. If Guarantor becomes liable for any indebtedness owing
by Borrower or PRN to KCIT other than under this Guaranty, such liability shall
not be in any manner impaired or affected hereby, and the rights of KCIT
hereunder shall be cumulative of any and all other rights that KCIT may have
against Guarantor. If Borrower or PRN is or becomes indebted to KCIT for any
indebtedness other than or in excess of the Indebtedness for which Guarantor is
liable under this Guaranty, any payment received or recovery realized upon any
indebtedness of Borrower or PRN to KCIT may, except to the extent paid by
Guarantor on the Indebtedness for which Guarantor is liable under this Guaranty
or specifically required by law or agreement of KCIT to be applied to the
Indebtedness for which Guarantor is liable under this Guaranty, in KCIT's sole
discretion, be applied upon indebtedness of Borrower or PRN to KCIT other than
the Indebtedness for which Guarantor is liable under this Guaranty.
5. KCIT Assigns. This Guaranty is for the benefit of KCIT and KCIT's
successors and assigns, and in the event of a permitted assignment of the
Guaranteed Obligations, or any part thereof, the rights and benefits hereunder,
to the extent applicable to the Guaranteed Obligations so assigned, may be
transferred with such Guaranteed Obligations. Guarantor waives notice of any
transfer or assignment of the Guaranteed Obligations, or any part thereof, and
agrees that failure to give notice will not affect the liabilities of Guarantor
hereunder.
6. Binding Effect. This Guaranty is binding not only on Guarantor, but also
on Guarantor's successors and assigns. Words importing persons herein shall
include firms, associations, partnerships (including limited partnerships),
joint ventures, trusts, corporations and other legal entities, including public
or governmental bodies, agencies or instrumentalities, as well as natural
persons.
7. Governing Law. This Guaranty, and its validity, enforcement, and
interpretation, shall for all purposes by governed by and construed in
accordance with the laws of the State of Delaware and applicable United States
federal law, and is intended to be performed in accordance with, and only to the
extent permitted by, such laws. All obligations of Guarantor hereunder are
payable and performable at the place or places where the Guaranteed Obligations
are payable and performable.
8. Invalidity of Certain Provisions. If any provision of this Guaranty or
the application thereof to any person or circumstance shall, for any reason and
to any extent, be judicially declared to be invalid
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or unenforceable, neither the remaining provisions of this Guaranty nor the
application of such provision to any other Person or circumstance shall be
affected thereby, and the remaining provisions of this Guaranty, or the
applicability of such provision to other Persons or circumstances, as
applicable, shall remain in effect and be enforceable to the maximum extent
permitted by applicable law.
9. Attorneys' Fees and Costs of Collection. Guarantor shall pay on demand
all reasonable attorneys' fees and all other costs and expenses incurred by KCIT
in the enforcement of or preservation of KCIT's rights under this Guaranty.
Guarantor agrees to pay interest on any expenses or other sums due to KCIT under
this Section 9 that are not paid when due, at a rate per annum equal to the
lesser of (i) the maximum rate of interest permitted by applicable law, or (ii)
the Default Rate (as defined in the Guaranteed Notes). Guarantor's obligations
and liabilities under this Section 9 shall survive any payment or discharge in
full of the Guaranteed Obligations.
10. Payments. All sums payable under this Guaranty shall be paid in lawful
money of the United States of America that at the time of payment is legal
tender for the payment of public and private debts.
11. Controlling Agreement. It is not the intention of KCIT or Guarantor to
obligate Guarantor to pay interest in excess of that lawfully permitted to be
paid by Guarantor under applicable law. Should it be determined that any portion
of the Guaranteed Obligations or any other amount payable by Guarantor under
this Guaranty constitutes interest in excess of the maximum amount of interest
that Guarantor, in Guarantor's capacity as guarantor, may lawfully be required
to pay under applicable law, the obligation of Guarantor to pay such interest
shall automatically be limited to the payment thereof in the maximum amount so
permitted under applicable law. The provisions of this Section 11 shall override
and control all other provisions of this Guaranty and of any other agreement
between Guarantor and KCIT.
12. Representations, Warranties, and Covenants of Guarantor. Guarantor
hereby represents, warrants, and covenants that (a) after giving effect to this
Guaranty, Guarantor is solvent, and does not intend to incur or believe that it
will incur debts that will be beyond its ability to pay as such debts mature;
(b) KCIT has no duty at any time to investigate or inform Guarantor of the
financial or business condition or affairs of Borrower or PRN or any change
therein, and Guarantor will keep itself fully appraised of Borrower's and PRN's
financial and business condition; (c) Guarantor acknowledges and agrees that
Guarantor may be required to pay and perform the Guaranteed Obligations in full
without assistance or support from Borrower, PRN or any other party; and (d)
Guarantor has read and fully understand the provisions contained in the
Guaranteed Notes. Guarantor's representations, warranties and covenants are a
material inducement to KCIT to make the Loan and accept the Guaranteed Notes and
shall survive the execution hereof and any bankruptcy, foreclosure, transfer of
security or other event affecting Borrower, PRN, Guarantor, any other party, or
any security for all or any part of the Guaranteed Obligations.
13. Notices. Unless specifically provided otherwise, any notice for
purposes of this Guaranty or any other document relating hereto shall be given
in writing or by telex or by facsimile (fax) transmission and shall be addressed
or delivered to the respective addresses set forth in this Guaranty, or to such
other address as may have been previously designated by the intended recipient
by notice given in accordance with this Section. If sent by prepaid, registered
or certified mail (return receipt requested), the notice shall be deemed
effective when deposited in a regularly maintained receptacle of the United
States Postal Service; if transmitted by telex, the notice shall be effective
when transmitted (answerback confirmed); and if transmitted by facsimile or
personal delivery, the notice shall be effective when received. No notice of
change of address shall be effective except upon actual receipt. This Section 13
shall not be construed in any way to affect or impair any waiver of notice or
demand provided in this Guaranty or in any other Loan Document or to require
giving notice or demand to or upon any Person in any situation or for any
reason.
14. Cumulative Rights. The exercise of KCIT of any right or remedy
hereunder or under the Guaranteed Notes, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
KCIT shall have all rights, remedies and recourses afforded to KCIT by
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reason of this Guaranty, the Guaranteed Notes, or by law, equity or otherwise,
and the same (a) shall be cumulative and concurrent, (b) may be pursued
separately, successively or concurrently against Guarantor or others obligated
for the Guaranteed Obligations, or any part thereof, or against any one or more
of them, or against any security or otherwise, at the sole discretion of KCIT,
(c) may be exercised as often as occasion therefor shall arise, it being agreed
by Guarantor that the exercise of, discontinuance of the exercise of or failure
to exercise any of such rights, remedies, or recourses shall in no event be
construed as a waiver or release thereof or of any other right, remedy, or
recourse, and (d) are intended to be, and shall be, non-exclusive. No waiver of
any default on the part of Guarantor or of any breach of any of the provisions
of this Guaranty or of any other document shall be considered a waiver of any
other or subsequent default or breach, and no delay or omission in exercising or
enforcing the rights and powers granted herein or in any other document shall be
construed as a waiver of such rights and powers, and no exercise or enforcement
of any rights or powers hereunder or under any other document shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time. The granting of any consent, approval or waiver by KCIT shall
be limited to the specific instance and purpose therefor and shall not
constitute consent or approval in any other instance or for any other purpose.
No notice to or demand on Guarantor in any case shall of itself entitle
Guarantor to any other or further notice or demand in similar or other
circumstances. No provision of this Guaranty or any right, remedy or recourse of
KCIT with respect hereto, or any default or breach, can be waived, nor can this
Guaranty or Guarantor be released or discharged in any way or to any extent,
except specifically in each case by a writing intended for that purpose (and
which refers specifically to this Guaranty) executed, and delivered to
Guarantor, by KCIT.
15. Term of Guaranty. This Guaranty shall continue in effect until all the
Guaranteed Obligations are fully and finally paid, and discharged, except that,
and notwithstanding any return of this Guaranty to Guarantor, this Guaranty
shall continue in effect (i) with respect to all obligations and liabilities of
Guarantor under Section 9 of this Guaranty, and (ii) as provided in Section 4(b)
hereof.
16. Further Assurances. Guarantor at Guarantor's expense will promptly
execute and deliver to KCIT upon KCIT's request all such other and further
documents, agreements, and instruments in compliance with or accomplishment of
the agreements of Guarantor under this Guaranty.
17. No Fiduciary Relationship. The relationship between KCIT and Guarantor
is solely that of KCIT and guarantor. KCIT has no fiduciary or other special
relationship with or duty to Guarantor and none is created hereby.
18. Interpretation. The term 'KCIT' shall be deemed to include any
permitted subsequent holder(s) of the Guaranteed Notes. Whenever the context of
any provisions hereof shall require it, words in the singular shall include the
plural, words in the plural shall include the singular, and pronouns of any
gender shall include the other genders. Captions and headings herein are for
convenience only and shall not affect the construction of the document. All
references in this Guaranty to Schedules, Articles, Sections, Subsections,
paragraphs and subparagraphs refer to the respective subdivisions of this
Guaranty, unless such reference specifically identifies another document. The
terms 'herein,' 'hereof,' 'hereto,' 'hereunder' and similar terms refer to this
Guaranty and not to any particular section or subsection of this Guaranty. The
terms 'include' and 'including' shall be interpreted as if followed by the words
'without limitation. ' All references in this Guaranty to sums denominated in
dollars or with the symbol '$' refer to the lawful currency of the United States
of America, unless such reference specifically identifies another currency.
19. Time of Essence. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.
20. Entire Agreement. This Guaranty embodies the entire agreement between
KCIT and Guarantor with respect to the guaranty by Guarantor of the Guaranteed
Obligations. This Guaranty supersedes all prior agreements and understandings,
if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations.
No condition or conditions precedent to the effectiveness of this Guaranty
exist. This Guaranty shall be effective upon execution by Guarantor and delivery
to KCIT.
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IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the 30th
day of September, 1994.
GUARANTOR:
PRN HOLDINGS, INC.
By:
Printed Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made by MEDIQ INCORPORATED, a Delaware
corporation, whose address is One MEDIQ Plaza, Pennsauken, New Jersey 08110
('Guarantor'), in favor of KCI THERAPEUTIC SERVICES, INC. , a Delaware
corporation ('KCIT');
W I T N E S S E T H:
WHEREAS, in connection with the sale to MEDIQ/PRN Life Support Services-I,
Inc. ('Borrower') by KCIT of certain assets of KCIT pursuant to the terms of
that certain Asset Purchase Agreement (so called herein) dated August 23, 1994,
as amended by Amendment No. 1 to Asset Purchase Agreement dated as of September
30, 1994, by and among Kinetic Concepts, Inc. , a Texas corporation ('KCI'),
KCIT, Guarantor, PRN Holdings, Inc. ('Holdings') and Borrower, KCIT has made
available to Borrower, MEDIQ/PRN Life Support Services, Inc. ('PRN') and/or
Holdings, as the case may be, several seller financing loans (collectively the
'Loan') being evidenced by the following: (i) a Promissory Note (the '$2,956,957
Note') dated the date hereof in the original principal amount of $2,956,957,
executed by Borrower and made payable to the order of KCIT, (ii) a Promissory
Note (the '$5,835,707 Note') dated the date hereof in the original principal
amount of $5,835,707, executed by PRN and made payable to the order of KCIT;
(iii) a Promissory Note ('Holdings Note-I') dated the date hereof in the
original principal amount of $5,000,000 executed by Holdings and payable to the
order of KCIT; (iv) a Promissory Note ('Holdings Note-II') dated the date hereof
in the original principal amount of $3,000,000 executed by Holdings and payable
to the order of KCIT; and (v) a Promissory Note ('Holdings Note-III') dated the
date hereof in the original principal amount of $2,000,000 executed by Holdings
and payable to the order of KCIT (the '$2,956,957 Note, the $5,835,707 Note,
Holdings Note-I, Holdings Note-II, and Holdings Note-III are herein collectively
called the 'Notes'), the Notes being entitled to the benefit of a Negative
Covenants Agreement executed by Borrower, Holdings and MEDIQ in favor of KCI and
KCIT (such Negative Covenants Agreement, being herein called the 'Negative
Covenants Agreement' and the Asset Purchase Agreement being herein called the
'Acquisition Agreement'), and;
WHEREAS, KCIT has made it a condition precedent to KCIT making the Loan
available to Borrower, PRN and Holdings that Guarantor guaranty payment of the
Notes on the terms and conditions set forth in this Guaranty Agreement;
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and as a material inducement to KCIT
to extend credit to Borrower, PRN and Holdings, Guarantor hereby guaranties to
KCIT the prompt and full payment of the Indebtedness described in Section 1
below in this Guaranty (collectively called the 'Guaranteed Obligations'), this
Guaranty being upon the following terms and conditions:
1. Guaranty of Payment. Guarantor hereby unconditionally and irrevocably
guarantees to KCIT the punctual payment when due, whether by lapse of time, by
acceleration of maturity, or otherwise, and at all times thereafter, of all
principal, interest (including interest accruing after the commencement of any
bankruptcy or insolvency proceeding by or against Borrower, PRN or Holdings as
the case may be, whether or not allowed in such proceeding), costs, expenses,
and other sums of money now or hereafter due and owing pursuant to (i) the terms
of the Notes, and (ii) all renewals, extensions, refinancings, modifications,
supplements or amendments of such indebtedness or any part thereof (the
indebtedness described in clauses (i) and (ii) above in this Section 1 is herein
collectively called the 'Indebtedness'). This Guaranty covers the Indebtedness,
whether presently outstanding or arising subsequent to the date hereof. The
guaranty of Guarantor as set forth in this Section 1 is a continuing guaranty of
payment and not a guaranty of collection.
2. Primary Liability of Guarantor.
(a) This Guaranty is an absolute, irrevocable and unconditional
guaranty of payment. Guarantor shall be liable for the payment of the
Guaranteed Obligations, as set forth in this Guaranty, as a primary
obligor. This Guaranty shall be effective as a waiver of, and Guarantor
<PAGE>
hereby expressly waives, any and all rights to which Guarantor may
otherwise have been entitled under any suretyship laws in effect from time
to time.
(b) In the event of default by Borrower, PRN and/or Holdings, in
payment of the Guaranteed Obligations, or any part thereof, when such
indebtedness becomes due, either by its terms or as the result of the
exercise of any power to accelerate, Guarantor shall, on demand and without
presentment, protest, notice of acceptance of this Guaranty, protest,
further notice of nonpayment or of dishonor or of default or
nonperformance, or notice of acceleration or of intent to accelerate, or
any other notice whatsoever, make payment in respect of or fully perform,
as the case may be, the Guaranteed Obligations. Further, it shall not be
necessary for KCIT, in order to enforce such payment by Guarantor, first to
institute suit or pursue or exhaust any rights or remedies against
Borrower, PRN, Holdings or others liable on such indebtedness, or to
enforce any rights against any security that shall ever have been given to
secure such indebtedness, or to join Borrower, PRN, Holdings or any others
liable for the payment of the Guaranteed Obligations or any part thereof in
any action to enforce this Guaranty, or to resort to any other means of
obtaining payment or performance of the Guaranteed Obligations.
(c) Suit may be brought or demand may be made against all parties who
have signed this Guaranty or any other guaranty covering all or any part of
the Guaranteed Obligations, or against any one or more of them, separately
or together, without impairing the rights of KCIT against any party hereto.
At any time that KCIT is entitled to exercise its rights or remedies
hereunder, it may in its discretion elect to demand payment.
(d) Notwithstanding anything contained herein to the contrary, if
following an Event of Default (as defined in the Notes) by Borrower, PRN
and/or Holdings under any of the Notes, the acceleration of the Notes is
prohibited pursuant to (i) that certain Standstill Agreement dated as of
September 30, 1994, by and among PRN, KCIT and Congress Financial
Corporation ('Congress'), (ii) that certain Subordination and Standstill
Agreement dated September 30, 1994, by and among Borrower, KCIT and
Congress, or (iii) that certain Subordination and Standstill Agreement
dated September 30, 1994 entered into by and among Holdings, KCIT and
Congress (said agreements being herein collectively called the 'Standstill
Agreements'), then Guarantor shall, on demand and without presentment,
protest, notice of acceptance of the Guaranty, further notice of
non-payment or of dishonor or of default or non-performance, or any notice
of acceleration or notice of intent to accelerate or any notice whatsoever,
make payment to KCIT, or the then owner or holder of the Notes, in an
amount equal to the then entire outstanding balance, including all
principal, regardless of whether or not same is then due under the terms of
the Notes, and accrued but unpaid interest thereon, of the Guaranteed
Obligations. Furthermore, it shall not be necessary for KCIT, in order to
enforce such payment by Guarantor, first to institute suit or pursue or
exhaust any rights or remedies against Borrower, PRN, Holdings or others
liable on such indebtedness or to enforce any rights against security that
shall ever have been given to secure such indebtedness, or to join
Borrower, PRN, Holdings or any others liable for payment of the Guaranteed
Obligations or any part thereof in any action to enforce this Guaranty, or
to resort to any other means of obtaining payment or performance of the
Guaranteed Obligations.
3. Certain Agreements and Waivers by Guarantor.
(a) Guarantor hereby agrees that neither KCIT's rights or remedies nor
Guarantor's obligations under the terms of this Guaranty shall be released,
diminished, impaired, reduced or affected by any one or more of the
following events, actions, facts, or circumstances, and the liability of
Guarantor under this Guaranty shall be absolute and unconditional
irrespective of:
(i) any limitation of liability or recourse in any other document
relating to the Guaranteed Obligations or arising under any law;
(ii) the taking or accepting of any other security or guaranty for
any or all of the Guaranteed Obligations;
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(iii) any release, surrender, abandonment, exchange, alteration,
sale or other disposition, subordination, deterioration, waste, failure
to protect or preserve, impairment, or loss of, or any failure to create
or perfect any lien or security interest with respect to, or any other
dealings with, any collateral or security at any time existing or
purported, believed or expected to exist in connection with any or all
of the Guaranteed Obligations;
(iv) whether express or by operation of law, any partial release of
the liability of Guarantor hereunder, or if one or more other guaranties
are now or hereafter obtained by KCIT covering all or any part of the
Guaranteed Obligations, any complete or partial release of any one or
more of such guarantors under any such other guaranty, or any complete
or partial release of Borrower, PRN, Holdings or any other party liable,
directly or indirectly, for the payment or performance of any or all of
the Guaranteed Obligations;
(v) the insolvency, bankruptcy, disability, dissolution,
liquidation, termination, receivership, reorganization, merger,
consolidation, change of form, structure or ownership, sale of all
assets, or lack of corporate, partnership or other power of Borrower,
PRN, Holdings or any other party at any time liable for the payment of
any or all of the Guaranteed Obligations;
(vi) either with or without notice to or consent of Guarantor: any
renewal, extension, modification or rearrangement of the terms of any or
all of the Guaranteed Obligations (including the Notes), including,
without limitation, material alterations of the terms of payment
(including changes in maturity date(s) and interest rate(s)) or
performance or any other terms thereof, or any waiver, termination, or
release of, or consent to departure from, the Notes or any other
guaranty of any or all of the Guaranteed Obligations, or any adjustment,
indulgence, forbearance, or compromise that may be granted from time to
time by KCIT to Borrower, PRN, Holdings, Guarantor, and/or any other
party at any time liable for the payment of any or all of the Guaranteed
Obligations;
(vii) any neglect, lack of diligence, delay, omission, failure, or
refusal of KCIT to (a) take or prosecute (or in taking or prosecuting)
any action for the collection or enforcement of any of the Guaranteed
Obligations, or (b) foreclose or take or prosecute any action to
foreclose (or in foreclosing or taking or prosecuting any action to
foreclose) upon any security therefor, or (c) exercise (or in
exercising) any other right or power with respect to any security
therefor, or (d) take or prosecute (or in taking or prosecuting) any
action in connection with any document relating to the Guaranteed
Obligations,
(viii) any failure to sell or otherwise dispose of in a
commercially reasonable manner any collateral securing any or all of the
Guaranteed Obligations.
(ix) any failure of KCIT to notify Guarantor of any creation,
renewal, extension, rearrangement, modification, supplement, or
assignment of the Guaranteed Obligations or any part thereof, or of the
Notes, or of any release of or change in any security or of any other
action taken or refrained from being taken by KCIT against Borrower, PRN
or Holdings or any security, it being understood that KCIT shall not be
required to give Guarantor any notice of any kind under any
circumstances with respect to or in connection with the Guaranteed
Obligations, and any and all rights to notice that Guarantor may have
otherwise had being hereby waived by Guarantor;
(x) KCIT being required to refund any payment by Borrower to
Borrower, by PRN to PRN or by Holdings to Holdings, as the case may be,
or any other party liable for the payment of any or all of the
Guaranteed Obligations;
(xi) the existence of any claim, set-off, or other right that
Guarantor may at any time have against Borrower, PRN or Holdings whether
or not arising in connection with this Guaranty or the Notes (provided,
that nothing contained herein shall prevent the assertion of any such
claim by separate suit or compulsory counterclaim); or
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(xii) the unenforceability of all or any part of the Guaranteed
Obligations against Borrower, PRN or Holdings, whether because the
Guaranteed Obligations exceed the amount permitted by law or violate any
usury law, or because the act of creating the Guaranteed Obligations, or
any part thereof, is ultra vires, or because the officers or persons
creating same acted in excess of their authority, or because of a lack
of validity or enforceability of or defect or deficiency in the Notes,
or because of the subordination of, or moratorium on, payments due and
owing under the Notes at such times as the same would otherwise become
due and owing under the Notes but for such subordination or moratium,
regardless of the party or parties, including, without limitation,
Congress Financial Corporation, intended to be benefited by such
subordination or moratium or because Borrower's, PRN's or Holding's
obligation ceases to exist by operation of law, or because of any other
reason or circumstance, it being agreed that Guarantor shall remain
liable hereon regardless of whether Borrower, PRN, Holdings or any other
person be found not liable on the Guaranteed Obligations, or any part
thereof, for any reason (and regardless of any joinder of Borrower, PRN,
Holdings or any other party in any action to obtain payment of any or
all of the Guaranteed Obligations); provided, however, that if any part
of the Guaranteed Obligations is not enforceable against Borrower, PRN
or Holdings, as the case may be, because of the proper exercise of any
right of set-off against the Notes pursuant to the terms of the
Acquisition Agreement, that such part of the Guaranteed Obligations
shall not be enforceable against Guarantor.
(b) In the event any payment by Borrower, PRN, Holdings or any other
party to KCIT is held to constitute a preference, fraudulent transfer or
other voidable payment under any bankruptcy, insolvency or similar law, or
if for any other reason KCIT is required to refund such payment or pay the
amount thereof to any other party, such payment by Borrower, PRN, Holdings
or any other party to KCIT shall not constitute a release of Guarantor from
any liability hereunder, and this Guaranty shall continue to be effective
or shall be reinstated (notwithstanding any prior release or discharge by
KCIT of this Guaranty or of Guarantor), as the case may be, with respect
to, and this Guaranty shall apply to, any and all amounts so refunded by
KCIT or paid by KCIT to another party, together with any interest paid by
KCIT and any attorneys' fees, costs and expenses paid or incurred by KCIT
in connection with any such event (all of which amounts shall constitute
part of the Guaranteed Obligations). It is the intent of Guarantor and KCIT
that the obligations and liabilities of Guarantor hereunder are absolute
and unconditional under any and all circumstances and that until the
Guaranteed Obligations are fully and finally paid, and not subject to
refund or disgorgement, the obligations and liabilities of Guarantor
hereunder shall not be discharged or released, in whole or in part, by any
act or occurrence that might, but for the provisions of this Guaranty, be
deemed a legal or equitable discharge or release of a guarantor. KCIT shall
be entitled to continue to hold this Guaranty in its possession for a
period of one year from the date the Guaranteed Obligations are paid and
performed in full and for so long thereafter as may be necessary to enforce
any obligation of Guarantor hereunder and/or to exercise any right or
remedy of KCIT hereunder.
(c) If acceleration of the time for payment of any amount payable by
Borrower, PRN and/or Holdings under the Notes is stayed or delayed by (i)
any law or tribunal, or (ii) pursuant to the terms of the Standstill
Agreements, all such amounts shall nonetheless be payable by Guarantor on
demand by KCIT.
4. Other Liability. If Guarantor becomes liable for any indebtedness owing
by Borrower, PRN or Holdings to KCIT other than under this Guaranty, such
liability shall not be in any manner impaired or affected hereby, and the rights
of KCIT hereunder shall be cumulative of any and all other rights that KCIT may
have against Guarantor. If Borrower, PRN or Holdings is or becomes indebted to
KCIT for any indebtedness other than or in excess of the Indebtedness for which
Guarantor is liable under this Guaranty, any payment received or recovery
realized upon any indebtedness of Borrower, PRN or Holdings to KCIT may, except
to the extent paid by Guarantor on the Indebtedness for which Guarantor is
liable under this Guaranty or specifically required by law or agreement of KCIT
to be
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applied to the Indebtedness for which Guarantor is liable under this Guaranty,
in KCIT's sole discretion, be applied upon indebtedness of Borrower, PRN or
Holdings to KCIT other than the Indebtedness for which Guarantor is liable under
this Guaranty.
5. KCIT Assigns. This Guaranty is for the benefit of KCIT and KCIT's
successors and assigns, and in the event of a permitted assignment of the
Guaranteed Obligations, or any part thereof, the rights and benefits hereunder,
to the extent applicable to the Guaranteed Obligations so assigned, may be
transferred with such Guaranteed Obligations. Guarantor waives notice of any
transfer or assignment of the Guaranteed Obligations, or any part thereof, and
agrees that failure to give notice will not affect the liabilities of Guarantor
hereunder.
6. Binding Effect. This Guaranty is binding not only on Guarantor, but also
on Guarantor's successors and assigns. Words importing persons herein shall
include firms, associations, partnerships (including limited partnerships),
joint ventures, trusts, corporations and other legal entities, including public
or governmental bodies, agencies or instrumentalities, as well as natural
persons.
7. Governing Law. This Guaranty, and its validity, enforcement, and
interpretation, shall for all purposes by governed by and construed in
accordance with the laws of the State of Delaware and applicable United States
federal law, and is intended to be performed in accordance with, and only to the
extent permitted by, such laws. All obligations of Guarantor hereunder are
payable and performable at the place or places where the Guaranteed Obligations
are payable and performable.
8. Invalidity of Certain Provisions. If any provision of this Guaranty or
the application thereof to any person or circumstance shall, for any reason and
to any extent, be judicially declared to be invalid or unenforceable, neither
the remaining provisions of this Guaranty nor the application of such provision
to any other Person or circumstance shall be affected thereby, and the remaining
provisions of this Guaranty, or the applicability of such provision to other
Persons or circumstances, as applicable, shall remain in effect and be
enforceable to the maximum extent permitted by applicable law.
9. Attorneys' Fees and Costs of Collection. Guarantor shall pay on demand
all reasonable attorneys' fees and all other costs and expenses incurred by KCIT
in the enforcement of or preservation of KCIT's rights under this Guaranty.
Guarantor agrees to pay interest on any expenses or other sums due to KCIT under
this Section 9 that are not paid when due, at a rate per annum equal to the
lesser of (i) the maximum rate of interest permitted by applicable law, or (ii)
the Default Rate (as defined in the Notes). Guarantor's obligations and
liabilities under this Section 9 shall survive any payment or discharge in full
of the Guaranteed Obligations.
10. Payments. All sums payable under this Guaranty shall be paid in lawful
money of the United States of America that at the time of payment is legal
tender for the payment of public and private debts.
11. Controlling Agreement. It is not the intention of KCIT or Guarantor to
obligate Guarantor to pay interest in excess of that lawfully permitted to be
paid by Guarantor under applicable law. Should it be determined that any portion
of the Guaranteed Obligations or any other amount payable by Guarantor under
this Guaranty constitutes interest in excess of the maximum amount of interest
that Guarantor, in Guarantor's capacity as guarantor, may lawfully be required
to pay under applicable law, the obligation of Guarantor to pay such interest
shall automatically be limited to the payment thereof in the maximum amount so
permitted under applicable law. The provisions of this Section 11 shall override
and control all other provisions of this Guaranty and of any other agreement
between Guarantor and KCIT.
12. Representations, Warranties, and Covenants of Guarantor. Guarantor
hereby represents, warrants, and covenants that (a) after giving effect to this
Guaranty, Guarantor is solvent, and does not intend to incur or believe that it
will incur debts that will be beyond its ability to pay as such debts mature;
(b) KCIT has no duty at any time to investigate or inform Guarantor of the
financial or business condition or affairs of Borrower, PRN or Holdings or any
change therein, and Guarantor will keep itself fully appraised of Borrower's,
PRN's and Holdings' financial and business condition; (c) Guarantor acknowledges
and agrees that Guarantor may be required to pay and perform the
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Guaranteed Obligations in full without assistance or support from Borrower, PRN,
Holdings or any other party; and (d) Guarantor has read and fully understand the
provisions contained in the Notes. Guarantor's representations, warranties and
covenants are a material inducement to KCIT to make the Loan and accept the
Notes and shall survive the execution hereof and any bankruptcy, foreclosure,
transfer of security or other event affecting Borrower, PRN, Holdings,
Guarantor, any other party, or any security for all or any part of the
Guaranteed Obligations.
13. Notices. Unless specifically provided otherwise, any notice for
purposes of this Guaranty or any other document relating hereto shall be given
in writing or by telex or by facsimile (fax) transmission and shall be addressed
or delivered to the respective addresses set forth in this Guaranty, or to such
other address as may have been previously designated by the intended recipient
by notice given in accordance with this Section. If sent by prepaid, registered
or certified mail (return receipt requested), the notice shall be deemed
effective when deposited in a regularly maintained receptacle of the United
States Postal Service; if transmitted by telex, the notice shall be effective
when transmitted (answerback confirmed); and if transmitted by facsimile or
personal delivery, the notice shall be effective when received. No notice of
change of address shall be effective except upon actual receipt. This Section 13
shall not be construed in any way to affect or impair any waiver of notice or
demand provided in this Guaranty or in any other Loan Document or to require
giving notice or demand to or upon any Person in any situation or for any
reason.
14. Cumulative Rights. The exercise of KCIT of any right or remedy
hereunder or under the Notes, or at law or in equity, shall not preclude the
concurrent or subsequent exercise of any other right or remedy. KCIT shall have
all rights, remedies and recourses afforded to KCIT by reason of this Guaranty,
the Notes, or by law, equity or otherwise, and the same (a) shall be cumulative
and concurrent, (b) may be pursued separately, successively or concurrently
against Guarantor or others obligated for the Guaranteed Obligations, or any
part thereof, or against any one or more of them, or against any security or
otherwise, at the sole discretion of KCIT, (c) may be exercised as often as
occasion therefor shall arise, it being agreed by Guarantor that the exercise
of, discontinuance of the exercise of or failure to exercise any of such rights,
remedies, or recourses shall in no event be construed as a waiver or release
thereof or of any other right, remedy, or recourse, and (d) are intended to be,
and shall be, non-exclusive. No waiver of any default on the part of Guarantor
or of any breach of any of the provisions of this Guaranty or of any other
document shall be considered a waiver of any other or subsequent default or
breach, and no delay or omission in exercising or enforcing the rights and
powers granted herein or in any other document shall be construed as a waiver of
such rights and powers, and no exercise or enforcement of any rights or powers
hereunder or under any other document shall be held to exhaust such rights and
powers, and every such right and power may be exercised from time to time. The
granting of any consent, approval or waiver by KCIT shall be limited to the
specific instance and purpose therefor and shall not constitute consent or
approval in any other instance or for any other purpose. No notice to or demand
on Guarantor in any case shall of itself entitle Guarantor to any other or
further notice or demand in similar or other circumstances. No provision of this
Guaranty or any right, remedy or recourse of KCIT with respect hereto, or any
default or breach, can be waived, nor can this Guaranty or Guarantor be released
or discharged in any way or to any extent, except specifically in each case by a
writing intended for that purpose (and which refers specifically to this
Guaranty) executed, and delivered to Guarantor, by KCIT.
15. Term of Guaranty. This Guaranty shall continue in effect until all the
Guaranteed Obligations are fully and finally paid, and discharged, except that,
and notwithstanding any return of this Guaranty to Guarantor, this Guaranty
shall continue in effect (i) with respect to all obligations and liabilities of
Guarantor under Section 9 of this Guaranty, and (ii) as provided in Section 4(b)
hereof.
16. Further Assurances. Guarantor at Guarantor's expense will promptly
execute and deliver to KCIT upon KCIT's request all such other and further
documents, agreements, and instruments in compliance with or accomplishment of
the agreements of Guarantor under this Guaranty.
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17. No Fiduciary Relationship. The relationship between KCIT and Guarantor
is solely that of KCIT and guarantor. KCIT has no fiduciary or other special
relationship with or duty to Guarantor and none is created hereby.
18. Interpretation. The term 'KCIT' shall be deemed to include any
permitted subsequent holder(s) of the Notes. Whenever the context of any
provisions hereof shall require it, words in the singular shall include the
plural, words in the plural shall include the singular, and pronouns of any
gender shall include the other genders. Captions and headings herein are for
convenience only and shall not affect the construction of the document. All
references in this Guaranty to Schedules, Articles, Sections, Subsections,
paragraphs and subparagraphs refer to the respective subdivisions of this
Guaranty, unless such reference specifically identifies another document. The
terms 'herein,' 'hereof,' 'hereto,' 'hereunder' and similar terms refer to this
Guaranty and not to any particular section or subsection of this Guaranty. The
terms 'include' and 'including' shall be interpreted as if followed by the words
'without limitation. ' All references in this Guaranty to sums denominated in
dollars or with the symbol '$' refer to the lawful currency of the United States
of America, unless such reference specifically identifies another currency.
19. Time of Essence. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.
20. Entire Agreement. This Guaranty embodies the entire agreement between
KCIT and Guarantor with respect to the guaranty by Guarantor of the Guaranteed
Obligations. This Guaranty supersedes all prior agreements and understandings,
if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations.
No condition or conditions precedent to the effectiveness of this Guaranty
exist. This Guaranty shall be effective upon execution by Guarantor and delivery
to KCIT.
IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the __ day
of ___, 1994.
GUARANTOR:
MEDIQ INCORPORATED
By:
Printed Name:
Title:
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EXHIBIT 4.9
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION,
as Lender
and
MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.,
as Borrower
Dated: September 30, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE
---------
SECTION 1. DEFINITIONS............................................................................. -1-
SECTION 2. CREDIT FACILITIES....................................................................... -8-
2.1 Term Loan............................................................................... -8-
SECTION 3. INTEREST AND FEES....................................................................... -11-
3.1 Interest................................................................................ -11-
3.2 Closing Fee............................................................................. -12-
3.3 Servicing Fee........................................................................... -12-
3.4 Success Fee............................................................................. -12-
3.5 Syndication Fee......................................................................... -12-
3.6 Changes in Laws and Increased Costs of Loans............................................ -13-
SECTION 4. CONDITIONS PRECEDENT.................................................................... -13-
4.1 Conditions Precedent to Term Loan....................................................... -13-
SECTION 5. GRANT OF SECURITY INTEREST.............................................................. -15-
SECTION 6. COLLECTION AND ADMINISTRATION........................................................... -16-
6.1 Borrower's Loan Account................................................................. -16-
6.2 Statements.............................................................................. -16-
6.3 Collection of Accounts.................................................................. -17-
6.4 Payments................................................................................ -18-
6.5 Use of Proceeds......................................................................... -19-
SECTION 7. COLLATERAL REPORTING AND COVENANTS...................................................... -19-
7.1 Collateral Reporting.................................................................... -19-
7.2 Inventory and Equipment Covenants....................................................... -19-
7.3 Power of Attorney....................................................................... -19-
7.4 Right to Cure........................................................................... -20-
7.5 Access to Premises...................................................................... -20-
SECTION 8. REPRESENTATIONS AND WARRANTIES.......................................................... -21-
8.1 Corporate Existence, Power and Authority; Subsidiaries.................................. -21-
8.2 Financial Statements; No Material Adverse Change........................................ -21-
8.3 Chief Executive Office; Collateral Locations............................................ -21-
8.4 Priority of Liens; Title to Properties.................................................. -21-
8.5 Tax Returns............................................................................. -21-
8.6 Litigation.............................................................................. -22-
8.7 Compliance with Other Agreements and Applicable Laws.................................... -22-
8.8 Accuracy and Completeness of Information................................................ -22-
8.9 Acquisition of Purchased Assets......................................................... -22-
8.10 Capitalization.......................................................................... -23-
8.11 Survival of Warranties; Cumulative...................................................... -23-
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS...................................................... -24-
9.1 Maintenance of Existence................................................................ -24-
9.2 New Locations........................................................................... -24-
9.3 Compliance with Laws, Regulations, Etc.................................................. -24-
9.4 Payment of Taxes and Claims............................................................. -24-
9.5 Insurance............................................................................... -24-
9.6 Financial Statements and Other Information.............................................. -25-
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc................................. -26-
9.8 Encumbrances............................................................................ -27-
9.9 Indebtedness............................................................................ -27-
9.10 Loans, Investments, Guarantees, Etc..................................................... -28-
9.11 Dividends and Redemptions............................................................... -28-
9.12 Transactions with Affiliates............................................................ -29-
9.13 Consolidated Tangible Net Worth......................................................... -29-
</TABLE>
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<TABLE>
<S> <C> <C>
9.14 Interest Coverage Ratio................................................................. -29-
9.15 Cash Flow Coverage Ratio................................................................ -29-
9.16 Capital Expenditures.................................................................... -30-
9.17 Utilization Rate........................................................................ -30-
9.18 Costs and Expenses...................................................................... -30-
9.19 Further Assurances...................................................................... -30-
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.......................................................... -31-
10.1 Events of Default....................................................................... -31-
10.2 Remedies................................................................................ -33-
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW............................ -34-
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver................... -34-
11.2 Waiver of Notices....................................................................... -35-
11.3 Amendments and Waivers.................................................................. -35-
11.4 Waiver of Counterclaims................................................................. -36-
11.5 Indemnification......................................................................... -36-
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS........................................................ -36-
12.1 Term.................................................................................... -36-
12.2 Notices................................................................................. -36-
12.3 Partial Invalidity...................................................................... -37-
12.4 Successors.............................................................................. -37-
12.5 Participant's Security Interest......................................................... -37-
12.6 Entire Agreement........................................................................ -37-
</TABLE>
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INDEX TO
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A Information Certificate
Schedule 9.8 Capitalized Leases
</TABLE>
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated September 30, 1994 is entered into
by and between Congress Financial Corporation, a California corporation
('Lender') and MEDIQ/PRN Life Support Services-I, Inc., a Delaware corporation
('Borrower').
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrower and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words 'hereof', 'herein', 'hereunder', 'this Agreement' and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3. Any accounting term used herein unless otherwise defined in
this Agreement shall have the meanings customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following terms shall
have the respective meanings given to them below:
1.1 'Accounts' shall mean all present and future rights of Borrower to
payment for goods leased, rented or sold or for services rendered, whether or
not evidenced by instruments or chattel paper, and whether or not earned by
performance, and shall include, without limitation, all present and future
rights to payment of Borrower from Old PRN pursuant to the Revenue Agreement or
otherwise, accounts, rentals, rent receivables and other obligations and
receivables for goods leased, rented or sold by Borrower to other Persons.
1.2 'Actual Revenues' shall mean fifty-five (55%) percent of the gross
amount of the actual revenues billed by Old PRN to its customers for Rented
Medical Inventory owned by Borrower in any calendar month.
1.3 'Actual Revenues Payment' shall mean the Actual Revenues for any
calendar month minus the Estimated Revenues for such calendar month previously
remitted by Old PRN to Lender for the account of Borrower as provided in Section
6.3 hereof.
1.4 'Adjusted Eurodollar Rate' shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (1) the Eurodollar Rate for such Interest Period by (2) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
'Reserve Percentage' shall mean the reserve percentage, expressed as a decimal,
required by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of the
Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan
made with the
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proceeds of such deposit, whether or not the Reference Bank actually holds or
has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.5 'Adjusted Interest Expense' shall mean as to any Person an amount equal
to the consolidated interest expense of such Person and its subsidiaries for the
applicable period, as reflected in financial statements prepared in accordance
with GAAP, less the aggregate amount of charges to such consolidated interest
expense for such period arising from amortization of costs relating to the
issuance of common stock or common stock equivalents, deferred charges relating
to the acquisition of the Purchased Assets and/or the acquisition of term debt
acquired at a discount.
1.6 'Blocked Accounts' shall have the meaning set forth in Section 6.3
hereof.
1.7 'Business Day' or 'business day' shall mean (a) for the Prime Rate
Loans, any day other than a Saturday, Sunday, or other day on which commercial
banks are authorized or required to close under the laws of the State of New
York or the Commonwealth of Pennsylvania, and a day on which the Reference Bank
and Lender are open for the transaction of business, and (b) for all Eurodollar
Rate Loans, any such day as described in (a) above in this definition of
Business Day, excluding any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
1.8 'Capital Expenditures' shall mean, collectively, the amount paid or
payable for the applicable period by any Person for the purchase of movable
medical equipment and accessories thereto after the date hereof by such Person
for lease or rental to other Persons, including, without limitation, to Old PRN.
1.9 'Cash Flow Coverage Ratio' shall mean, as to any Person, at any
applicable time, the ratio of (A) the EBITDA of such Person for the applicable
period to (B) the amount equal to the difference between (i) the aggregate
amount during such period of the Adjusted Interest Expense of such Person,
principal payments on term debt owed and made by such Person and its
subsidiaries exclusive of mandatory prepayments thereof pursuant to Section
2.1(b)(i) and (ii) of this Agreement, cash payments for Capital Expenditures
made by such Person and its subsidiaries and income taxes paid by such Person
and its subsidiaries, and, only as to Borrower, cash dividends paid by Borrower
to Holdings which are permitted under Section 9.11(A) of this Agreement, and
(ii) the aggregate amount of proceeds of any term loans and capitalized
equipment leases received by such Person and its subsidiaries.
1.10 'Collateral' shall have the meaning set forth in Section 5 hereof.
1.11 'Consolidated Tangible Net Worth' shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its subsidiaries (if any),
the amount equal to: (a) the difference between: (i) the aggregate net book
value of all assets of such Person and its subsidiaries (excluding the book
value of patents, trademarks, licenses and, to the extent not related to the
acquisition of the Purchased Assets, goodwill and other intangible assets),
calculating the book value of inventory and other goods held for sale for this
purpose on a lower of cost or market basis, after deducting from such book
values all appropriate reserves in accordance with GAAP (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and (ii)
the aggregate amount of the indebtedness and other liabilities of such Person
and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.12 'Cumulative Excess Cash Flow' shall have the meaning ascribed thereto
in Section 2.1(c) of this Agreement.
1.13 'EBITDA' shall mean as to any Person an amount equal to the
consolidated net income of such Person and its subsidiaries for the applicable
period, as reflected in financial statements prepared in accordance with GAAP,
(A) plus, depreciation, amortization, interest, income taxes, deductions
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from consolidated net income as a result of changes in GAAP, deducted for the
applicable period in determining such consolidated net income, and non-cash
extraordinary losses not incurred in the ordinary course of business and (B)
minus any amounts added to such consolidated net income as a result of changes
in GAAP and extraordinary gains not incurred in the ordinary course of business.
1.14 'Equipment' shall mean all of Borrower's now owned and hereafter
acquired equipment, computers and computer hardware and software (whether owned
or licensed), vehicles, tools, furniture, fixtures, all attachments, accessions
and property now or hereafter affixed thereto or used in connection therewith,
and substitutions and replacements thereof, wherever located, but which shall
not include Inventory.
1.15 'Estimated Revenues' shall mean a payment equal to fifty-five (55%)
percent of the product of (A) the gross amount of the total rentals billed by
Old PRN to its customers for Rented Medical Inventory owned by Old PRN and
Borrower during the applicable period, multiplied by (B) a fraction of which (i)
the numerator shall be the number of units of Rented Medical Inventory owned by
Borrower on the Estimated Revenues Calculation Date and (ii) the denominator of
which shall be the total number of units of Rented Medical Inventory owned by
Old PRN and Borrower on the Estimated Revenues Calculation Date. The 'Estimated
Revenues Calculation Date' shall mean the date of October 1, 1994 or, after
September 30, 1994 and receipt by Lender of a certificate from the President or
Chief Financial Officer of Old PRN and Borrower as to the reasonable basis of an
increase or decrease in the above fraction as of such date or any annual
anniversary date thereof, October 1 of any subsequent calendar year thereafter.
1.16 'Eurodollar Rate' shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.17 'Eurodollar Rate Loans' shall mean the Term Loan or the outstanding
amount thereof on which interest is payable based on the Adjusted Eurodollar
Rate in accordance with the terms hereof.
1.18 'Financing Agreements' shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor or Old PRN in connection with this Agreement, including, without
limitation, the guarantee of Old PRN by Borrower in favor of Lender, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.19 'GAAP' shall mean generally accepted accounting principles as in
effect on the date hereof consistently applied.
1.20 'Holdings' shall mean PRN Holdings, Inc., a Delaware corporation, and
its successors.
1.21 'Holdings Note' shall mean, individually and collectively, the three
(3) Promissory Notes, each dated of even date herewith, by Holdings in favor of
KCI in the respective original principal amounts of $5,000,000, $3,000,000 and
$2,000,000.
1.22 'Information Certificate' shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.23 'Interest Coverage Ratio' shall mean as to any Person, at any
applicable time, the ratio of its EBITDA for the applicable period to its
Adjusted Interest Expense for such period.
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1.24 'Interest Period' shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will begin after the first day of any
calendar month or which will end before the last day of any calendar month or
which will end after the date on which all remaining principal is payable under
the Term Note.
1.25 'Interest Rate' shall mean, as to Prime Rate Loans, a rate of two (2%)
percent per annum in excess of the Prime Rate and, as to Eurodollar Rate Loans,
a rate of four and one-quarter (4 1/4%) percent per annum in excess of the
Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrower as in effect three (3) Business Days after
the date of receipt by Lender of the request of Borrower for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to Borrower); provided, that, the Interest
Rate shall mean the rate of four (4%) percent per annum in excess of the Prime
Rate as to Prime Rate Loans and the rate of six and one-quarter (6 1/4%) percent
per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans,
at Lender's option, without notice, for the period on and after the date of the
occurrence of any Event of Default and for so long as such Event of Default or
other event is continuing as determined by Lender and until such time as all
Obligations are indefeasibly paid in full (notwithstanding entry of any judgment
against Borrower).
1.26 'Inventory' shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located, including,
without limitation, all goods leased or rented or held for lease or rental by
Borrower to Old PRN or any other Person.
1.27 'KCI' shall mean KCI Therapeutic Services, Inc., a Delaware
corporation, and its successors and assigns.
1.28 'KCI Trigger Event' shall mean the occurrence and continuance of a
'Trigger Event' under, and as said quoted term is defined in, that certain
Subordination and Standstill Agreement among Holdings, KCI and Lender.
1.29 'Kinetic Concepts' shall mean Kinetic Concepts, Inc., a Texas
corporation and its successors and assigns.
1.30 'Mass Mutual' shall mean, individually and collectively, Massachusetts
Mutual Life Insurance Company ('Insurance'), MassMutual Participation Investors
('Participation') and MassMutual Corporate Investors ('Investors'), and their
respective successors and assigns.
1.31 'Mass Mutual Note' shall mean, individually and collectively, the
Senior Subordinated Notes due October 1, 2004, dated of even date herewith, by
Holdings in favor of Mass Mutual in the aggregate original principal amount of
$10,000,000.
1.32 'Mass Mutual Trigger Event' shall mean the occurrence and continuance
of a 'Trigger Event' under, and as said quoted term is defined in, (a) the
Subordination and Standstill Agreement dated of even date herewith executed by
and among Holdings, Lender and Insurance, (b) the Subordination and Standstill
Agreement dated of even date herewith executed by and among Holdings, Lender and
Investors, or (c) the Subordination and Standstill Agreement dated of even date
herewith executed by and among Holdings, Lender and Participation.
1.33 'New PRN Note' shall mean the Promissory Note, dated of even date
herewith, by Borrower in favor of KCI in the original principal amount of
$2,956,957.
1.34 'Obligations' shall mean the Term Loan and all other obligations,
liabilities and indebtedness of every kind, nature and description owing by
Borrower to Lender and/or its affiliates, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Agreement
or otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under
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the United States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the commencement of such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lender.
1.35 'Obligor' shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.36 'Old PRN' shall mean MEDIQ/PRN Life Support Services, Inc., a Delaware
corporation, and its successors.
1.37 'Old PRN Agreements' shall mean, collectively, the Accounts Financing
Agreement [Security Agreement], dated May 29, 1992, between Lender and Old PRN,
as from time to time amended and supplemented, including, without limitation, as
amended by the letter agreement between Lender and Old PRN, dated of even date
herewith, the Amended and Restated Covenant Supplement to Accounts Financing
Agreement between Lender and Old PRN, dated of even date herewith, and any and
all other supplements thereto, and all other agreements, documents and
instruments now or at any time hereafter executed and/or delivered in connection
therewith or related thereto, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.38 'Old PRN Note' shall mean the Promissory Note, dated of even date
herewith, by Old PRN in favor of KCI in an original principal amount not to
exceed $5,880,000.
1.39 'Parent' shall mean MEDIQ Incorporated, a Delaware corporation, and
its successors.
1.40 'Participant' shall mean any person which at any time participates
with Lender in respect of the Term Loan or other Obligations or any portion
thereof.
1.41 'Person' or 'person' shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.42 'Prime Rate' shall mean the rate from time to time publicly announced
by Philadelphia National Bank, incorporated as CoreStates Bank, N.A., or its
successors, at its office in Philadelphia, Pennsylvania, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.43 'Prime Rate Loans' shall mean the Term Loan or the outstanding amount
thereof on which interest is payable based on the Prime Rate in accordance with
the terms thereof.
1.44 'Purchase Agreements' shall mean, individually and collectively, the
Asset Purchase Agreement, dated August 23, 1994, among Sellers, Parent, Holdings
and Borrower, together with all bills of sale, quitclaim deeds, assignment and
assumption agreements and such other instruments of transfer as are referred to
therein and all side letters with respect thereto, and all agreements, documents
and instruments executed and/or delivered in connection therewith, as all of the
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced; provided, that, the term 'Purchase
Agreements' as used herein shall not include any of the 'Financing Agreements'
as such term is defined herein.
1.45 'Purchased Assets' shall mean all of the assets and properties
acquired by Borrower from Sellers pursuant to the Purchase Agreements.
1.46 'Quarterly Utilization Percentage' shall mean as to any Person, at the
end of its applicable fiscal quarter, the arithmetic average for such fiscal
quarter of all of the Daily Utilization Rates of such Person in such fiscal
quarter. The 'Daily Utilization Rate' shall mean as to any Person the percentage
which (A) the total number of units of Rented Medical Inventory owned by such
Person at the end of each day for at least twenty (20) days during each month,
bears to (B) the total number of units of
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<PAGE>
movable medical equipment owned by such Person and available for lease or rental
at the end of each such day in each such month. For purposes of such
calculations, (A) movable medical equipment owned by Borrower and leased or
rented by Borrower to Old PRN pursuant to the Revenue Agreement or otherwise and
which is not, in turn, leased or rented by Old PRN to any other Person shall not
be deemed to be Rented Medical Inventory, and (B) movable medical equipment
owned by Old PRN which is leased or rented by Old PRN to Borrower shall not be
deemed to be Rented Medical Inventory.
1.47 'Records' shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.48 'Reference Bank' shall mean Philadelphia National Bank, incorporated
as CoreStates Bank, N.A., or such other bank as Lender may from time to time
designate.
1.49 'Rented Medical Inventory' shall mean as to any Person, at any time,
the goods of such Person consisting of movable medical equipment currently
leased or rented by or for the benefit of each such Person to any other Person
except that, with respect to Borrower, such term shall not include any such
movable medical equipment leased or rented by Borrower to Old PRN and which, in
turn, is not currently leased or rented by Old PRN to any other Person.
1.50 'Revenue Agreement' shall mean the Revenue Sharing Agreement, dated of
even date herewith, between Borrower and Old PRN, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.51 'Seller Notes' shall mean, individually and collectively, the New PRN
Note, the Old PRN Note and the Holdings Note.
1.52 'Sellers' shall mean, individual and collectively, Kinetic Concepts,
Inc., a Texas corporation, and KCI.
1.53 'Term Loan' shall mean the term loan made by Lender to Borrower as
provided for in Section 2.1 hereof.
1.54 'Term Promissory Note' shall have the meaning ascribed thereto in
Section 2.1(a)(i) hereof.
SECTION 2. CREDIT FACILITIES
2.1 Term Loan.
(a) Lender is making a term loan to Borrower in the original principal
amount of $43,000,000 (the 'Term Loan'). The Term Loan is (i) evidenced by
a Term Promissory Note in such original principal amount duly executed and
delivered by Borrower to Lender concurrently herewith (the 'Term Promissory
Note'); (ii) to be repaid, together with interest and other amounts, in
accordance with this Agreement, the Term Promissory Note, and the other
Financing Agreements and (iii) secured by all of the Collateral. Borrower
shall have no right to reborrow any amount repaid with respect to the Term
Loan.
(b) In addition to the principal installments and other amounts
required to be paid by Borrower pursuant to the Term Note and this
Agreement, beginning with and continuing after the end of the second full
fiscal quarter of Borrower following the date hereof, Borrower shall pay to
Lender mandatory prepayments of the principal amount of the Term Loan as
follows: (i) not later than the thirtieth day following the end of each of
Borrower's first three (3) fiscal quarters (except that no such mandatory
prepayment shall be due for Borrower's fiscal quarter ending on December
31, 1994), in each of Borrower's fiscal years, an amount equal to thirty
(30%) percent of Borrower's Cumulative Excess Cash Flow for the immediately
preceding fiscal quarter of
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Borrower, (ii) not later than one hundred (100) days after the end of each
fiscal year of Borrower, an amount equal to fifty (50%) percent of
Borrower's Cumulative Excess Cash Flow for such fiscal year, less the
aggregate amount of mandatory prepayments for the prior fiscal quarters of
such fiscal year paid to Lender as provided in clause (i) above, and (iii)
after payment to Lender of the success fee as provided in Section 3.4 below
and any unpaid portion of the closing fee as provided in Section 3.2 below,
concurrently with the consummation by Holdings or any subsidiary of
Holdings of an initial public offering of debt or equity, an amount equal
to one hundred (100%) percent of the balance of the net proceeds received
by Holdings or any such subsidiary of Holdings from consummation of such
initial public offering less the amount of any mandatory prepayments
required to be paid and paid to KCI on account of the Holdings Note, the
New PRN Note and the Old PRN Note from the balance of the net proceeds of
such initial public offering as permitted under Section 9.9(d) hereof.
(c) For the purposes hereof, 'Cumulative Excess Cash Flow' shall mean
an amount equal to the consolidated net income of Borrower and its
subsidiaries for the applicable period, as reflected in financial
statements prepared in accordance with GAAP, plus (i)(A) proceeds of any
term loans received by Borrower or its subsidiaries during such period (B)
proceeds from capitalized equipment leases received by Borrower or its
subsidiaries during such period, (C) depreciation and amortization deducted
for the applicable period in determining such net income, (D) interest
expense arising from the amortization of deferred charges, the issuance of
common stock or common stock equivalents or the acquisition of term debt at
a discount deducted for in such period in determining net income, and (E)
deferred income taxes not paid during such period and deducted in such
period in determining net income, minus, (ii)(A) payments by Borrower for
Capital Expenditures during such period, (B) payments of principal with
respect to term debt and any capitalized leases paid by Borrower or its
subsidiaries during such period, (C) cash dividends paid by Borrower to
Holdings which are permitted by Section 9.11(A) of this Agreement, and (D)
only for the Borrower's fiscal year ending September 30, 1995, accrued
expenses relating to the acquisition of the Purchased Assets paid by
Borrower during such period, and (iii) plus (in the case of an increase in
accounts payable) or minus (in the case of a decrease in accounts payable),
as the case may be, any increase or decrease in the aggregate outstanding
amount of Borrower's accounts payable between the beginning and the end of
the applicable period.
(d)(i) Borrower may, prior to the earlier of an Event of Default and
acceleration of the Term Loan or the fourth annual anniversary date of this
Agreement, prepay the outstanding balance of the Term Loan, in part,
provided that any such partial prepayment must not be less than $500,000,
in each instance, and must be in multiples of $500,000, provided, that,
concurrently with each such prepayment, Borrower pays to Lender (A) all
interest accrued on the Term Loan as of the date of such prepayment and (B)
a prepayment fee in an amount equal to the amount of such prepayment times
the applicable percentage for each of the periods set forth below,
determined, in each instance, as of the date Lender receives such
prepayment ('Partial Voluntary Prepayment Fee'):
<TABLE>
<S> <C>
PERCENTAGE PERIOD
- - ------------- -----------------------------------------------
1/2 of 1% October 1, 1994 to September 30, 1995
3/4 of 1% October 1, 1995 to September 30, 1996
1% October 1, 1996 to September 30, 1997
1 1/2% October 1, 1997 to September 29, 1998
</TABLE>
(ii) Borrower may, prior to the earlier of an Event of Default and
acceleration of the Term Loan or the fourth annual anniversary date of this
Agreement, prepay the outstanding balance of the Term Loan, in whole, provided,
that, concurrently with such prepayment, Borrower pays to Lender (A) all
interest accrued on the Term Loan as of the date of such prepayment, (B) all
other Obligations owed to Lender, and (C) a prepayment fee in an amount equal to
(1) the applicable amount set forth below for each of the periods set forth
below, determined, in each instance, as of the date Lender receives such
prepayment, less (2) the amount of any Partial Voluntary Prepayment Fees, if
any, received by Lender in accordance with Section 2.1(d)(i) above:
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<TABLE>
<S> <C>
AMOUNT OF FEE PERIOD
- - ------------------ -----------------------------------------------
$215,000 October 1, 1994 to September 30, 1995
322,500 October 1, 1995 to September 30, 1996
430,000 October 1, 1996 to September 30, 1997
645,000 October 1, 1997 to September 29, 1998
</TABLE>
(iii) On or after September 30, 1998, Borrower may prepay the Term Loan in
whole, but not in part, without payment of any prepayment fee, provided, that,
all interest accrued on the Term Loan and all other Obligations shall have been
paid in full to Lender concurrently therewith.
(e) If, prior to the fourth annual anniversary date hereof, an Event of
Default occurs and Lender accelerates the Term Loan, Borrower shall pay
to Lender, in addition to the principal balance of the Term Loan, all interest
thereon and all other Obligations owed to Lender, a fee, which fee shall be
fully earned as of the date said Event of Default occurs and Lender
accelerates the Term Loan ('Fee Determination Date'), in an amount equal to
(i) the applicable amount set forth below, for each of the periods set forth
below, determined as of the date in which such Fee Determination Date occurs,
less (ii) the aggregate amount of all Partial Voluntary Prepayment Fees,
if any, received by Lender prior to the Fee Determination Date:
<TABLE>
<S> <C>
AMOUNT OF FEE PERIOD
- - ------------------ -----------------------------------------------
$215,000 October 1, 1994 to September 30, 1995
322,500 October 1, 1995 to September 30, 1996
430,000 October 1, 1996 to September 30, 1997
645,000 October 1, 1997 to September 29, 1998
</TABLE>
(f) Notwithstanding the prepayment fee provision of Section 2.1(d)(i)
above, Borrower shall not be obligated to pay a prepayment fee for any mandatory
prepayment made at any time pursuant to Section 2.1(b)(i), (ii) or (iii) hereof.
(g) The prepayment fee payable under either Subsections (d) or (e) hereof
has been mutually agreed upon by Borrower and Lender as a reasonable calculation
of Lender's lost profits as a result of such prepayment and the impracticability
and extreme difficulty of calculating actual damages with respect thereto. Such
prepayment fee shall be presumed to be the amount of damages sustained by Lender
as a result of such prepayment and Borrower agrees that it is reasonable under
the circumstances currently existing.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding principal
amount of the Obligations at the Interest Rate. All interest accruing under the
Term Note and on the other Obligations on and after the date of any Event of
Default shall be payable on demand.
(b) Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrower shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Lender of such a
request from Borrower, such Prime Rate Loans shall be converted to Eurodollar
Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default, or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing, (ii) Borrower shall have complied with such customary procedures
as are established by Lender and specified by Lender to Borrower from time to
time for requests by Borrower for Eurodollar Rate Loans, (iii) the aggregate
amount of the Eurodollar Rate Loans must be in an amount not less than the
entire outstanding balance of the Term Loan which it is anticipated will be
outstanding as of the last day of the applicable Interest
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Period, as determined by Lender, and the elected Interest Period must begin on
the first day of a calendar month and end on the last day of a calendar month,
(iv) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrower shall not exceed the amount equal to the principal amount of the Term
Loan which it is anticipated will be outstanding as of the last day of the
applicable Interest Period, as determined by Lender and (v) Lender shall have
determined that the Interest Period and Adjusted Eurodollar Rate is available to
Lender through the Reference Bank and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by Borrower. Any request by
Borrower to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any
existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to
the contrary contained herein, Lender and Reference Bank shall not be required
to purchase United States Dollar deposits in the London interbank market or
other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but
the provisions hereof shall be deemed to apply as if Lender and Reference Bank
had purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Lender has
received and approved a request to continue such Eurodollar Rate Loan at least
three (3) Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice by
Lender to Borrower, convert to Prime Rate Loans in the event that (i) an Event
of Default or event which with the notice or passage of time or both would
constitute an Event of Default, shall exist, or (ii) the aggregate principal
amount of the Prime Rate Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate Loans continued, as the case
may be, at the beginning of an Interest Period shall at any time during such
Interest Period exceed the then outstanding principal amount of the Term Loan.
Borrower shall pay to Lender, upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any loss
(including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in arrears not
later than the first day of each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed. The
interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs. In no event shall charges constituting
interest payable by Borrower to Lender exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee an amount
equal to one and one-quarter (1 1/4%) percent of the original principal amount
of the Term Loan less any amounts previously paid by Borrower to Lender as a
commitment fee with respect thereto, which closing fee shall be fully earned as
of the date hereof, $75,000 of which is payable on the date hereof and the
balance of which is payable on the earlier of the first anniversary date of this
Agreement or the consummation of an initial public offering of debt or equity of
Holdings or any subsidiary of Holdings.
3.3 Servicing Fee. Borrower shall pay to Lender quarterly a servicing fee
in an amount equal to $2,500 in respect of Lender's services for each calendar
quarter (or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each calendar quarter hereafter.
3.4 Success Fee. If Holdings or any subsidiary of Holdings consummates an
initial public offering of debt or equity, Borrower, Holdings and Parent
shall be jointly and severally obligated to pay to Lender a success fee in
an amount equal to one-half of one (1/2 of 1%) percent of the gross proceeds
of such initial public offering, payable simultaneously with the consummation
of such initial public offering, which fee is fully earned as of the date of
such initial public offering.
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<PAGE>
3.5 Syndication Fee. Borrower, Holdings and Parent shall be jointly and
severally obligated to pay to Lender a syndication fee in an amount equal to
one-quarter of one (1/4 of 1%) percent of the original principal amount of the
Term Loan, payable simultaneously with the execution of this Agreement, $50,000
of which was earned on August 22, 1994 and the remaining balance of which is
fully earned as of the date hereof.
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall either (A) make it unlawful
for Lender, Reference Bank or any participant to make or maintain Eurodollar
Rate Loans or to comply with the terms hereof in connection with the Eurodollar
Rate Loans, by an amount deemed by Lender to be material, or (B) shall result in
the increase in the costs to Lender, Reference Bank or any Participant of making
or maintaining any Eurodollar Rate Loans or (C) reduce the amounts received or
receivable by Lender in respect thereof, by an amount deemed by Lender to be
material or (ii) the cost to Lender, Reference Bank or any participant of making
or maintaining any Eurodollar Rate Loans shall otherwise increase by an amount
deemed by Lender to be material. Borrower shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account of Borrower) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof. A certificate of
Lender setting forth the basis for the determination of such amount necessary to
compensate Lender as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate Loans
are received by Lender other than on the last day of the applicable Interest
Period (whether pursuant to acceleration, upon maturity or otherwise), including
any payments made with the proceeds of Collateral, Borrower shall pay to Lender
upon demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any additional loss (including loss of anticipated
profits), cost or expense incurred by such person as a result of such prepayment
or payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such person to make or maintain such Eurodollar Rate Loans or any portion
thereof.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Term Loan. Each of the following is a condition
precedent to Lender making the Term Loan hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination and release of any
interest in and to the Acquired Assets of any lender to or other creditor
of the Sellers, duly authorized, executed and delivered by it or each of
them, including, but not limited to, UCC termination or release statements
for all UCC financing statements previously filed by it or any of them or
their predecessors, as secured party, and Sellers, as debtor or debtors,
with respect to the Acquired Assets;
(b) Lender shall have received evidence that the Purchase Agreements
have been duly executed and delivered by and to the appropriate parties
thereto and the transactions contemplated under the terms of the Purchase
Agreements have been consummated prior to or contemporaneously with the
execution of this Agreement, all in form and substance satisfactory to
Lender;
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(c) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property
which is intended to be security for the Obligations or the liability of
any Obligor in respect thereof, subject only to the security interests and
liens permitted herein or in the other Financing Agreements;
(d) Lender shall have received evidence that the Revenue Agreement has
been duly executed by Borrower and Old PRN and is in full force and effect,
all in form and substance satisfactory to Lender;
(e) all requisite corporate actions and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation,
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender
or its counsel to be certified by appropriate corporate officers or
governmental authorities;
(f) no material adverse change shall have occurred in the assets,
business or prospects of Borrower or Old PRN since the date of Lender's
latest field examination and no change or event shall have occurred which
would materially impair the ability of Borrower or any Obligor to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce the Obligations or realize upon
the Collateral;
(g) Lender shall have received, in form and substance satisfactory to
Lender, a pro-forma balance sheet of consolidated and consolidating balance
sheets of each of Borrower, Old PRN and Holdings and a consolidated balance
sheet of Parent reflecting the initial transactions contemplated hereunder,
including, but not limited to, (i) the consummation of the acquisition of
the Purchased Assets by Borrower from Sellers and the other transactions
contemplated by the Purchase Agreements and (ii) the Loans provided by
Lender to Borrower on the date hereof and the use of the proceeds of the
Loans as provided herein, accompanied by a certificate, dated of even date
herewith, of the chief financial officer of, respectively, Borrower, Old
PRN, Holdings and Parent stating that such pro-forma consolidated balance
sheet and, for Borrower, Old PRN and Holdings, consolidating balance sheet
represents the reasonable, good faith opinion of such officer as to the
subject matter thereof as of the date of such certificate;
(h) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including, without limitation,
acknowledgements by lessors, mortgagees and warehousemen of Lender's
security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the Collateral
and agreements permitting Lender access to, and the right to remain on, the
premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(i) Lender shall have received evidence of insurance and lender's loss
payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and certificates
of insurance policies and/or endorsements naming Lender as loss payee;
(j) Lender shall have received, in form and substance satisfactory to
Lender, the opinion letter of counsel(s) to Borrower with respect to the
Purchase Agreements, the Revenue Agreement, the Financing Agreements and
the security interests and liens of Lender with respect to the Collateral
and such other matters as Lender may request;
(k) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to
Lender, in form and substance satisfactory to Lender;
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(l) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material
respects;
(m) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing; and
(n) Lender shall have received evidence of compliance, in form and
substance satisfactory to Lender, of all other terms and conditions to the
making of loans and providing of other credit accommodations by Lender as
set forth in the letter, dated August 22, 1994, from Lender to Old PRN,
Borrower, Holdings and Parent and accepted by Old PRN, Borrower, Holdings
and Parent on August 23, 1994, including, without limitation, all of the
terms and conditions set forth in paragraph 12 of such letter.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the 'Collateral'):
5.1 Accounts.
5.2 all present and future contract rights, general intangibles (including,
but not limited to, tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choses in action and other
claims and existing and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, letters of credit, bankers'
acceptances and guaranties;
5.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) the Term Loan and other
Obligations and the Collateral, (b) all payments made by or on behalf of
Borrower and (c) all other appropriate debits and credits as provided in this
Agreement, including, without limitation, fees, charges, costs, expenses and
interest. All entries in the loan account(s) shall be made in accordance with
Lender's customary practices as in effect from time to time.
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6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Old PRN shall be irrevocably directed by Borrower and shall agree to
directly remit to Lender (which may be by a debit to Old PRN's loan account with
Lender and a credit by Lender for Borrower's account as provided below) (i) the
Estimated Revenues for the initial fifteen (15) days of each calendar month (or
at more frequent periods during each calendar month if Lender so requests) not
later than three (3) business days after the end of such period, and (ii) the
Actual Revenues Payment for each calendar month, together with a certificate of
the President or Chief Financial Officer of Old PRN as to the calculation
thereof, not later than ten (10) business days after the end of such calendar
month. The Estimated Revenues remitted to Lender for each calendar month shall
be credited by Lender to a blocked account for Borrower maintained by Lender
(the 'Provisional Account') and upon remittance to Lender of the Actual Revenues
Payment for such calendar month, the outstanding balance of the Provisional
Account for such calendar month shall be debited and then, together with such
Actual Revenues Payment, credited to an availability account for Borrower
maintained by Lender (the 'Availability Account'). Lender shall have the right
to charge and set off against the Provisional Account and the Availability
Account for any of the Obligations which are then due and payable. Both the
Provisional Account and the Availability Account shall constitute additional
collateral for the Obligations and, at any time, an Event of Default has
occurred and is continuing, Lender may charge and set off against the
Provisional Account and the Availability Account for any of the Obligations,
whether or not then due and payable. Unless an Event of Default has occurred and
is continuing, Lender will remit the outstanding balance of the Availability
Account or any portion thereof to Borrower at the request of Borrower and debit
the Availability Account for such advance. The outstanding balance from time to
time of the Provisional Account will be credited by Lender with interest at the
current Interest Rate (as defined in the Old PRN Agreements and not hereunder)
and, although the Provisional Account is the property of Borrower, Borrower
agrees (since the Estimated Revenues payment represents a payment in advance not
otherwise due pursuant to the Revenue Agreement) that all such accrued interest
shall be credited by Lender to the interest payable by Old PRN to Lender
pursuant to the Old PRN Agreements. The outstanding balance from time to time of
the Availability Account will be credited by Lender with interest at the current
Interest Rate (as defined in this Agreement) and all such accrued interest shall
be credited to the interest payable by Borrower with respect to the Term Loan.
(b) If the Revenue Agreement has been terminated and is not renewed or
extended, on terms and conditions satisfactory to Lender, and with respect to
Collateral not subject to Section 6(a) above, Borrower shall establish and
maintain, at its expense, blocked accounts or lockboxes and related blocked
accounts (in either case, 'Blocked Accounts'), as Lender may specify, at the
request of Lender, with such banks as are acceptable to Lender into which
Borrower shall promptly deposit and direct its account debtors to directly remit
all payments on Accounts and all payments constituting proceeds other Collateral
in the identical form in which such payments are made, whether by cash, check or
other manner. The banks at which the Blocked Accounts are established shall
enter into an agreement, in form and substance satisfactory to Lender, providing
that all items received or deposited in the Blocked Accounts are the property of
Lender, that the depository bank has no lien upon, or right to setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately
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available funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ('Payment Account'). For purposes of calculating
interest on the Obligations, such payments or other funds received will be
applied (conditional upon final collection) to the Obligations one (1) business
day following the date of receipt of immediately available funds by Lender in
the Payment Account.
(c) Borrower agrees that all payments made to Blocked Accounts or other
funds received and collected by Lender, whether on the Accounts or as proceeds
of Inventory or other Collateral or otherwise (except as specifically provided
in clause (a) above) shall be the property of Lender. Borrower and all of its
affiliates, subsidiaries, shareholders, directors, employees or agents shall,
acting as trustee for Lender, receive, as the property of Lender, any monies,
checks, notes, drafts or any other payment relating to and/or proceeds of
Accounts or other Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person. The obligation of Borrower to reimburse Lender for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrower or for the
account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Lender determines. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 Use of Proceeds. Borrower shall use all of the proceeds of the Term
Loan provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements and (c) expenses relating to the
consummation of the acquisition of the Purchased Assets. None of the proceeds
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a 'purpose
credit' within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the following
documents in a form satisfactory to Lender: (a) upon Lender's request, copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by Borrower; and (b) such other reports as to the Collateral as Lender
shall reasonably request from time to time. If any of Borrower's records or
reports of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, Borrower hereby irrevocably authorizes such
service, contractor, shipper or agent to deliver such records, reports, and
related documents to Lender and to follow Lender's instructions with respect to
further services at any time that an Event of Default exists or has occurred and
is continuing.
7.2 Inventory and Equipment Covenants. With respect to the Inventory and
Equipment: (a) upon Lender's request, Borrower shall, at its expense, at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Inventory and/or Equipment in form, scope and methodology reasonably acceptable
to Lender and by an appraiser acceptable to Lender; (b) Borrower shall keep the
Inventory and Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (c) Borrower shall use the Inventory and
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws,
regulations and manufacturers' specifications; (d) the Inventory and Equipment
is and shall be used in Borrower's business and not for personal, family,
household or farming use; (e) at Lender's request, but not more frequently than
once each month, Borrower shall furnish to Lender a written report of the
locations of all Inventory and Equipment and, if Leased Medical Equipment, the
name and address of the lessee thereof; (f) the Inventory and Equipment is now
and shall remain personal property and Borrower shall not permit any of the
Inventory or Equipment to be or become a part of or affixed to real property;
and (g) Borrower assumes all responsibility and liability arising from the use
of the Inventory and Equipment.
7.3 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default or event which with notice or passage of time or
both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment of Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(vii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (viii) do all acts and things which are
necessary, in Lender's determination, to fulfill Borrower's obligations under
this Agreement and the other Financing Agreements and (b) at any time to (i)
take control in any manner of any item of payment or proceeds thereof, (ii) have
access to any lockbox or postal box into which Borrower's mail is deposited,
(iii) endorse Borrower's name upon any items of payment or proceeds thereof and
deposit the same in the Lender's account for application to the Obligations,
(iv) endorse Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Collateral, (v) sign
Borrower's name on any verification of Accounts and notices thereof to account
debtors and (vi) execute in Borrower's name and file any UCC financing
statements with respect to the Collateral or amendments thereto. Borrower hereby
releases Lender and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of Lender's own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.4 Right to Cure. Lender may, at its option, upon two (2) business days
notice to Borrower if no Event of Default then exists or, if an Event of Default
then exists without notice, (a) cure any default by Borrower under any agreement
with a third party or pay or bond on appeal any judgment entered
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against Borrower, (b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge Borrower's account therefor,
such amounts to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.
7.5 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including, without limitation, the Records, and (b) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrower's personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the realization of Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans by Lender to
Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is a
corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and it has no other place of business.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens
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and security interests in and upon the Collateral subject only to purchase money
liens permitted under Section 9.8(e) hereof. Borrower has good and marketable
title to all of its properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Lender or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of Borrower's knowledge threatened, against or affecting Borrower, its assets or
business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against Borrower or
its assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which if adversely determined against Borrower would result in
any material adverse change in the assets, business or prospects of Borrower or
would impair the ability of Borrower to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local governmental authority.
8.8 Accuracy and Completeness of Information. All information furnished by
or on behalf of Borrower in writing to Lender in connection with this Agreement
or any of the other Financing Agreements or any transaction contemplated hereby
or thereby, including, without limitation, all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of Borrower,
which has not been fully and accurately disclosed to Lender in writing.
8.9 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated thereunder
have been duly executed, delivered and performed in accordance with their terms
by the respective parties thereto in all respects, including the fulfillment
(not merely the waiver, except as may be disclosed to Lender and consented to in
writing by Lender) of all conditions precedent set forth therein and giving
effect to the terms of the Purchase Agreements and the assignments to be
executed and delivered by Sellers (or any of their affiliates or subsidiaries)
thereunder, Borrower acquired and has good and marketable title to the Purchased
Assets, free and clear of all claims, liens, pledges and encumbrances of any
kind, except as permitted hereunder.
(b) All actions and proceedings, required by the Purchase Agreements,
applicable law or regulation (including, but not limited to, compliance with the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended) have been
taken and the transactions required thereunder have been duly and validly taken
and consummated.
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(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or other
action or proceeding has been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Purchase Agreements.
(d) Borrower has delivered, or caused to be delivered, to Lender, true,
correct and complete copies of the Purchase Agreements.
8.10 CAPITALIZATION.
(a) All of the issued and outstanding shares of capital stock of Borrower
are directly and beneficially owned and held by Holdings, all of the issued and
outstanding shares of capital stock of Holdings are directly and beneficially
owned and held by Parent and all of such shares have been duly authorized and
are fully paid and non-assessable, and all of such shares are free and clear of
all claims, liens, pledges and encumbrances of any kind, except for the pledge
thereof in favor of Lender.
(b) Borrower is solvent and will continue to be solvent after the creation
of the Obligations and the security interests of Lender contemplated hereunder,
is able to pay its debts as they mature and has (and has reason to believe it
will continue to have) sufficient capital (and not unreasonably small capital)
to carry on its business and all businesses in which it is about to engage. The
Purchased Assets acquired by Borrower have a purchase price greater than the
Indebtedness of Borrower on the date hereof, including subordinated and
contingent liabilities computed at the amount which, to the best of Borrower's
knowledge, represents an amount which can reasonably be expected to become an
actual or matured liability.
(c) Holdings has, on or before the date hereof, made a cash equity capital
contribution to Borrower in an amount not less than $21,000,000 as consideration
for shares of capital stock of Borrower consisting of common stock. The proceeds
of such cash equity capital contributions have been applied, contemporaneously
herewith, to the cash portion of the purchase price for the Purchased Assets.
8.11 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve, renew
and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Locations. Borrower may not open any new location or place of
business without the prior written consent of Lender.
9.3 Compliance with Laws, Regulations, Etc. Borrower shall, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders of any Federal, State or local governmental
authority applicable to it.
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9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge all
taxes, assessments, contributions and governmental charges upon or against it or
its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be reasonably satisfactory to Lender as to form, amount and
insurer. Borrower shall furnish certificates, policies or endorsements to Lender
as Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance reasonably satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and complete
entries shall be made of all dealings or transactions of or in relation to the
Collateral and the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within twenty-five (25) days after the end of each fiscal month,
monthly and cumulative fiscal year-to-date and, within sixty (60) days after the
end of each fiscal quarter, cumulative fiscal quarter unaudited consolidated and
consolidating financial statements of Borrower, Holdings and their respective
subsidiaries (including in each case cumulative balance sheets, statements of
income and loss and statements of shareholders' equity), all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrower, Holdings and their respective subsidiaries as of the end
of and through such fiscal month and, as applicable, fiscal quarter and
cumulative fiscal year-to-date and (ii) within one hundred (100) days after the
end of each fiscal year, audited consolidated and consolidating financial
statements of Borrower, Holdings, Parent and their respective subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), except that no
audited consolidating financial statements shall be required for Holdings or
Parent, and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrower,
Holdings, Parent and their respective subsidiaries as of the end of and for such
fiscal year, together with the opinion of independent certified public
accountants, which accountants shall be an independent accounting firm selected
by Borrower, Holdings or Parent, as applicable and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of
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operations and financial condition of Borrower, Holdings, Parent and their
respective subsidiaries as of the end of and for the fiscal year then ended.
(b) Concurrently with the delivery to Lender of Borrower's financial
statements for each of its fiscal quarters and for each of its fiscal years,
Borrower shall deliver to Lender a certificate of Borrower's President or Chief
Financial Officer setting forth (i) Borrower's Interest Coverage Ratio, Cash
Flow Ratio, Cumulative Excess Cash Flow, Consolidated Tangible Net Worth and
Utilization Ratio as at the end of such applicable fiscal quarter and fiscal
year and the calculation thereof and (ii) the amount of Borrower's Capital
Expenditures during such applicable fiscal quarter and year and the calculation
thereof.
(c) Borrower shall promptly notify Lender in writing of the details of (i)
any material loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's,
Holdings' or Old PRN's business, properties, assets, goodwill or condition,
financial or otherwise and (ii) the occurrence of any Event of Default or event
which, with the passage of time or giving of notice or both, would constitute an
Event of Default.
(d) Borrower shall promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which Borrower, Holdings,
Parent or Old PRN sends to its stockholders generally and copies of all reports
and registration statements which Borrower, Holdings, Parent or Old PRN files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(e) Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts, projections and other information respecting the Collateral and the
business of Borrower, as Lender may, from time to time, reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrower to (i), upon five (5)
business days notice to Borrower if there is no Event of Default or, if there is
an Event of Default, without notice, any court or other government agency or
(ii) any participant or assignee or (iii), after giving Borrower the name
thereof, any prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(f) Borrower shall deliver, or cause to be delivered, to Lender, within one
hundred (100) days from the date hereof, opening balance sheets prepared by
Borrower and reviewed by independent certified public accountants, which
accountants shall be a nationally recognized independent accounting firm
selected by Borrower and reasonably acceptable to Lender to the effect that such
opening balance sheets have been prepared in accordance with GAAP and present
fairly the financial condition of Borrower as of such date, except that, in the
event that the date hereof is the Borrower's fiscal year end (i.e., September
30, 1994), then such opening balance sheets shall be certified (as opposed to
reviewed) by such independent certified accountants to the effect that such
opening balance sheets have been prepared in accordance with GAAP and present
fairly the financial condition of Borrower as of such date.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall
not, directly or indirectly, (a) merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any stock or indebtedness to any other Person or any of its assets to any other
Person (except for (i) transactions with Old PRN with respect to Inventory
consisting of movable medical equipment pursuant to and on the terms and
conditions provided in the Revenue Agreement as presently in effect and (ii)
during any year of this Agreement the sale or disposition of worn-out, lost or
obsolete goods or goods no longer used in the business of Borrower, having an
aggregate sales price of
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up to $1,000,000 per annum, provided that, all cash proceeds received by
Borrower from the sale of such goods are used by Borrower to purchase
replacement movable medical equipment or such goods are exchanged for other
movable medical equipment having a value reasonably equivalent to the value of
the goods so disposed of by Borrower), or (c) form or acquire any subsidiaries,
or (d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrower as presently conducted thereon or materially impair the value of the
real property which may be subject thereto; (e) purchase money security
interests in Equipment and Inventory (including capitalized leases) not included
in the Purchased Assets so long as such security interests do not apply to any
property of Borrower other than the Equipment or Inventory so acquired, and the
indebtedness secured thereby does not exceed the cost of the Equipment or
Inventory so acquired; and (f) capitalized leases included in the Purchased
Assets as set forth on Schedule 9.8 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower and with respect
to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capitalized leases) to the
extent not incurred or secured by liens (including capitalized leases) in
violation of any other provision of this Agreement;
(d) indebtedness of Borrower to KCI, which indebtedness is not secured
by any assets of Borrower and is evidenced by the New PRN Note, which
indebtedness is subject to a right of standstill with respect thereto
pursuant to a Subordination and Standstill Agreement between Lender and
KCI; provided, that: (i) Borrower shall not, directly or indirectly, make
any payments in respect of such indebtedness, including, but not limited
to, any prepayments or other non-mandatory payments, except that until a
KCI Trigger Event shall exist or have occurred and be continuing or would
result from any payment to KCI as provided in this Section 9.9(d), Borrower
may make (A) regularly scheduled payments of principal and interest in
accordance with the terms of the New PRN Note as in effect on the date
hereof, and (B) after the payment to Lender of the success fee pursuant to
Section 3.4 above and the unpaid portion of the closing fee pursuant to
Section 3.2 above and repayment in full of the Holdings Note, prepayments
in respect of principal due under the New PRN Note in an aggregate amount
not to exceed the lesser of: (1) fifty (50%) percent of the balance of the
net proceeds received from an initial public offering as set forth in
Section 3.2 above, and (2) $10,000,000 minus any portion of the net
proceeds of such initial public offering used to prepay the Holdings Note;
(ii) Borrower shall not, directly or indirectly,
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(A) amend, modify, alter or change any terms of such indebtedness or any
agreement, document or instrument related thereto, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose; and (iii) Borrower
shall furnish to Lender all notices, demands or other materials concerning
such indebtedness either received by Borrower or on its behalf, promptly
after receipt thereof, or sent by Borrower or on its behalf, concurrently
with the sending thereof, as the case may be; and
(e) Indebtedness in connection with the capitalized leases set forth
on Schedule 9.8 hereto.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of the Borrower or to bearer and
delivered to Lender, and (iii) commercial paper rated A1 or P1; provided, that,
as to any of the foregoing, unless waived in writing by Lender, Borrower shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments, (c) the guarantee by Borrower of the
obligations of Old PRN to Lender under the Old PRN Agreements, (d) the
guarantees set forth in the Information Certificate, and (e) the guarantee by
Borrower of the Obligations of Holdings to Mass Mutual evidenced by the Mass
Mutual Note.
9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of class of capital stock
of Borrower now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing except that:
(A) Borrower may declare and pay cash dividends from Borrower's
lawfully available funds to Holdings in an aggregate amount not in excess
of the (and for the purpose of paying) regularly scheduled payments of
principal and interest, but not any prepayments thereof, when due and
payable, under terms of the Holdings Note and the Mass Mutual Note as
presently in effect, provided, that, (i) no Mass Mutual Trigger Event then
exists or would exist after payment of such dividend to fund such payment
due and payable under the Mass Mutual Note, and (ii) no KCI Trigger Event
then exists or would exist after the payment of any such dividend to fund
any such payment due and payable under the Holdings Note; and
(B) In addition, provided, that, no Event of Default or condition or
event which, with notice or the passage of time or both, would constitute and
Event of Default then exists or would exist after payment of any dividend as set
forth below, Borrower may declare and pay cash dividends to Holdings from
Borrower's lawfully available funds, after payment to Lender of any unpaid
portion of the closing fee as provided in Section 3.2 above and the mandatory
prepayment of the Term Loan for the applicable fiscal quarter or fiscal year as
provided in Section 2.1(b)(i) and (ii) above, (i) following the end of each of
Borrower's first three (3) fiscal quarters (except that no such dividend shall
be paid for Borrower's fiscal quarter ending on December 31, 1994) in each of
Borrower's fiscal years, in an amount equal to fifteen (15%) percent of
Borrower's Cumulative Excess Cash Flow (as defined in Section 2.1(c) hereof) for
the immediately preceding fiscal quarter of Borrower and (ii) following the end
of each fiscal year of Borrower, in an amount equal to twenty-five (25%) percent
of Borrower's Cumulative Excess Cash Flow for such fiscal year, less the amount
of the aggregate dividends for the prior fiscal year of Borrower paid to
Holdings as provided in Subsection 9.11(B)(i) above and Section 9.11(A) above.
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9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale, lease or exchange of property or the
rendering of any service to or by any affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of Borrower's business and upon
fair and reasonable terms no less favorable to the Borrower than Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person,
including, without limitation, Borrower entering into the Revenue Agreement as
presently in effect and receiving from Old PRN all amounts due thereunder to
Borrower, subject to compliance with the provisions of Section 6 above, and,
provided, that the Revenue Agreement may not be terminated or amended without
the prior written consent of Lender.
9.13 Consolidated Tangible Net Worth. Borrower shall, at all times,
maintain a Consolidated Tangible Net Worth of not less than the following
amounts in the periods set forth below:
<TABLE>
<S> <C>
CONSOLIDATED TANGIBLE NET
PERIOD WORTH
- - --------------------------------------- ------------------------------
October 1, 1994 to June 30, 1995 $ 21,000,000
July 1, 1995 to June 30, 1996 $ 26,000,000
July 1, 1996 to June 30, 1997 $ 33,000,000
July 1, 1997 to June 30, 1998 $ 36,500,000
After June 30, 1998 $ 44,500,000
</TABLE>
9.14 Interest Coverage Ratio. Commencing on December 31, 1994, at the end
of each of Borrower's fiscal quarters in each of its fiscal years commencing on
or after October 1, 1994, Borrower shall have an Interest Coverage Ratio of not
less than 3.5 to 1.0 based upon the calculation thereof for the period from the
beginning of such fiscal year to the end of such fiscal quarter.
9.15 Cash Flow Coverage Ratio. Commencing on December 31, 1994, at the end
of each of Borrower's fiscal quarters in each of its fiscal years commencing on
or after October 1, 1994, Borrower shall have a Cash Flow Coverage Ratio of not
less than 1.0 to 1.0 based upon the calculation thereof from the beginning of
such fiscal year to the end of such fiscal quarter.
9.16 Capital Expenditures. Exclusive of the purchase of Purchased Assets
and Capital Expenditures for future purchases of movable medical equipment
subject to purchase money security interests, (including capitalized leases)
permitted under Section 9.8(e) hereof, commencing on and after October 1, 1994
Borrower shall make additional Capital Expenditures of not less than $3,000,000
in each of its fiscal years and Borrower's Capital Expenditures shall be not
less than sixty (60%) percent of the combined Capital Expenditures of Old PRN
and Borrower.
9.17 Utilization Rate. Commencing on December 31, 1994, at the end of each
of Borrower's fiscal quarters the Quarterly Utilization Rate of Borrower shall
not be less than 35% for such fiscal quarter.
9.18 Costs and Expenses. Borrower shall pay to Lender on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) all title insurance
and other insurance premiums, appraisal fees and search fees; (c) costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (e) costs and expenses
of preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions
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contemplated hereby and thereby (including, without limitation, preparations for
and consultations concerning any such matters); (g) all out-of-pocket expenses
and costs heretofore and from time to time hereafter incurred by Lender during
the course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $500 per person per day for
Lender's examiners in the field and office; and (h) the fees and disbursements
of counsel (including legal assistants) to Lender and any Participant in
connection with any of the foregoing.
9.19 Further Assurances. At the request of Lender at any time and from time
to time, Borrower shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans
contained herein are satisfied. In the event of such request by Lender, Lender
may, at its option, cease to make any further Loans until Lender has received
such certificate and, in addition, Lender has determined that such conditions
are satisfied. Where permitted by law, Borrower hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an 'Event of
Default', and collectively as 'Events of Default':
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms, covenants, conditions or provisions contained in
this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment or judgments for the payment of money is rendered
against Borrower or any Obligor or Old PRN in excess of $250,000 in any one
case or in excess of $400,000 in the aggregate and which shall remain
undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any material
judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or Old
PRN or any of their assets;
(e) Borrower or any Obligor or Old PRN dissolves or suspends or
discontinues doing business;
(f) Borrower or any Obligor or Old PRN becomes insolvent (however
defined or evidenced), makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against Borrower or any Obligor or
Old PRN or all or any part of its properties and such petition or
application is not dismissed within thirty (30) days after the date of its
filing or Borrower or any Obligor or Old PRN shall file any answer
admitting or not contesting
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<PAGE>
such petition or application or indicates its consent to, acquiescence in
or approval of, any such action or proceeding or the relief requested is
granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by Borrower or any Obligor or Old PRN
or for all or any part of its property; or
(i) any default by Borrower or any Obligor or Old PRN under any
agreement, document or instrument relating to the Seller Notes, the Mass
Mutual Note or any other indebtedness for borrowed money owing to any
person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity
or similar type of instrument in favor of any person other than Lender, in
any case in an amount in excess of $250,000, with respect to Borrower, Old
PRN or any Obligor other than Parent, or $2,500,000 with respect to Parent,
which default continues for more than the applicable cure period, if any,
with respect thereto, or any default by Borrower or any Obligor or Old PRN
under any material contract, lease, license or other obligation to any
person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any change in the controlling ownership of Borrower, Old PRN,
Holdings or Parent, except that, in the case of Parent, a change in
controlling ownership shall not be deemed to occur so long as the
controlling ownership of Parent remains with Bernard J. Korman and/or a
trust (the 'Rotko Trust') created pursuant to an Agreement of Trust, dated
November 18, 1993, for the benefit, during her lifetime, of Bessie G.
Rotko, and the Trustees of the Rotko Trust, which are Bessie G. Rotko,
Michael J. Rotko, Judith M. Shipon, Lionel Falzer and PNC Bank, N.A.
(formerly Provident National Bank);
(k) termination of the Revenue Agreement or the delivery of any notice
by Old PRN or Borrower of its intention to terminate or not to renew or
extend the Revenue Agreement;
(l) termination or nonrenewal of the Old PRN Agreements or the
occurrence of an Event of Default (as defined in the Old PRN Agreements)
under the Old PRN Agreements;
(m) the indictment of Borrower or any Obligor or Old PRN under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against Borrower or any Obligor or Old PRN, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor or
Old PRN;
(n) there shall be a material adverse change in the business, assets
or prospects of Borrower or any Obligor or Old PRN after the date hereof;
(o) If either,
(i) Holdings shall maintain a Consolidated Tangible Net Worth of
less than the following amounts at all times in the periods set forth
below:
<TABLE>
<S> <C>
CONSOLIDATED TANGIBLE NET
PERIOD WORTH
- - --------------------------------------- ------------------------------
October 1, 1994 to June 30, 1995 $ 21,500,000
July 1, 1995 to June 30, 1996 $ 27,000,000
July 1, 1996 to June 30, 1997 $ 34,000,000
July 1, 1997 to June 30, 1998 $ 38,000,000
After June 30, 1998 $ 46,500,000; or
</TABLE>
(ii) commencing on December 31, 1994, at the end of each of
Holdings' fiscal quarters in each of Holdings' fiscal years commencing
on or after October 1, 1994, Holdings, on a consolidated basis, shall
have an Interest Coverage Ratio of less than 2.0 to 1.0 based upon
28
<PAGE>
the calculation thereof for the period from the beginning of such fiscal
year to the end of such fiscal quarter; or
(iii) commencing on December 31, 1994, at the end of each of
Holdings' fiscal quarters in each of Holdings fiscal years, commencing
on or after October 1, 1994, Holdings, on a consolidated basis, shall
have a Cash Flow Coverage Ratio of less than 1.0 to 1.0 based upon the
calculation thereof for the period from the beginning of such fiscal
year to the end of such fiscal quarter; or
(p) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Lender may, in its discretion and without
limitation, (i) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender (provided, that, upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h), all Obligations shall
automatically become immediately due and payable), (ii) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (iii) require Borrower, at Borrower's expense, to assemble and make
available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including, without limitation, entering into contracts with
respect thereto, public or private sales at any exchange, broker's board, at any
office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in such order as Lender
may elect, whether or not then due. Borrower shall remain liable to
29
<PAGE>
Lender for the payment of any deficiency with interest at the highest interest
rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and the
other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York (without giving
effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and the United States
District Court for the Southern District of New York and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).
(c) Borrower hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon Borrower in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, Borrower shall
appear in answer to such process, failing which Borrower shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
30
<PAGE>
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement or the other Financing
Agreements nor any provision hereof or thereof shall be amended, modified,
waived or discharged orally or by course of conduct, but only by a written
agreement signed by an authorized officer of Lender. Lender shall not, by any
act, delay, omission or otherwise be deemed to have expressly or impliedly
waived any of its rights, powers and/or remedies unless such waiver shall be in
writing and signed by an authorized officer of Lender. Any such waiver shall be
enforceable only to the extent specifically set forth therein. A waiver by
Lender of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the other Financing Agreements, the Obligations, the Collateral or
any matter arising therefrom or relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, the other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, except as a result of Lender's gross negligence or
willful misconduct. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination of this Agreement and the other Financing
Agreements.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term. This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the Collateral
and the rights and remedies of Lender hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
31
<PAGE>
12.3 Partial Invalidity. If any provision of this Agreement or the other
Financing Agreements is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement and the other Financing
Agreements as a whole, but this Agreement and the other Financing Agreements
shall be construed as though it did not contain the particular provision held to
be invalid or unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Term Loan or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such assignment
or participation, and except that Lender will not sell any participations in the
Term Loan pursuant to which it does not continue to manage the Term Loan on
behalf of the participants.
12.5 Participant's Security Interest. If a Participant shall at any time
participate with Lender in the Loans or other Obligations, Borrower hereby
grants to such Participant and such Participant shall have and is hereby given,
a continuing lien on and security interest in any money, securities and other
property of Borrower in the custody or possession of the Participant, including
the right of setoff, to the extent of the Participant's participation in the
Obligations, and such Participant shall be deemed to have the same right of
setoff to the extent of its participation in the Obligations, as it would have
if it were a direct lender.
12.6 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written.
[Remainder of Page Intentionally Omitted]
32
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
LENDER BORROWER
- - -------------------------------------------------------- --------------------------------------------------------
CONGRESS FINANCIAL CORPORATION MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.
By: Kathleen R. Quinn By: Thomas Carroll
Title: Vice-President Title: President
ADDRESS: CHIEF EXECUTIVE OFFICE:
- - -------------------------------------------------------- --------------------------------------------------------
1133 Avenue of the Americas One MEDIQ Plaza
New York, New York 10036 Pennsauken, New Jersey 08110
</TABLE>
33
<PAGE>
EXHIBIT A
INFORMATION CERTIFICATE
SCHEDULE 9.8
CAPITALIZED LEASES
34
<PAGE>
- - --------------------------------------------------------------------------------
PRN HOLDINGS, INC.
NOTE AGREEMENT
Dated as of September 30, 1994
Re:
$10,000,000 Senior Subordinated Notes
Due October 1, 2004
and
Warrants to Purchase Common Stock
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<S> <C> <C>
SECTION HEADING PAGE
- - ------------------- -------------------------------------------------------------------------------------- ---------
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT 1
Section 1.1 Description of Notes 1
Section 1.2 Commitment; Closing Date 2
Section 1.3 Warrants to Purchase Common Stock 2
Section 1.4 Several Commitments 3
SECTION 2 PREPAYMENT OF NOTES 3
Section 2.1 Required Prepayments of Notes 3
Section 2.2 Optional Prepayments 3
Section 2.3 Prepayment upon Designated Event 4
Section 2.4 Notice of Prepayments 5
Section 2.5 Allocation of Prepayments 5
Section 2.6 Direct Payment 6
SECTION 3 FINANCIAL STATEMENTS AND OTHER INFORMATION 6
Section 3.1 Financial and Business Information 6
Section 3.2 Officer's Certificates 8
Section 3.3 Accountants' Certificates 8
Section 3.4 Inspection 8
Section 3.5 Observation Rights 8
SECTION 4 COMPANY COVENANTS 9
Section 4.1 Corporate Existence, etc.; Type of Business 9
Section 4.2 Payment of Taxes and Claims 9
Section 4.3 Maintenance of Properties; Business Insurance 9
Section 4.4 Consolidated Net Worth 9
Section 4.5 Limitations on Debt 10
Section 4.6 Fixed Charges Coverage Ratio 10
Section 4.7 Dividends, Stock Purchases 11
Section 4.8 Merger or Consolidation 11
Section 4.9 Sale of Assets 12
Section 4.10 Sale of Subsidiary Stock and Debt 12
Section 4.11 Permitted Investments 13
Section 4.12 Payment of Dividends by Subsidiaries 14
Section 4.13 Repurchase of Notes 14
Section 4.14 Transactions with Affiliates 14
SECTION 5 EVENTS OF DEFAULT AND REMEDIES THEREFOR 14
Section 5.1 Events of Default 14
Section 5.2 Notice to Holders 16
Section 5.3 Acceleration of Maturities 16
Section 5.4 Rescission of Acceleration 16
SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS. 17
Section 6.1 Consent Required 17
Section 6.2 Effect of Amendment or Waiver 17
Section 6.3 Solicitation of Holders 17
SECTION 7 INTERPRETATION OF NOTE AGREEMENT; DEFINITIONS 18
Section 7.1 Definitions 18
Section 7.2 Accounting Principles 25
Section 7.3 Directly or Indirectly 25
SECTION 8. SUBORDINATION 26
Section 8.1. Notes Subordinated to Senior Debt 26
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9. REPRESENTATIONS. 26
Section 9.1. Representations of the Company 26
Section 9.2. Representations of the Purchasers 26
SECTION 10. CLOSING CONDITIONS 27
Section 10.1. Closing Certificate 27
Section 10.2. Legal Opinions 27
Section 10.3. Concurrent Sale of Notes and Warrants 27
Section 10.4. Subsidiary Guaranty 27
Section 10.5. Asset Purchase Agreement 27
Section 10.6. Revolving Line of Credit and Term Loan 28
Section 10.7. Equity Contribution 28
Section 10.8. Consent of Holders of Other Securities 28
Section 10.9. Satisfactory Proceedings 28
Section 10.10. Waiver of Conditions 28
SECTION 11. MISCELLANEOUS 28
Section 11.1. Registered Notes 28
Section 11.2. Exchange of Notes 29
Section 11.3. Loss, Theft, etc. of Notes 29
Section 11.4. Expenses; Stamp Tax Indemnity 29
Section 11.5. Powers and Rights Not Waived; Remedies Cumulative 30
Section 11.6. Notices 30
Section 11.7. Successors and Assigns 30
Section 11.8. Survival of Covenants and Representations 30
Section 11.9. Severability 31
Section 11.10. Governing Law 31
Section 11.11. Captions 31
Signatures................................................................................................. 31
</TABLE>
ATTACHMENTS TO NOTE AGREEMENT:
<TABLE>
<S> <C> <C>
Schedule I -- Names and Addresses of Note Purchasers and Amounts of Commitments
Schedule II -- List of Outstanding Investments
Exhibit A -- Form of Senior Subordinated Note
Exhibit B -- Form of Warrant
Exhibit C -- Representations and Warranties of the Company
Exhibit D -- Description of Special Counsel's Closing Opinion
Exhibit E -- Description of Closing Opinion of Counsel to the Company
Exhibit F -- Form of Subsidiary Guaranty
Exhibit G -- Form of Subordination Agreement
</TABLE>
<PAGE>
PRN HOLDINGS, INC.
One MEDIQ Plaza
Pennsauken, New Jersey 08110
NOTE AGREEMENT
Re:
$10,000,000 Senior Subordinated Notes
Due October 1, 2004
Dated as of
September 30, 1994
To the Purchasers named in
Schedule I attached to
this Agreement
Ladies and Gentlemen:
The undersigned, PRN Holdings, Inc., a Delaware corporation (the
'Company'), agrees with the purchasers named on Schedule I to this Agreement
(the 'Purchasers') as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the issue and
sale of $10,000,000 aggregate principal amount of its Senior Subordinated Notes
due October 1, 2004 (the 'Notes'). The Notes shall be (i) dated the date of
issue, (ii) expressed to bear interest prior to maturity at the rate of 10.00%
per annum (subject to adjustment as set forth below) payable semiannually on the
first day of each April and October in each year commencing April 1, 1995, and
at maturity, (iii) expressed to bear interest on overdue principal (including
any overdue required or optional prepayment of principal) and premium, if any,
and (to the extent legally enforceable) on any overdue installment of interest
at the Overdue Rate after the date due, whether by acceleration or otherwise,
until paid, (iv) expressed to mature on October 1, 2004, (v) subordinate and
junior to Senior Debt of the Company as provided in Section 8 and (vi) otherwise
substantially in the form attached hereto as Exhibit A. The interest rate borne
by the Notes shall be increased upon the occurrence of any of the following: (i)
if the Company shall deliver an OID Adjustment Notice the interest rate borne by
the Notes shall be increased by 25 basis points (.25%) per annum effective as of
the Closing Date, and (ii) if an IPO Adjustment Date shall occur the interest
rate borne by the Notes shall be increased by 300 basis points (3.00%) per annum
effective as of the IPO Adjustment Date. Interest on the Notes shall be computed
on the basis of a 360-day year and actual days elapsed. The term Notes as used
herein shall include each Note delivered pursuant to this Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
Section 2 of this Agreement.
The payment of principal, premium, if any, and interest on the Notes will
be guaranteed by New PRN, a Wholly-owned Subsidiary (the 'Guarantor'), for the
benefit of the Holders pursuant to a Senior Subordinated Subsidiary Guaranty
Agreement dated as of the date hereof, in the form of Exhibit F hereto (the
'Subordinated Guaranty').
Section 1.2. Commitment; Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to each Purchaser, and such
Purchaser agrees to purchase from the Company, Notes of the Company in the
aggregate principal amount set forth opposite such Purchaser's name in Schedule
I at a price of 100% of the principal amount thereof on the Closing Date
mentioned below. The aggregate purchase price for the Notes and the Warrants
referred to in Section 1.3 to be purchased by each Purchaser shall not exceed an
amount equal to 100% of the principal amount of the Notes set forth opposite
such Purchaser's name in Schedule I.
<PAGE>
Delivery of the Notes and Warrants will be made at the offices of
Otterbourg, Steindler, Houston & Rosen, P.C., 230 Park Avenue, New York, New
York 10169, against payment therefor in Federal Reserve or other funds current
and immediately available and wired to such account at such bank in the
continental United States as the Company shall direct in a written notice given
to the Purchasers in the amount of the purchase price at 11:00 A.M. Eastern
time, on September 30, 1994 or such later date (not later than October 19, 1994)
as shall mutually be agreed upon by the Company and the Purchasers (the 'Closing
Date'). The Notes will be delivered to each Purchaser in the form of a single
registered Note, registered in such Purchaser's name or in the name of such
Purchaser's nominee as such Purchaser may specify at any time prior to the date
fixed for delivery.
Section 1.3. Warrants to Purchase Common Stock. In consideration of, and as
an inducement to, each Purchaser's obligation to purchase the Notes, the Company
also agrees to deliver to each Purchaser on the Closing Date warrants (all
warrants being delivered to the Purchasers being referred to collectively as the
'Warrants') substantially in the form attached hereto as Exhibit B to purchase
shares of Common Stock of the Company. The number of shares which may be
purchased upon the exercise of the Warrants and the price per share are subject
to adjustment in the manner and on the terms and conditions set forth in the
Warrants.
The Company and the Purchasers agree that for U.S. federal income tax
purposes the aggregate amount of original issue discount is less than a de
minimus amount (as defined in the Treasury Regulations). Unless an OID
Adjustment Notice (as hereinafter defined) is delivered to the Purchasers, the
Company agrees to use the foregoing determination for U.S. federal income tax
purposes with respect to this transaction. In the event that the Company shall
in good faith determine that the original issue discount attributable to the
Notes is more than the de minimus amount (as defined in the Treasury
Regulations), the Company shall give written notice of such determination (an
'OID Adjustment Notice') to the Purchasers. Such determination shall be
supported by a written opinion of an Independent Financial Advisor which shall
set forth the basis for such determination in reasonable detail. Any such
determination shall be made by and communicated to the Purchasers on or prior to
December 31, 1994. The Company covenants and agrees with the Purchasers that in
no event will the original issue discount attributable to the Notes exceed
$2,000,000.
The rights, powers and terms of and relating to the Common Stock will be
provided for in the Company's Certificate of Incorporation as in effect on the
Closing Date, and as otherwise provided by the general corporation law of the
State of Delaware.
Section 1.4. Several Commitments. The obligations of the Purchasers shall
be several and not joint and no Purchaser shall be liable or responsible for the
acts or defaults of any other Purchaser.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments of Notes. The Company agrees that on the
first day of each April and October in each year, commencing April 1, 2000 and
ending April 1, 2004, both inclusive, it will prepay and apply and there shall
become due and payable on the principal indebtedness evidenced by the Notes an
amount equal to the lesser of (i) $1,000,000 or (ii) the principal amount of the
Notes then outstanding. The entire remaining principal amount of the Notes shall
become due and payable on October 1, 2004. No premium shall be payable in
connection with any required prepayment made pursuant to this Section 2.1. For
purposes of this Section 2.1, any prepayment of less than all of the outstanding
Notes pursuant to Section 2.2 shall reduce the amount of each subsequent
scheduled principal payment on the Notes pursuant to this Section 2.1 in the
same proportion that the principal amount of such prepayment pursuant to
Section 2.2 bears to the unpaid principal amount of the Notes immediately prior
to such prepayment.
In the event any portion of the Notes is applied to the payment of the
purchase price of Common Stock as contemplated in Section 1 of the Warrants, the
amount so applied shall be deemed to constitute payment of the principal amount
of the Notes scheduled to remain unpaid on October 1, 2004, and then, to the
remaining scheduled principal prepayments in inverse chronological order.
Section 2.2. Optional Prepayments. In addition to the payments required by
Section 2.1, upon compliance with Section 2.4, the Company shall have the
privilege, at any time and from time to time, on or after, but not prior to,
October 1, 1997, of prepaying the outstanding Notes, either in whole or in
<PAGE>
part (but if in part then in a minimum principal amount of $500,000 or any
integral multiple thereof) by payment of the principal amount of the Notes, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with a premium equal to the principal amount of the Notes
being so prepaid multiplied by the applicable premium set forth opposite the
applicable period below:
<TABLE>
<S> <C>
IF PREPAID DURING THE 12-MONTH
PERIOD COMMENCING OCTOBER 1
IN THE YEAR: APPLICABLE PREMIUM
1997 4%
1998 3%
1999 2%
2000 1%
2001 and thereafter 0%
</TABLE>
Notwithstanding the limitations set forth in this Section 2.2 if the
Company shall complete an IPO within two years of the Closing Date, the Company
may prepay, upon compliance with Section 2.4 and without premium, 35% of the
aggregate principal amount of the outstanding Notes at any time or from time to
time during the two year period immediately subsequent to such IPO.
Section 2.3. Prepayment upon Designated Event. In the event the Company has
knowledge of a Designated Event or an impending Designated Event, the Company
will give written notice (a 'Company Notice') of such fact to all Holders at
least 30 days prior to any proposed Designated Event Date; provided, however,
that if the Company shall not then have knowledge of such fact, such Company
Notice shall be delivered promptly after the Company shall have knowledge of
such fact, but in no event later than three business days after the Designated
Event Date. The Company Notice shall (i) describe the facts and circumstances of
such Designated Event in reasonable detail (including the Designated Event Date
or proposed Designated Event Date), (ii) make reference to this Section 2.3 and
the rights of the Holders to require the Company to prepay their Notes, (iii)
state that the Holder must make a declaration of its intent to have the Notes
held by it prepaid, and (iv) specify the date upon which such prepayment will be
made (the 'Designated Event Payment Date'). The Designated Event Payment Date
shall occur not less than 20 days nor more than 30 days after the Designated
Event Date, provided that the Holders of 66-2/3% in aggregate principal amount
of outstanding Notes may designate an earlier date (but not earlier than the
date upon which the Designated Event shall occur) by written notice delivered to
the Company pursuant to the Declaration Notice (as hereinafter defined).
Upon the receipt of such Company Notice or, if no Company Notice is given,
upon receipt of actual knowledge of a Designated Event, any Holder shall have
the privilege, upon written notice (the 'Declaration Notice') to the Company, of
declaring all Notes held by such Holder serving such Declaration Notice to
become due and payable on the Designated Event Payment Date or, if such notice
is given as a result of the failure of the Company to deliver a Company Notice,
on the date designated by such Holder (which shall be not earlier than the
Designated Event Date). In the event that a Company Notice is given and a Holder
fails to provide a Declaration Notice on or prior to the fifth business day
preceding the Designated Event Payment Date, the Notes held by such Holder shall
not become due and payable as a result of such Designated Event.
Acquiring Person: any Person or group of two or more Persons acting as a
partnership, limited partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of Voting Stock of the Company, together with
all affiliates and associates (as defined in Rule 12b-2 under the Securities and
Exchange Act of 1934, as amended) of such Person or Persons, but excluding
Bernard J. Korman and/or a trust (the 'Rotko Trust') created pursuant to an
Agreement of Trust, dated November 18, l983, for the benefit, during her
lifetime, of Bessie G. Rotko, and the Trustees of the Rotko Trust, which are
Bessie G. Rotko, Michael J. Rotko, Judith M. Shipon, Lionel Felzer and PNC Bank,
N.A. (formerly Provident National Bank), together all affiliates and associates
of the foregoing Persons.
Designated Event: shall be deemed to have occurred on the date on which an
Acquiring Person shall have acquired, or obtained the right to acquire, legal or
beneficial ownership of more than 50% of the outstanding shares of the Voting
Stock of the Company.
<PAGE>
Designated Event Date: any date upon which a Designated Event shall occur.
All prepayments on the Notes pursuant to this Section 2.3 shall be made by
the payment of the aggregate principal amount remaining unpaid on such Notes and
accrued interest thereon to the date of such prepayment, together with a premium
equal to the premium which would have been payable if the Notes had been prepaid
in accordance with Section 2.2, determined as of the Designated Event Payment
Date, provided that if the Designated Event Payment Date shall occur prior to
October 1, 1997, the amount of such premium shall equal 6% of the aggregate
principal amount of the Notes being prepaid pursuant to this Section 2.3. Any
prepayment of less than all of the outstanding Notes made pursuant to this
Section 2.3 shall be applied to the payment in full of the Notes held by the
Holders providing a Declaration Notice, and each scheduled prepayment pursuant
to the provisions of Section 2.1 coming due thereafter shall be reduced by an
amount which bears the same relationship to such payment as the aggregate amount
being so applied pursuant to this Section 2.3 bears to the unpaid principal
amount of the Notes immediately prior to such application, so that the amounts
of the scheduled payments on each Note remaining outstanding after such
application shall be unchanged by such application.
Section 2.4. Notice of Prepayments. The Company shall give written notice
of any prepayment of the Notes pursuant to Section 2.2 to each Holder not less
than 25 days nor more than 60 days before the date fixed for such optional
prepayment. Such notice shall specify (i) such date, (ii) the principal amount
of the Holder's Notes to be prepaid and the aggregate principal amount of all
Notes to be prepaid, (iii) the premium, if any, and (iv) the accrued interest
applicable to the prepayment. Such notice of prepayment shall also set forth
sufficient information to establish satisfaction of all conditions precedent to
any such prepayment. Notice of prepayment having been given in accordance with
this Section 2.4, the aggregate principal amount of the Notes specified in such
notice, together with the premium, if any, and accrued interest thereon shall
become due and payable on the prepayment date.
Section 2.5. Allocation of Prepayments. All partial prepayments of the
Notes pursuant to Section Section 2.1 and 2.2 shall be applied on all
outstanding Notes ratably among all Holders in accordance with the unpaid
principal amount of the Notes outstanding; provided, however, that solely for
purposes of allocating partial prepayments of the Notes under Section 2.1, the
principal amount of any Note which has been applied against the purchase price
of Common Stock as contemplated in Section 1 of the Warrants shall be deemed to
be outstanding.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary in
this Agreement or the Notes, in the case of any Note owned by any Holder that is
a Purchaser or any other Institutional Holder which has given written notice to
the Company requesting that the provisions of this Section shall apply, the
Company will punctually pay all sums becoming due without any presentment
thereof directly to such Holder at its address set forth herein or at such other
address as such Holder may from time to time designate in writing to the Company
in accordance with Section 11.6 or, if a bank account is so designated for such
Holder, the Company will make such payments to such bank account by initiating
such payment before 11:00 A.M., New York time, by bank wire transfer in
immediately available funds, marked for attention as indicated, or in such other
manner or to such other account of such Holder in any bank in the United States
as such Holder may from time to time direct in writing.
Any Holder to which this Section 2.6 applies agrees that in the event it
shall sell or transfer any Note (i) it will, prior to the delivery of such Note
(unless it has already done so), make a notation thereon of all principal, if
any, prepaid on such Note and will also note thereon the date to which interest
has been paid on such Note, and (ii) it will promptly notify the Company of the
name and address of the transferee of any Note so transferred. With respect to
Notes to which this Section 2.6 applies, the Company shall be entitled to
presume conclusively that the original or such subsequent Holder as shall have
requested the provisions hereof to apply to its Notes remains the Holder of
such Notes until (i) the Company shall have received notice in writing of the
transfer of such Notes, and of the name and address of the transferee, or (ii)
such Notes shall have been presented to the Company as evidence of the transfer.
SECTION 3. FINANCIAL STATEMENTS AND OTHER INFORMATION.
Section 3.1. Financial and Business Information. The Company agrees to
furnish (x) to each Purchaser so long as it or its nominee is a Holder and to
each other Institutional Holder of the then
<PAGE>
outstanding Notes and (y) if at any time the Company is not subject to the
reporting requirements of the Securities and Exchange Act of 1934, as amended,
then to each Institutional Holder of Common Stock initially issued upon the
exercise of any Warrant and to each subsequent transferee of such Common Stock:
(a) Quarterly Statements. Within 60 days after the end of each
quarterly fiscal period (except the last) in each fiscal year of the
Company, duplicate copies of:
(1) consolidated and consolidating balance sheets of the Company
and its Subsidiaries as of the close of such quarterly fiscal period,
and
(2) consolidated and consolidating statements of income and
consolidated statement of cash flows of the Company and its Subsidiaries
for such quarterly fiscal period and for the portion of the fiscal year
ending with such period,
in each case setting forth in comparative form the consolidated figures for
the corresponding period of the preceding fiscal year, all in reasonable
detail and certified as having been prepared in accordance with GAAP by an
authorized financial officer of the Company.
(b) Annual Statements. As soon as available and in any event within 95
days after the close of each fiscal year of the Company, duplicate copies
of:
(1) audited consolidated and unaudited consolidating balance sheets
of the Company and its Subsidiaries as of the close of such fiscal year,
and
(2) audited consolidated and unaudited consolidating statements of
income, audited consolidated statements of stockholders' equity and cash
flows of the Company and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and accompanied by an
opinion thereon of a firm of independent public accountants of recognized
national standing selected by the Company to the effect that the
consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the end of the fiscal year being reported on and the
consolidated results of the operations and cash flows for said year in
conformity with GAAP and that the examination of such accountants in
connection with such financial statements has been made in accordance
with generally accepted auditing standards and included such tests of
the accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances.
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit, if any, made by independent accountants of the
books of the Company or any Subsidiary and any comment letter to
management, if any, received from such accountants.
(d) SEC and Other Reports. From and after the date upon which the
Company shall be subject to the reporting requirements of the Securities
and Exchange Act of 1934, as amended, promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally, of each regular or
periodic report and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or with the
Commission or any successor agency. Promptly after receipt thereof, copies
of any final, substantive orders in any proceedings to which the Company or
any of its Subsidiaries is a party, issued by any governmental agency,
Federal or state, having jurisdiction over the Company or any of its
Subsidiaries.
(e) Requested Information. Subject to the requirements of applicable
securities law, with reasonable promptness, such other data and information
as any Holder may reasonably request.
Section 3.2. Officer's Certificates. With each set of financial statements
delivered pursuant to Section 3.1(a) and (b) above, the Company will deliver a
certificate of an authorized financial officer of the Company stating that such
officer has reviewed the provisions of this Agreement and setting forth: (i) the
information and computations (in sufficient detail) required in order to
establish whether the Company was in compliance with the requirements of
Section 4.4 through Section 4.11 at the end of the period covered by the
financial statements then being furnished, (ii) the amount charged in such
period
<PAGE>
for depreciation, interest expense and rental expense, and (iii) whether there
existed as of the date of such financial statements and whether, to the best of
such officer's knowledge, there exists on the date of the certificate or existed
at any time during the period covered by such financial statements any Default
or Event of Default and, if any such condition or event exists on the date of
the certificate, specifying the nature and period of existence thereof and the
action the Company is taking and proposes to take with respect thereto.
Section 3.3. Accountants' Certificates. With the annual financial
statements delivered pursuant to Section 3.1(b), the Company will deliver a
certificate of the accountants who render an opinion with respect to such
financial statements, stating that they have reviewed this Agreement and stating
further, whether in making their audit, such accountants have become aware of
any Default or Event of Default under any of the terms or provisions of this
Agreement insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or event then
exists, specifying the nature and period of existence thereof.
Section 3.4. Inspection. The Company will permit each Holder (or such
Persons as such Holder may designate) to visit and inspect upon reasonable prior
notice, under the Company's guidance, any of the properties of the Company or
its Subsidiaries, to examine all their books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees having management duties, and independent public accountants (and by
this provision the Company authorizes said accountants to discuss with such
Holder the finances and affairs of the Company and its Subsidiaries) all at such
reasonable times and as often as may be reasonably requested. Prior to the
existence of any Default under this Agreement, the cost of any visitation or
inspection pursuant to this Section 3.4 shall be borne by any Holder exercising
its rights pursuant to this Section 3.4. So long as any Default or Event of
Default shall exist hereunder, all such costs shall be borne by the Company.
Section 3.5. Observation Rights. From and after the occurrence of an IPO,
the Company agrees to (i) give the Purchasers at least ten business days prior
written notice of each regular meeting (2 days prior written notice delivered by
facsimile communication in the case of any special meeting) of the Board of
Directors of the Company (a 'Board Meeting') and (ii) permit a representative or
representatives designated by the Holder or Holders of at least 66-2/3% in
aggregate principal amount of the Notes then outstanding, to serve as observers
at each Board Meeting.
SECTION 4. COMPANY COVENANTS.
The Company agrees that from and after the Closing Date and continuing so
long as any amount remains unpaid on any Note:
Section 4.1. Corporate Existence, etc.; Type of Business. Except as
otherwise permitted by Section 4.9 or Section 4.10, the Company will, and will
cause each Subsidiary to, at all times preserve and keep in full force and
effect its corporate existence, rights and franchises. The Company will not, and
will not permit any Subsidiary to, engage in any new type of business which is
not related to the business conducted at the date of this Agreement by the
Company and its Subsidiaries.
Section 4.2. Payment of Taxes and Claims. The Company will, and will cause
each Subsidiary to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits, all trade accounts payable in
accordance with usual and customary business terms, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which by law have or might become a lien
or charge upon any of its properties or assets; provided, that no such tax,
assessment, charge, account payable or claim need be paid if being contested in
good faith by appropriate proceedings promptly initiated and diligently
conducted and if such reserve or other appropriate provisions, if any, as shall
be required by GAAP shall have been made therefor.
Section 4.3. Maintenance of Properties; Business Insurance. The Company
will, and will cause each Subsidiary to, maintain or cause to be maintained in
good repair, working order and condition all properties (whether owned in fee or
a leasehold interest) used or useful in the business of the Company and its
Subsidiaries and from time to time will make or cause to be made all appropriate
repairs, renewals and replacements thereof. The Company will, and will cause
each Subsidiary to, maintain or
<PAGE>
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar business and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations.
Section 4.4. Consolidated Net Worth. The Company will at all times keep and
maintain Consolidated Net Worth at an amount not less than the sum of (i)
$20,000,000, plus (ii) an amount equal to 50% of Consolidated Net Income for
each quarterly fiscal period of the Company from and after December 31, 1994 to
and including the date of any determination thereof, computed on a cumulative
basis for said entire period. If Consolidated Net Income is a deficit figure for
any quarterly fiscal period, such deficit shall not reduce the amount of
Consolidated Net Worth required to be maintained pursuant to this Section 4.4.
Section 4.5. Limitations on Debt. The Company will not, and will not permit
any Subsidiary to, create, assume or incur or in any manner be or become liable
in respect of any Debt, except:
(a) Debt evidenced by the Notes;
(b) Debt of the Company and its Subsidiaries outstanding as of the
Closing Date and described in Annex B to Exhibit C;
(c) Debt of Old PRN (and Guaranty thereof by the Company and New PRN)
from time to time outstanding under the Revolving Line of Credit and any
renewal, extension or refunding of such Debt;
(d) Debt of New PRN (and Guaranty thereof by the Company) outstanding
under the Term Loan in an aggregate principal amount not in excess of
$45,000,000 and any renewal, extension or refunding of such Debt;
(e) Debt of the Company and its Subsidiaries as evidenced by the
Seller Notes;
(f) additional Debt of the Company and its Subsidiaries, provided that
at the time of issuance thereof and after giving effect thereto and to the
application of the proceeds thereof, consolidated Debt shall not exceed 90%
of Total Capitalization;
(g) Debt evidenced by the Subsidiary Guaranty; and
(h) Debt of a Subsidiary to the Company or to a Wholly-owned
Subsidiary.
Any corporation which becomes a Subsidiary after the date hereof shall for
all purposes of this Section 4.5 be deemed to have created, assumed or incurred,
at the time it becomes a Subsidiary, all Debt of such corporation existing
immediately after it becomes a Subsidiary.
Section 4.6. Fixed Charges Coverage Ratio. The Company will keep and
maintain the ratio of Net Income Available for Fixed Charges to Fixed Charges
for each period of four consecutive fiscal quarters at not less than 1.75 to
1.00.
Section 4.7. Dividends, Stock Purchases; Management Fees.. The Company will
not:
(a) Declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of Common Stock of the Company); or
(b) Directly or indirectly, or through any Subsidiary, purchase,
redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its
capital stock; or
(c) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock; or
(d) Pay any Management Fees to the Parent or any affiliate of the
Parent;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such other
distributions and Management Fees being herein collectively called 'Restricted
Payments'), if after giving effect thereto any Default or Event of
<PAGE>
Default shall have occurred and be continuing or the aggregate amount of
Restricted Payments made or declared during the period from and after October 1,
1994, to and including the date of the making of the Restricted Payment in
question, would exceed 50% of Consolidated Net Income for such period, computed
on a cumulative basis for said entire period (or if such Consolidated Net Income
is a deficit figure, then minus 100% of such deficit).
The Company will not declare any dividend which constitutes a Restricted
Payment payable more than 60 days after the date of declaration thereof.
For the purposes of this Section 4.7, the amount of any Restricted Payment
declared, paid or distributed in property of the Company shall be deemed to be
the greater of the book value or fair market value (as determined in good faith
by the Board of Directors of the Company) of such property at the time of the
making of the Restricted Payment in question.
Section 4.8. Merger or Consolidation. The Company will not, and will not
permit any Subsidiary to, consolidate with or be a party to a merger with any
other corporation; provided, however, that:
(a) any Subsidiary may merge or consolidate with or into the Company
or any Wholly-owned Subsidiary so long as in any merger or consolidation
involving the Company, the Company shall be the surviving or continuing
corporation; and
(b) the Company may merge or consolidate with or into any other
corporation if (i) the Company shall be the surviving or continuing
corporation, (ii) at the time of such consolidation or merger and after
giving effect thereto no Default or Event of Default shall have occurred
and be continuing, (iii) after giving effect to such merger or
consolidation the Company would be permitted to incur at least $1.00 of
additional Debt under the provisions of Section 4.5(e) and no default shall
exist under Section 4.6 after giving effect to the income and debt
outstanding during the applicable period of the entity with which the
Company shall have merged or consolidated, and the Company provides written
notice not less than 30 days prior to the consummation of the proposed
merger or consolidation, which notice shall refer to this Section 4.8(b).
Section 4.9. Sale of Assets. The Company will not, and will not permit any
Subsidiary to, sell, lease or otherwise dispose of all or any substantial part
of the assets of the Company and its Subsidiaries, taken as a whole; provided,
however, that (i) any Subsidiary may sell, lease or otherwise dispose of all or
any part of its assets to the Company or a Wholly-owned Subsidiary and (ii) the
Company and its Subsidiaries may dispose of assets in the ordinary course of
business.
As used in this Section 4.9, a sale, lease or other disposition of assets
shall be deemed to be a 'substantial part' of the assets of the Company and its
Subsidiaries if the book value of such assets, when added to the book value of
all other assets sold, leased or otherwise disposed of by the Company and its
Subsidiaries (other than in the ordinary course of business) during the 12-month
period ending with the date of such sale, lease or other disposition, exceeds
15% of the assets of the Company and its Subsidiaries determined on a
consolidated basis as of the end of the immediately preceding fiscal year. For
purposes of calculations pursuant to this Section 4.9, the sale or other
disposition of equipment which is worn out, obsolete or no longer suitable for
use in the conduct of the business of the Company and its Subsidiaries shall
constitute dispositions in the ordinary course of business.
Section 4.10. Sale of Subsidiary Stock and Debt. (a) The Company will not
permit any Subsidiary to issue or sell any shares of such Subsidiary's capital
stock (including as 'stock' for the purposes of this Section 4.10 any warrants,
rights or options to purchase or otherwise acquire stock or other Securities
exchangeable for or convertible into stock) except (i) to the Company or a
Wholly-owned Subsidiary, (ii) to directors for qualifying shares, (iii) to
satisfy the validly pre-existing preemptive rights of minority shareholders in
connection with the simultaneous issuance of stock to the Company and/or a
Subsidiary whereby the Company and/or such Subsidiary maintain their same
proportionate interest in such Subsidiary, and (iv) to satisfy the requirement
of the Warrant dated as of May 29, l992 originally issued to Internationale
Nederlanden (U.S.) Finance Corporation pursuant to which 2.5% of the common
stock of Old PRN (as adjusted from time to time in the manner set forth in such
warrant as in effect on the Closing Date) may be issued.
(b) The Company will not, and will not permit any Subsidiary to, sell,
transfer or otherwise dispose of any shares of capital stock or any Debt of any
Subsidiary, unless (i) simultaneously with
<PAGE>
such sale, transfer or disposition, all shares of capital stock and all Debt of
such Subsidiary at the time owned by the Company and other Subsidiaries shall be
sold, transferred or disposed of as an entirety, (ii) the Subsidiary being
disposed of shall not have any continuing Investment in the Company or any other
Subsidiary, (iii) the Board of Directors of the Company shall have determined,
as evidenced by a resolution of the Board, that the retention of such stock and
Debt is no longer in the best interests of the Company, (iv) such stock and Debt
are sold, transferred or otherwise disposed of to a Person for a cash
consideration and on terms reasonably deemed by the Board of Directors to be
adequate and satisfactory, and (v) such sale, transfer or disposition is
permitted by Section 4.9.
Section 4.11. Permitted Investments. The Company will not, and will not
permit its Subsidiaries to, make or have outstanding any Investments except:
(a) Investments in direct obligations of, or obligations the payment
of the principal and interest on which is guaranteed by, the United States
of America maturing within one year from the date of acquisition thereof;
(b) Investments in certificates of deposit maturing within one year
from the date of issuance thereof, issued by any bank or trust company
organized under the laws of the United States or any state thereof or the
District of Columbia, having capital, surplus and undivided profits
aggregating at least $100,000,000 and whose long-term certificates of
deposit are, at the time of acquisition thereof by the Company or a
Subsidiary, rated AA or better by Standard & Poor's Corporation or Aa or
better by Moody's Investors Service, Inc.;
(c) Investments in commercial paper having a maturity of not more than
270 days from the date of acquisition and which at the time of acquisition
are accorded the highest rating by Standard & Poor's Corporation or by
Moody's Investors Service, Inc.;
(d) loans or advances in the usual and ordinary course of business to
officers and employees incidental to carrying on the business of the
Company or its Subsidiaries;
(e) accounts receivable arising from transactions with customers and
suppliers in the ordinary course of business;
(f) Investments by the Company in and to its Subsidiaries including
corporations which, as a result of such Investment, become Subsidiaries;
(g) Investments existing on the date of this Agreement and described
in Schedule II hereto in the amount set forth therein; and
(h) other Investments (in addition to those permitted by the foregoing
provisions of this Section 4.11), provided that (i) the aggregate amount of
all such other Investments at any time owned by the Company and its
Subsidiaries shall not exceed 10% of Consolidated Net Worth, and (ii) after
giving effect to such other Investments, no Default or Event of Default
shall have occurred and be continuing.
In valuing any Investments for the purpose of applying the limitations set
forth in this Section 4.12, such Investments shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein, but less any amount repaid or recovered on account of
capital or principal.
For purposes of this Section 4.11, at any time when a corporation becomes a
Subsidiary, all Investments of such corporation at such time shall be deemed to
have been made by such corporation, as a Subsidiary, at such time.
Section 4.12. Payment of Dividends by Subsidiaries. Except for the
restrictions set forth in the Credit Agreement, the Indenture and the Negative
Covenants Agreement, the Company will not, and will not permit any Subsidiary
to, enter into any agreement which restricts the ability of any Subsidiary to
declare and pay any dividend or to make any distribution on any equity interest
of such Subsidiary.
Section 4.13. Repurchase of Notes. Neither the Company nor any Subsidiary
or Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless the offer has been made to repurchase Notes, pro
rata, from all Holders at the same time and upon the same terms. If the
<PAGE>
Company, any Subsidiary or any Affiliate repurchases any Notes, such Notes shall
thereafter be cancelled and no Notes shall be issued in substitution therefor.
Without limiting the foregoing, upon the repurchase or other acquisition of any
Notes by the Company, any Subsidiary or any Affiliate, such Notes shall no
longer be outstanding for the purposes of any section of this Agreement relating
to the taking by the Holders of any actions with respect thereto.
Section 4.14. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, enter into or be a party to any transaction or
arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or any such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or its
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate.
SECTION 5. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 5.1. Events of Default. Any one or more of the following shall
constitute an 'Event of Default' as the term is used herein:
(a) Default in the payment of interest on any Note when due and such
default shall continue for more than five days;
(b) Default in the making of any prepayment on the Notes required by
Section 2.1, or a default in the payment of the principal of any Note or
premium thereon, if any, at the expressed or any accelerated maturity date
or at any date fixed for prepayment;
(c) Default in the payment when due of the principal of or interest on
any Debt (other than the Notes) of the Company or any Subsidiary having an
unpaid principal amount of more than $5,000,000 when due, and such default
or event shall continue beyond the period of grace, if any, allowed with
respect thereto;
(d) Default or the happening of any event shall occur under any
indenture, agreement, or other instrument under which any Debt of the
Company or any Subsidiary having an unpaid principal amount of more than
$5,000,000 may be issued and such default or event shall continue uncured
or unwaived for a period of time sufficient to permit the acceleration of
the maturity of any Debt of the Company or any Subsidiary outstanding
thereunder;
(e) Default in the observance or performance of any covenant or
agreement contained in Section Section 4.1 through 4.13 hereof;
(f) Default in the observance or performance of any other covenant or
provision of this Agreement which is not remedied within 30 days;
(g) Any material representation or warranty made by the Company herein
or any Guarantor in the Guaranty Agreement, or made by the Company or any
Guarantor in any written statement or certificate furnished by the Company
or any Guarantor in connection with the consummation of the issuance and
delivery of the Notes or the execution and delivery of the Guaranty
Agreement or furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof;
(h) Final judgment or judgments for the payment of money aggregating
in excess of $3,000,000 is or are outstanding against the Company or any
Subsidiary or against any of the property or assets of the Company or any
Subsidiary and any such judgment or judgments aggregating in excess of
$3,000,000 has or have remained unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of 30 days from the date of its entry;
(i) Default shall occur in the observance or performance of the
agreements and undertakings of the Company set forth in the Warrants which
default shall not be remedied within 5 days after an officer of the
Company shall have knowledge of such default or any such Warrant shall be
held by a court of competent jurisdiction to be invalid or unenforceable
in any material respect; or
(j) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or the Company
<PAGE>
or any Subsidiary causes or suffers an order for relief to be entered with
respect to it under applicable Federal bankruptcy law or applies for or
consents to the appointment of a custodian, trustee or receiver for the
Company or any Subsidiary or for the major part of the property of the
Company or any Subsidiary;
(k) A custodian, liquidator, trustee or receiver is appointed for the
Company or any Subsidiary or for the major part of the property of the
Company or any Subsidiary and is not discharged within 30 days after such
appointment; or
(l) Bankruptcy, reorganization, arrangement or insolvency proceedings,
or other proceedings for relief under any bankruptcy or similar law or laws
for the relief of debtors, are instituted by or against the Company or any
Subsidiary and, if instituted against the Company or any Subsidiary, are
consented to or are not dismissed within 60 days after such institution.
Section 5.2. Notice to Holders. When any Event of Default described in
Section 5.1 has occurred, or if any Holder or if any holder of any other
evidence of Debt of the Company or any Subsidiary gives any notice or takes
any other action with respect to a claimed default, the Company agrees to
give notice within three business days of such event to all Holders.
Section 5.3. Acceleration of Maturities. When any Event of Default
described in paragraphs (a) or (b) of Section 5.1 has happened and is
continuing, any Holder may, and when any Event of Default described in
paragraphs (c) through (i), inclusive, of Section 5.1 has happened and is
continuing, the Holder or Holders holding 50% or more of the principal amount
of the outstanding Notes may, by notice in writing sent by registered or
certified mail to the Company, declare the principal of the Notes to be, and
all principal of and interest on all outstanding Notes shall thereupon
become, forthwith due and payable, without any presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived. When
any Event of Default described in paragraph (j), (k) or (l) of Section 5.1
has occurred, then all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind, all of which are
hereby expressly waived. Upon the Notes becoming due and payable as a result
of any Event of Default as aforesaid, the Company will forthwith pay to the
Holders, subject to the provisions of Section 8, all principal of and
interest accrued on the Notes, together with, to the extent permitted by law,
an amount as liquidated damages for the loss of the bargain evidenced hereby
(and not as a penalty) equal to the premium which would have been payable if
the Notes had been prepaid in accordance with Section 2.2, determined as of
the date on which the Notes shall so become due and payable, provided that if
the Notes become so due and payable as a result of any Event of Default prior
to October 1, 1997, the amount of such liquidated damages shall equal 6% of
the aggregate principal amount of the outstanding Notes. Neither any course
of dealing on the part of any Holder nor any delay or failure on the part
of any Holder to exercise any right shall operate as a waiver of such right or
otherwise prejudice such Holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay to the Holder or Holders
all expenses incurred by them in the collection of any Notes upon any default
hereunder or thereon, including reasonable compensation to such Holder's or
Holders' attorneys for all services rendered in connection therewith.
Section 5.4. Rescission of Acceleration. The provisions of Section 5.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(i), inclusive, of Section 5.1, the Holders holding at least 66-2/3% in
aggregate principal amount of the outstanding Notes may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is rescinded
and annulled:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under Section 5.3) shall have been duly paid;
and
<PAGE>
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to Section 6.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS.
Section 6.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the Holders of at least 66-2/3% in aggregate principal amount of
outstanding Notes; provided that without the written consent of all of the
Holders, no such waiver, modification, alteration or amendment shall be
effective which will (i) extend the time of payment (including any prepayment
pursuant to Section 2.l) of the principal of or the interest or premium, if any,
on any Note or reduce the principal amount thereof or change the rate of
interest thereon, or (ii) change any of the provisions with respect to optional
prepayments, or (iii) change any of the provisions of Section 8, or (iv) change
the percentage of Holders required to consent to any such waiver, amendment,
alteration or modification of any of the provisions of this Section 6 or
Section 5.
Section 6.2. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the Holders and shall be binding upon them, upon
each future Holder and upon the Company, whether or not any Note shall have been
marked to indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or impair any
right consequent thereon.
Section 6.3. Solicitation of Holders. The Company will not solicit, request
or negotiate for or with respect to any proposed waiver or amendment of any of
the provisions of this Agreement or the Notes unless each Holder (irrespective
of the amount of Notes then owned by it) shall be concurrently informed thereof
by the Company and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to enable it to
make an informed decision with respect thereto. Executed or true and correct
copies of any waiver or consent effected pursuant to the provisions of this
Section 6 shall be delivered by the Company to each Holder forthwith following
the date on which the same shall have been executed and delivered by the Holder
or Holders of the requisite percentage of outstanding Notes. The Company will
not, directly or indirectly, pay or cause to be paid any fee (whether
denominated as servicing fee or otherwise) remuneration, including supplemental
or additional interest, expenses or other amount, to any Holder as consideration
for or as an inducement to the consideration or review of or entering into by
such Holder of any waiver or amendment of any of the terms and provisions of
this Agreement (or any proposed waiver or amendment hereof) unless such
remuneration is concurrently paid, on the same terms, ratably to all Holders.
SECTION 7. INTERPRETATION OF NOTE AGREEMENT; DEFINITIONS.
Section 7.1. Definitions. In addition to the terms defined in other
Sections of this Agreement, the following terms will mean:
Affiliate: any Person (other than a Subsidiary) (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, the Company, (ii) which beneficially owns or holds
5% or more of any class of the Voting Stock of the Company or (iii) 5% or more
of the Voting Stock (or in the case of a Person which is not a corporation, 5%
or more of the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary. The term 'control' means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise.
Asset Purchase Agreement: the Asset Purchase Agreement dated August 23,
1994 by and among Kinetic Concepts, Inc., and KCI, as Seller, and the Parent,
the Company, and New PRN, as Buyer, pursuant to which New PRN shall acquire
certain assets of the medical services division of KCI and Old PRN shall acquire
the disposable inventory of the medical services division of KCI.
<PAGE>
Capitalized Lease: any lease the obligation for Rentals with respect to
which is required to be capitalized on a consolidated balance sheet of the
lessee and its subsidiaries in accordance with GAAP.
Capitalized Rentals: of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
Closing Date: is defined in Section 1.2.
Code: the Internal Revenue Code of 1986, as amended.
Commission: the Securities and Exchange Commission, or any other Federal
agency at the time administering the Securities Act or the Trust Indenture Act
of 1939, as amended, as the case may be.
Common Stock: is defined in the Warrants.
Consolidated Net Income: for any period shall mean the gross revenues of
the Company and its Subsidiaries for such period less all expenses and other
proper charges (including taxes on income), determined on a consolidated basis
after eliminating earnings or losses attributable to outstanding Minority
Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Subsidiary accrued prior to the
date it became a Subsidiary;
(d) net earnings and losses of any corporation (other than a
Subsidiary), substantially all the assets of which have been acquired in
any manner by the Company or any Subsidiary, realized by such corporation
prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a
Subsidiary) with which the Company or a Subsidiary shall have consolidated
or which shall have merged into or with the Company or a Subsidiary prior
to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest unless such
net earnings shall have actually been received by the Company or such
Subsidiary in the form of cash distributions;
(g) earnings resulting from any reappraisal, revaluation or write-up
of assets;
(h) any deferred or other credit representing any excess of the equity
in any Subsidiary at the date of acquisition thereof over the amount
invested in such Subsidiary; and
(i) any gain arising from the acquisition of any Securities of the
Company or any Subsidiary.
Consolidated Net Worth: as of the date of any determination thereof shall
mean the shareholders' equity of the Company and its Subsidiaries determined
in accordance with GAAP.
Convertible Securities: evidence of Debt, shares of Common Stock, preferred
stock or other Securities which are convertible into or exchangeable for shares
of Common Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
Credit Agreement: shall mean, collectively, (i) the Accounts Financing
Agreement dated May 29, 1992, between Congress Financial Corporation and Old
PRN, as amended from time to time, and (ii) the Loan and Security Agreement
dated September 30, 1994 between Congress Financial Corporation and New PRN, as
amended from time to time, pursuant to which the Revolving Line of Credit and
the Term Loan shall be issued and outstanding as amended or modified and any
agreements pursuant to which any renewal, refunding or extension of the
Revolving Line of Credit Loan or the Term Loan shall be outstanding.
<PAGE>
Current Debt: of any Person shall mean as of the date of any determination
thereof (i) all Debt of such Person for borrowed money other than Funded Debt of
such Person, and (ii) Guaranties by such Person of Current Debt of others.
Debt: of any Person shall mean as of the date of any determination thereof
(i) all Current Debt of such Person, and (ii) all Funded Debt of such Person
Default: any event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, constitute an Event of Default.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate: any corporation, trade or business that is, along with the
Company, a member of a controlled group of corporations or a controlled group of
trades or businesses, as described in section 414(b) and 414(c), respectively,
of the Internal Revenue Code of 1986, as amended, or Section 4001 of ERISA.
Event of Default: is defined in Section 5.1.
Fixed Charges: for any period shall mean on a consolidated basis the sum of
(i) all Rentals (other than Rentals on Capitalized Leases) payable during such
period by the Company and its Subsidiaries, and (ii) all Interest Charges on all
Debt (including the interest component of Rentals on Capitalized Leases) of the
Company and its Subsidiaries.
Funded Debt: of any Person shall mean (i) all Debt of such Person for
borrowed money or which has been incurred in connection with the acquisition
of assets in each case having a final maturity of one or more than one year
from the date of origin thereof (or which is renewable or extendible at the
option of the obligor for a period or periods more than one year from the
date of origin), including all payments in respect thereof that are required
to be made within one year from the date of any determination of Funded
Debt, whether or not the obligation to make such payments shall constitute
a current liability of the obligor under GAAP, (ii) all Capitalized Rentals
of such Person, and (iii) all Guaranties by such Person of Funded Debt of
others. Rentals in respect of leases which are not Capitalized Leases shall
not be included in Funded Debt.
GAAP: shall mean generally accepted accounting principles at the time in
the United States.
Guaranties: all obligations (other than endorsements in the ordinary course
of business of negotiable instruments for deposit or collection) of any Person
guaranteeing or in effect guaranteeing any Indebtedness, dividend or other
obligation of any other Person (the 'primary obligor') in any manner, whether
directly or indirectly, including, without limitation, all obligations incurred
through an agreement, contingent or otherwise, by such Person: (i) to purchase
such Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of
such Indebtedness or obligation, (y) to maintain working capital or other
balance sheet condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, or (iii) to lease
property or to purchase Securities or other property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation, or (iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purposes of all computations made under this Agreement, a Guaranty in respect of
any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to
the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
Guarantor: is defined in Section 1.1.
Guaranty Supplement: is defined in the Subsidiary Guaranty.
Holder: shall mean any Person which is, at the time of reference, the
registered Holder of any Note.
Indebtedness: of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such
<PAGE>
Person, and in any event shall include all (i) obligations of such Person for
borrowed money or which has been incurred in connection with the acquisition of
property or assets, (ii) obligations secured by any lien upon property or assets
owned by such Person, even though such Person has not assumed or become liable
for the payment of such obligations, (iii) obligations created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Capitalized Rentals and (v)
Guaranties of obligations of others of the character referred to in this
definition.
Indenture: shall mean the Indenture dated as July 6, 1992 by and between
Old PRN and United Jersey Bank, as Trustee.
Independent Financial Advisor: means a reputable accounting, appraisal
or investment banking firm that is, in the reasonable judgment of the Board
of Directors of the Company, qualified to determine the valuation of the
Warrants as of the Closing Date for purpose of establishing the original
issue discount, if any, attributable to the Notes. The independent financial
advisor shall be disinterested and independent with respect to the Company
and its Affiliates.
Institutional Holder: shall mean any Holder which is a Purchaser or any
insurance company, bank, savings and loan association, trust company, investment
company, charitable foundation, employee benefit plan (as defined in ERISA) or
other institutional investor, registered broker dealer or financial institution
and, for purposes of the direct payment provisions of this Agreement, shall
include any nominee of any such Holder.
Interest Charges: for any period shall mean all interest and all
amortization of debt discount on any particular Debt for which such calculations
are being made. Computations of Interest Charges on a pro forma basis for Debt
having a variable interest rate shall be calculated at the rate in effect on the
date of any determination.
Investments: shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition
of shares of capital stock, indebtedness or other obligations or Securities
or by loan, advance, capital contribution or otherwise; provided, however,
that 'Investments' shall not mean or include routine investments in property
to be used or consumed in the ordinary course of business.
IPO: any initial public offering of shares of Common Stock by the Company
or its shareholders (i) in which the Company receives net proceeds in excess of
$10,000,000 and (ii) after which the Common Stock is listed on the National
Association of Securities Dealers Automatic Quotation System National Market
System, the American Stock Exchange or the New York Stock Exchange.
IPO Adjustment Date: shall occur on October 1, 1997 unless one of the
following events shall have occurred prior to such date: (i) the Company shall
have sold Common Stock in an IPO, (ii) the Company or the Parent shall have
purchased all outstanding Warrants, or (iii) the Warrants shall have been sold
or exchanged for cash or other Securities registered on a national securities
exchange in connection with a merger or other corporate reorganization of the
Company approved by the Holders of 66-2/3% of the principal amount of the Notes
then outstanding.
KCI: KCI Therapeutic Services, Inc., a Delaware corporation.
Kinetic Concepts, Inc.: Kinetic Concepts, Inc., a Texas corporation, and
the sole shareholder of KCI.
Long-Term Lease: shall mean any lease of personal property (other than a
Capitalized Lease) having an original term, including any period for which the
lease may be renewed or extended at the option of the lessor, of more than
three years.
Management Fees: shall mean any payment to the Parent or an affiliate of
the Parent (other than Old PRN) for the payment of goods and services provided
by officers and employees of the Parent or any such affiliate (other than Old
PRN); provided that Management Fees shall not include payments by the Company or
any Subsidiary pursuant to the Consolidated Group Tax Agreement by and between
the Parent and the Company, the Insurance Program Agreement by and between New
PRN, the Company and the Parent, the Reimbursement Agreement by and between New
PRN, the Company and the Parent, the Services Agreement by and between New PRN,
the Company and the Parent, the Insurance Program Agreement by and between Old
PRN, the Company and the Parent, the Reimbursement Agreement by and between Old
PRN, the Company and the Parent, and the Services
<PAGE>
Agreement by and between Old PRN, the Company and the Parent, in each case as
such agreement shall be in effect on the Closing Date.
Minority Interests: any shares of stock of any class of a Subsidiary (other
than directors' qualifying shares as required by law) that are not owned by the
Company and/or one or more of its Subsidiaries. Minority Interests shall be
valued by valuing Minority Interests constituting preferred stock at the
voluntary or involuntary liquidating value of such preferred stock, whichever is
greater, and by valuing Minority Interests constituting common stock at the book
value of capital and surplus applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock required by the
foregoing method of valuing Minority Interests in preferred stock.
Multiemployer Plan: the same meaning as in ERISA.
Negative Covenants Agreement: the Negative Covenants Agreement dated as
of September 30, 1994, by and among the Parent, the Company, New PRN, Kinetic
Concepts, Inc. and KCI.
Net Income Available for Fixed Charges: for any period shall mean the sum
of (i) Consolidated Net Income during such period plus (to the extent deducted
in determining Consolidated Net Income during such period), (ii) all provisions
for any Federal, state or other income taxes made by the Company and its
Subsidiaries during such period, and (iii) Fixed Charges of the Company and its
Subsidiaries during such period and (iv) all provisions made for depreciation
and amortization during such period.
New PRN: MEDIQ/PRN Life Support Services-I, Inc., a Delaware corporation.
OID Adjustment Notice: is defined in Section 1.3.
Old PRN: MEDIQ/PRN Life Support Services, Inc., a Delaware corporation.
Overdue Rate: the per annum rate of interest equal to the sum of (i) the
per annum rate of interest accruing on the Notes prior to any overdue payment of
principal, premium, if any, or interest on the Notes, whether by acceleration or
otherwise, plus (ii) two percent (2%) per annum.
Parent: MEDIQ Incorporated, a Delaware corporation, the sole shareholder of
the Company.
Person: an individual, partnership, corporation, trust or unincorporated
organization, and a government or agency or political subdivision thereof.
Plan: a 'pension plan,' as such term is defined in ERISA, established or
maintained by the Company or any ERISA Affiliate or as to which the Company or
any ERISA Affiliate contributed or is a member or otherwise may have any
liability.
Rentals: as of the date of any determination thereof all fixed payments
(including as such all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Subsidiary, as lessee or sublessee under a lease of real or
personal property, but shall be exclusive of any amounts required to be paid by
the Company or a Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar charges.
Reportable Event: the same meaning as in ERISA.
Revolving Line of Credit: revolving credit loans and standby letters of
credit from time to time outstanding pursuant to the Credit Agreement and which
shall be secured by accounts receivable and/or inventory of the Company and/or
one or more of its Subsidiaries.
Securities Act: the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Security: has the same meaning as in Section 2(1) of the Securities Act.
Seller Notes: collectively the following promissory notes (i) the
promissory note of Old PRN payable to KCI or Kinetic Concepts, Inc. in a
principal amount not to exceed $5,880,000, (ii) the subordinated promissory note
of New PRN payable to KCI or Kinetic Concepts, Inc. in a principal amount not to
exceed $3,000,000, and (iii) the subordinated promissory notes of the Company
payable to KCI or Kinetic Concepts, Inc. in an aggregate principal amount not to
exceed $10,000,000.
Senior Debt: has the meaning set forth in the Subordination Agreement.
<PAGE>
Subordination Agreement: shall mean the Subordination Agreement dated as of
September 30, 1994 among the Company, Congress Financial Corporation and the
Purchasers in substantially the form set forth in Exhibit G attached hereto.
Subordination Agreement shall also include any successor subordination agreement
entered into between the Company, the holders of 66-2/3% in principal amount of
the Notes at the time outstanding and any financial institution which is
providing financing pursuant to the Credit Agreement.
Subordinated Debt: the Notes and all other unsecured Funded Debt and
unsecured Current Debt of the Company which shall contain or have applicable
thereto subordination provisions substantially in the form set forth in the
Subordination Agreement.
Subsidiary: any corporation of which more than 50% (by number of votes) of
the Voting Stock is owned, directly or indirectly, by the Company.
Subsidiary Guaranty: is defined in Section 1.1.
Term Loan: the secured Term Loan dated September 30, 1994 in an aggregate
principal amount of $45,000,000 from Congress Financial Corporation to New PRN.
Total Capitalization: shall mean as of the date of any determination
thereof the sum of (i) Consolidated Net Worth as of such date of determination,
plus (ii) consolidated Debt as of such date of determination.
Underlying Shares: the shares of Common Stock of the Company issuable upon
exercise of the Warrants.
Voting Stock: securities of any class or classes the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or persons performing similar functions).
Warrants: is defined in Section 1.3.
Wholly-owned: when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Debt shall be owned by
the Company and/or one or more of its Wholly-owned Subsidiaries.
Section 7.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the requirements
of this Agreement.
Section 7.3. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 8. SUBORDINATION.
Section 8.1. Notes Subordinated to Senior Debt. The Debt evidenced by the
Notes and any renewals or extensions thereof, shall at all times be wholly
subordinate and junior in right of payment to all Senior Debt, whether now or
hereafter outstanding, all in the manner and with the force and effect set forth
in the Subordination Agreement.
The provisions of the Subordination Agreement are solely for the purpose
of defining the relative rights of the holders of Senior Debt on the one hand,
and the Holders on the other hand, and nothing herein shall impair, as between
the Company and the Holders, the obligation of the Company which is
unconditional and absolute, to pay the principal, premium, if any, and interest
on the Notes in accordance with their terms, nor shall anything herein prevent
the Holders from exercising all remedies otherwise permitted by applicable law
or hereunder upon default hereunder, subject to the limitations set forth in
the Subordination Agreement and the rights of the holders of Senior Debt as
provided for therein.
SECTION 9. REPRESENTATIONS.
<PAGE>
Section 9.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit C are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 9.2. Representations of the Purchasers. Each Purchaser represents,
and in entering into this Agreement the Company understands, that such Purchaser
is acquiring the Notes, the Warrants and the Underlying Shares for the purpose
of investment and not with a view to the distribution thereof, and that such
Purchaser has no present intention of selling, negotiating or otherwise
disposing of the Notes, the Warrants or the Underlying Shares; it being
understood, however, that the disposition of such Purchaser's property will at
all times be and remain within its control.
Each Purchaser has received and reviewed all information that it has
requested from the Company and has had the opportunity to discuss the Company's
business, management and financial affairs with officers of the Company. Each
Purchaser acknowledges that the Notes and the Warrants acquired by it pursuant
to this Agreement must be held indefinitely unless subsequently registered under
the Securities Act or an exemption from such registration is available.
SECTION 10. CLOSING CONDITIONS.
The obligation of each Purchaser to purchase the Notes and Warrants on the
Closing Date will be subject to the performance by the Company of its agreements
hereunder which by the terms hereof are to be performed at or prior to the time
of delivery of the Notes and Warrants, and to the following further conditions
precedent:
Section 10.1. Closing Certificate. Such Purchaser shall receive a
certificate dated the Closing Date, signed by the Chief Financial Officer, the
President or a Vice President of the Company, the truth and accuracy of which
shall be a condition to such Purchaser's obligation to purchase the Notes and
Warrants proposed to be sold to such Purchaser, to the effect that (i) the
representations and warranties of the Company set forth in Exhibit C hereto are
true and correct on and with respect to the Closing Date, (ii) the Company has
performed all of its obligations hereunder which are to be performed on or prior
to the Closing Date, and (iii) no Default or Event of Default has occurred and
is continuing.
Section 10.2. Legal Opinions. Such Purchaser shall receive from Chapman and
Cutler, who are acting as special counsel to each Purchaser in this transaction,
and from Alan S. Einhorn and Steve J. Feder, Corporate Counsel for the Company,
their respective opinions dated the Closing Date, in form and substance
satisfactory such Purchaser, and covering the matters set forth in Exhibits D
and E, respectively, hereto.
Section 10.3. Concurrent Sale of Notes and Warrants. On the Closing Date,
the Company shall have consummated the sale of the entire principal amount of
the Notes and the Warrants scheduled to be sold on the Closing Date pursuant to
this Agreement.
Section 10.4. Subsidiary Guaranty. The Subsidiary Guaranty substantially in
the form attached hereto as Exhibit F shall have been executed and delivered by
New PRN and shall be in full force and effect.
Section 10.5. Asset Purchase Agreement. On or prior to the Closing Date,
each Purchaser shall have received, in form and substance satisfactory to such
Purchaser and its special counsel, copies of the executed and delivered Asset
Purchase Agreement and other acquisition agreements related thereto, and such
Purchaser shall have received evidence that the transactions contemplated
pursuant to the terms of such Asset Purchase Agreement have been consummated
(including all necessary consents and compliance with all applicable laws in
connection with the acquisition thereunder) such that (i) New PRN has purchased
certain assets of the medical services division of KCI as contemplated by such
Asset Purchase Agreement and has good and marketable title to such assets, free
and clear of all claims or Liens, security interests and encumbrance of any
kind, except for certain Capital Leases which will be purchased by New PRN under
the Asset Purchase Agreement and liens created pursuant to the Credit Agreement,
and (ii) Old PRN has purchased the disposable inventory of the medical services
division of KCI and has good and marketable title to such assets, free and clear
of all claims, liens, security interests and encumbrances of any kind except for
liens created pursuant to the Credit Agreement and the Indenture.
<PAGE>
Section 10.6. Revolving Line of Credit and Term Loan. On or prior to the
Closing Date, the Revolving Line of Credit and the Term Loan shall have been
executed and delivered by Congress Financial Corporation and New PRN or Old PRN,
as the case may be, and each Purchaser shall have received a certificate dated
the Closing Date, signed by the President or a Vice President of the Company, to
the effect that Old PRN has at least $1,000,000 of borrowing availability under
the Revolving Line of Credit.
Section 10.7. Equity Contribution. On or prior to the Closing Date, each
Purchaser shall have received evidence that New PRN shall have received not less
than $11,000,000 in cash as an equity contribution from the Parent and/or the
Company.
Section 10.8. Consent of Holders of Other Securities. On or prior to the
Closing Date, any consent or approvals required to be obtained from any holder
or holders of any outstanding securities of the Company which shall be necessary
to permit the consummation of the transactions contemplated hereby shall have
been obtained and all such consents or amendments shall be satisfactory in form
and substance to such Purchaser and such Purchaser's special counsel.
Section 10.9. Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement and the Warrants, and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to such Purchaser, and such Purchaser shall have received a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
Section 10.10. Waiver of Conditions. If on the Closing Date the Company
fails to tender to any Purchaser the Notes or Warrants to be issued to such
Purchaser on such date or if the conditions specified in this Section 10 have
not been fulfilled, such Purchaser may thereupon elect to be relieved of all
further obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in this Section 10 have not been fulfilled, such Purchaser
may waive compliance by the Company with any such condition to such extent as
such Purchaser may in its sole discretion determine.
SECTION 11. MISCELLANEOUS.
Section 11.1. Registered Notes. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes
(hereinafter called the 'Note Register'), and the Company will register or
transfer or cause to be registered or transferred as hereinafter provided any
Note issued pursuant to this Agreement.
At any time and from time to time any Holder which has been duly registered
as hereinabove provided may, subject to compliance with applicable securities
laws, transfer its Note upon surrender thereof at the principal office of the
Company duly endorsed or accompanied by a written instrument of transfer duly
executed by such Holder or its attorney duly authorized in writing.
The person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof and a Holder for all purposes
of this Agreement. Payment of or on account of the principal, premium, if any,
and interest on any Note shall be made to or upon the written order of such
registered Holder.
Section 11.2. Exchange of Notes. At any time and from time to time, upon
not less than ten days' notice to that effect given by any Holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section
11.1, this Section 11.2 or Section 11.3, and upon surrender of any Note to the
Company at its office, the Company will deliver in exchange therefor, without
expense to such Holder, except as set forth below, Notes for the same aggregate
principal amount as the then unpaid principal amount of the Note so
surrendered, in a denomination equal to the Note so surrendered or in such
other denomination in excess of $500,000 as such Holder shall specify, dated
as of the date to which interest has been paid on the Note so surrendered or,
if such surrender is prior to the payment of any interest thereon, then dated
as of the date of issue, registered in the name of such Person or Persons as
may be designated by such Holder, and otherwise of the same form and tenor as
the Note so surrendered for exchange; provided that in the case of any transfer
to a Person other than such Holder, any such transfer shall be made in
accordance with applicable securities laws. The Company may
<PAGE>
require the payment of a sum sufficient to cover any stamp tax or governmental
charge imposed upon such exchange or transfer.
Section 11.3. Loss, Theft, etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the Holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If any Purchaser or any other Institutional Holder which has
satisfactory creditworthiness in the judgment of the Company is the owner of any
such lost, stolen or destroyed Note, then the affidavit of an authorized officer
of such owner, setting forth the fact of loss, theft or destruction and of its
ownership of the Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof and no further indemnity shall be
required as a condition to the execution and delivery of a new Note other than
the written agreement of such owner to indemnify the Company.
Section 11.4. Expenses; Stamp Tax Indemnity. Whether or not the Notes
and Warrants are sold, the Company will pay all expenses in connection with this
Agreement and the Warrants and the transactions contemplated hereby and thereby,
including but not limited to (i) the reasonable charges and disbursements of
Chapman and Cutler, special counsel to the Purchasers, (ii) the Purchasers'
reasonable out-of-pocket expenses, (iii) duplicating and printing costs and
charges for shipping the Notes and Warrants, adequately insured to each
Purchaser's home office or at such other place as such Purchaser may designate,
and (iv) all such expenses relating to any assumption agreement or Guaranty
Supplement (including the expenses of opinions of Counsel delivered in
connection therewith) or any amendment, waivers or consents (whether or not
consummated) pursuant to the provisions hereof, including, without limitation,
any amendments, waivers, or consents resulting from any work-out, renegotiation
or restructuring relating to the performance by the Company of its obligations
under this Agreement, the Notes and the Warrants. The Company will pay and save
each Purchaser harmless against any and all liability with respect to stamp and
other taxes (excluding income taxes), if any, which may be payable in connection
with the execution and delivery of this Agreement, the Notes or the Warrants,
whether or not any Notes or Warrants are then outstanding. The Company will also
pay, and indemnify each Purchaser against any liability for, brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement and resulting from an agreement
or alleged agreement between the Company and such Person. Each Purchaser
represents that no placement agent, broker or finder has been retained by such
Purchaser in connection with its purchase of the Notes. The obligation of the
Company to pay expenses pursuant to Section 9.9 of the Warrants shall survive
the payment of the Notes.
Section 11.5. Powers and Rights Not Waived; Remedies Cumulative. No delay
or failure on the part of any Holder in the exercise of any power or right shall
operate as a waiver thereof; nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of each Holder are cumulative
to and are not exclusive of any rights or remedies any such Holder would
otherwise have, and no waiver or consent, given or extended pursuant to
Section 6 hereof, shall extend to or affect any obligation or right not
expressly waived or consented to.
Section 11.6. Notices. All communications provided for hereunder shall be
in writing and, if to a Holder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to such Holder at its address appearing beneath its signature at
the foot of this Agreement or such other address as any Holder may designate to
the Company in writing, and if to the Company, delivered or mailed by registered
or certified mail or overnight courier, or by facsimile communication, to the
Company at the address beneath its signature at the foot of this Agreement or to
such other address as the Company may designate to the Holders in writing;
provided, however, that a notice to a Holder by overnight air courier shall only
be effective if delivered to such Holder at a street address designated for such
purpose in accordance with this Section , and a notice to such Holder by
facsimile communication shall only be effective if made by confirmed
transmission to such Holder at a telephone number designated for such purpose in
<PAGE>
accordance with this Section and promptly followed by delivery of such notice by
registered or certified mail or overnight air courier, as set forth above.
Section 11.7. Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of
each Purchaser and its successors and assigns, including each successive Holder.
Section 11.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, will survive the closing and the delivery of this Agreement, the
Notes and the Warrants.
Section 11.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision will not affect the
validity or unenforceability of any remaining portion, which remaining portion
will remain in force and effect as if this Agreement had been executed with the
invalid portion thereof eliminated and it is hereby declared the intention of
the parties hereto that they would have executed the remaining portion of this
Agreement without including therein any such part or portion which may, for any
reason, be hereafter declared invalid or unenforceable.
Section 11.10. Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with New York law.
Section 11.11. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
The execution hereof by the Purchasers shall constitute a contract among
the Company and the Purchasers for the uses and purposes hereinabove set forth.
This Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement.
PRN Holdings, Inc.
By ___________________________________
Its
PRN HOLDINGS, INC.
ONE MEDIQ PLAZA
PENNSAUKEN, NEW JERSEY 08110
ATTENTION: CHIEF FINANCIAL OFFICER
TELEFACSIMILE: 609-486-4725
<PAGE>
Accepted as of September 30, 1994:
Massachusetts Mutual Life Insurance
Company
By ___________________________________
Its
<TABLE>
<S> <C> <C>
PURCHASE ORIGINAL APPLICABLE PRINCIPAL AMOUNT
PRICE OF PERCENTAGE OF OF NOTES TO BE
WARRANT WARRANT PURCHASED
$ 1.75% $1,750,000
</TABLE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as PRN
Holdings, Inc., $10,000,000 Senior Subordinated Notes due 2004, PPN 69357@ AA 0,
principal or interest') to:
Chemical Bank (ABA #021-000128)
Institutional Client Services
4 New York Plaza, 4th Floor
New York, New York 10004-2413
for credit to: Massachusetts Mutual Life Insurance Company
IFM Traditional Account Number 321-029-852
with telephone advice to the Securities Custody and Collection Department of
Massachusetts Mutual Life Insurance Company at (413) 788-8411, Facsimile: (413)
744-6263.
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate actions, to be addressed
Attention: Securities Custody and Collection Department, E381.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1590850
<PAGE>
<TABLE>
<S> <C> <C>
PURCHASE ORIGINAL APPLICABLE PRINCIPAL AMOUNT
PRICE OF PERCENTAGE OF OF NOTES TO BE
WARRANT WARRANT PURCHASED
$ 1% $1,000,000
</TABLE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as PRN
Holdings, Inc., $10,000,000 Senior Subordinated Notes due 2004, PPN 69357@ AA 0,
principal or interest') to:
Chemical Bank (ABA #021-000128)
Institutional Client Services
4 New York Plaza, 4th Floor
New York, New York 10004-2413
for credit to: Massachusetts Mutual Life Insurance Company
IFM Traditional Account Number 321-029-852
with telephone advice to the Securities Custody and Collection Department of
Massachusetts Mutual Life Insurance Company at (413) 788-8411, Facsimile: (413)
744-6263.
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate actions, to be addressed
Attention: Securities Custody and Collection Department, E381.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1590850
<PAGE>
<TABLE>
<S> <C> <C>
PURCHASE ORIGINAL APPLICABLE PRINCIPAL AMOUNT
PRICE OF PERCENTAGE OF OF NOTES TO BE
WARRANT WARRANT PURCHASED
$ 2.75% $2,750,000
</TABLE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as PRN
Holdings, Inc., $10,000,000 Senior Subordinated Notes due 2004, PPN 69357@ AA 0,
principal or interest') to:
Chemical Bank (ABA #021-000128)
Institutional Client Services
4 New York Plaza, 4th Floor
New York, New York 10004-2413
for credit to: Massachusetts Mutual Life Insurance Company
IFM Traditional Account Number 321-029-852
with telephone advice to the Securities Custody and Collection Department of
Massachusetts Mutual Life Insurance Company at (413) 788-8411, Facsimile: (413)
744-6263.
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate actions, to be addressed
Attention: Securities Custody and Collection Department, E381.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1590850
<PAGE>
Accepted as of September 30, 1994:
This Agreement is executed on behalf of MassMutual Participation Investors,
organized under a Declaration of Trust, dated April 7, 1988, as amended from
time to time. The obligations of such trust are not personally binding upon, nor
shall resort be had to the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but the Trust's assets and property
only shall be bound.
MassMutual Participation Investors
By ___________________________________
Its Vice President
<TABLE>
<S> <C> <C>
PURCHASE ORIGINAL APPLICABLE PRINCIPAL AMOUNT
PRICE OF PERCENTAGE OF OF NOTES TO BE
WARRANT WARRANT PURCHASED
$ 1.5% $1,500,000
</TABLE>
MASSMUTUAL PARTICIPATION INVESTORS
C/O MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Divisions
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as PRN
Holdings, Inc., $10,000,000 Senior Subordinated Notes due 2004, PPN 69357@ AA 0,
principal or interest') to:
MassMutual Participation Investors
c/o The Bank of New York (ABA #021-000018)
BNF IOC 566 Security Income Collection
Attention: P&I Department
With telephone advice to the Treasurer of MassMutual Participation Investors at
(413) 788-8411; Facsimile: (413) 730-6263
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment,
to be addressed Attention: Securities Custody and Collection Department.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-3025730
<PAGE>
Accepted as of September 30, 1994:
This Agreement is executed on behalf of MassMutual Corporate Investors,
organized under a Declaration of Trust, dated September 13, 1985, as amended
from time to time. The obligations of such trust are not personally binding
upon, nor shall resort be had to the property of, any of the trustees,
shareholders, officers, employees or agents of such trust, but the trust
property only shall be bound.
MassMutual Corporate Investors
By ___________________________________
Its Vice President
<TABLE>
<S> <C> <C>
PURCHASE ORIGINAL APPLICABLE PRINCIPAL AMOUNT
PRICE OF PERCENTAGE OF OF NOTES TO BE
WARRANT WARRANT PURCHASED
$ 3% $3,000,000
</TABLE>
MASSMUTUAL CORPORATE INVESTORS
C/O MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Divisions
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as PRN
Holdings, Inc., $10,000,000 Senior Subordinated Notes due 2004, PPN 69357@ AA 0,
principal or interest') to:
MassMutual Corporate Investors
c/o The Bank of New York (ABA #021-000018)
BNF IOC 566 Security Income Collection
Attention: P&I Department
With telephone advice to the Treasurer of MassMutual Corporate Investors at
(413) 788-8411; Facsimile: (413) 730-6263.
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment,
to be addressed Attention: Securities Custody and Collection Department.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-2483041
<PAGE>
<TABLE>
<S> <C>
PRINCIPAL AMOUNT
OF NOTES TO BE
NAME OF PURCHASERS PURCHASED
Massachusetts Mutual Life Insurance Company $5,500,000
MassMutual Participation Investors $1,500,000
MassMutual Corporate Investors $3,000,000
----------------
Total $10,000,000
----------------
----------------
</TABLE>
<PAGE>
INVESTMENTS OUTSTANDING AS OF SEPTEMBER 30, 1994
None
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER APPLICABLE
SECURITIES LAWS OR IF AN EXEMPTION THEREFROM IS AVAILABLE.
PRN HOLDINGS, INC.
Senior Subordinated Note
Due October 1, 2004
PPN 69357@ AA O
No. R- __________, 19__
$
PRN HOLDINGS, INC., a Delaware corporation (the 'Company'), for value
received, hereby promises to pay to
or registered assigns
on the first day of October, 2004
the principal amount of
D O L L A R S ($ )
and to pay interest (computed on the basis of a 360-day year and actual days
elapsed) on the principal amount from time to time remaining unpaid hereon at
the rate of 10.00% per annum (subject to adjustment as set forth below) from the
date hereof until maturity, payable semiannually on the first day of each April
and October in each year (commencing on April 1, 1995), and at maturity. The
Company agrees that the interest rate borne by the Notes shall be increased upon
the occurrence of any of the following: (i) if the Company shall deliver an OID
Adjustment Notice (as such term is defined in the Note Agreement referred to
below) then the interest rate borne by this Note shall be increased by 25 basis
points (.25%) per annum effective as of September 30, 1994 and (ii) if an IPO
Adjustment Date (as such term is defined in the Note Agreement referred to
below) shall occur then the interest rate borne by this Note shall be increased
by 300 basis points (3.00%) per annum effective as of the IPO Adjustment Date.
The Company agrees to pay interest on overdue principal and premium, if any, and
(to the extent legally enforceable) on any overdue installment of interest, at
the Overdue Rate (as defined in the Note Agreement referred to below) after the
due date, whether by acceleration or otherwise, until paid. Both the principal
hereof and interest hereon are payable at the principal office of Congress
Financial Corporation in New York, New York, in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts.
This Note is one of the Senior Subordinated Notes of the Company in the
aggregate principal amount of $10,000,000 issued or to be issued under and
pursuant to the terms and provisions of the Note Agreement, dated as of
September 30, 1994, entered into by the Company with the original Purchasers
therein referred to and this Note and the holder hereof are entitled equally and
ratably with the holders of all other Notes outstanding under
EXHIBIT A
(to Note Agreement)
<PAGE>
the Note Agreement to all the benefits provided for thereby or referred to
therein, to which Note Agreement reference is hereby made for the statement
thereof.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates and certain prepayments are
required to be made thereon, all in the events, on the terms and in the manner
and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
Section 2 of the Note Agreement.
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY, INCLUDING THE PRINCIPAL
AND INTEREST, SHALL AT ALL TIMES REMAIN JUNIOR AND SUBORDINATE TO ANY AND ALL
SENIOR DEBT AS DEFINED IN THE SUBORDINATION AGREEMENT DATED AS OF SEPTEMBER 30,
1994 AMONG THE COMPANY, CONGRESS FINANCIAL CORPORATION AND THE PURCHASERS AND
INCLUDING ANY SUCCESSOR SUBORDINATION AGREEMENT ENTERED INTO BETWEEN THE
COMPANY, THE HOLDERS OF 66-2/3% IN PRINCIPAL AMOUNT OF THE NOTES AT THE TIME
OUTSTANDING AND ANY FINANCIAL INSTITUTION WHICH IS PROVIDING FINANCING PURSUANT
TO THE CREDIT AGREEMENT (AS DEFINED IN THE NOTE AGREEMENT).
<PAGE>
The payment of principal, interest and premium, if any, on the Notes has
been unconditionally guaranteed by a Subsidiary of the Company under and
pursuant to the Senior Subordinated Subsidiary Guaranty Agreement dated as of
September 30, 1994.
This Note may be surrendered for cancellation in payment to the Company of
the aggregate purchase price (or portion thereof) for shares of Common Stock of
the Company pursuant to the Warrants referred to in Section 1.3 of the Note
Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
PRN Holdings, Inc.
By ___________________________________
Its
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Purchaser as follows:
1. Subsidiaries. Annex A attached hereto states the name of each of the
Company's Subsidiaries, its jurisdiction of incorporation and the percentage of
its Voting Stock owned by the Company and/or its Subsidiaries. The Company and
each Subsidiary has good and marketable title to all of the shares it purports
to own of the stock of each Subsidiary, free and clear in each case of any lien
except for liens created pursuant to the Credit Agreement. All such shares have
been duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each Subsidiary,
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary licenses
and permits to own and operate its properties and to carry on its business
as now conducted and as presently proposed to be conducted except where the
failure to have any such licenses or permits would not materially and
adversely affect the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole; and
(c) is duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it makes
such licensing or qualification necessary except where the failure to be so
licensed or qualified would not materially and adversely affect the
condition, financial or otherwise, of the Company and such Subsidiaries
taken as a whole.
3. Authorized Capital Stock. The authorized capital stock of the Company
consists of 2,000 shares of Common Stock, $.01 per share par value, of which
1,000 shares are outstanding on the date hereof and all of said outstanding
shares are duly authorized, validly issued, fully paid and non-assessable. The
Company does not have outstanding any warrants, options, Convertible Securities
or other rights for the purchase or acquisition of shares of its Common Stock.
The Board of Directors of the Company has duly reserved for issuance upon
exercise of the Warrants 10% of the Pro Forma Shares (as defined in the Warrant)
of Common Stock. No shareholder of the Company or any other Person is entitled
to preemptive or similar rights with respect to the shares of Common Stock which
are issuable upon exercise of the Warrants and, if and when issued upon exercise
of the Warrants in accordance with the provisions thereof, such shares will be
validly issued, fully paid and non-assessable shares.
4. Financial Statements. (a) The balance sheet of Old PRN in each of the
fiscal years 1991 through 1993, inclusive, and the related statements of income,
shareholders' equity and changes in financial position or cash flows for the
fiscal years ended on said
EXHIBIT C
(to Note Agreement)
<PAGE>
dates, each accompanied by a report thereon containing an opinion unqualified
as to scope limitations imposed by Old PRN and otherwise without qualification
by Deloitte & Touche (or its predecessors) have been prepared in accordance
with GAAP consistently applied except as therein noted, are correct and
complete in all material respects and present fairly the financial position
of Old PRN as of such dates and the results of its operations and changes
in its financial position or cash flows for such periods. The unaudited
balance sheet of Old PRN as of June 30, 1994 and the related statements
of income and retained earnings and cash flows for the nine-month period
then ended have been prepared in accordance with GAAP consistently applied,
are correct and complete in all material respects and present fairly the
financial position of Old PRN as of such date and the results of its
operations and changes in its financial position or cash flows for such periods
subject to year-end audit adjustments.
(b) Since June 30, 1994, there has been no change in the condition,
financial or otherwise, of Old PRN as shown on the balance sheet as of such
date except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse to Old PRN.
5. Full Disclosure. Neither the financial statements referred to in
paragraph 4, nor the representations and warranties set forth herein, nor any
other written statement furnished to any Purchaser by or on behalf of the
Company in connection with the negotiation of the sale of the Notes and
Warrants, contains any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. To the best knowledge of the Company, there is no fact peculiar to
the Company or its Subsidiaries which the Company has not disclosed to each
Purchaser in writing which materially affects adversely or, so far as the
Company can now reasonably foresee, will materially affect adversely the
properties, business, prospects, profits or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
6. Sale is Legal and Authorized. The sale of the Notes and Warrants and
compliance by the Company with all of the provisions of the Agreement, the Notes
and Warrants:
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order of any
court or governmental authority or agency and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under the Certificate of Incorporation or Bylaws of
the Company or any indenture or other agreement or instrument to which the
Company or the Parent is a party or by which it may be bound or result in
the imposition of any liens or encumbrances on any property of the Company;
and
(c) have been duly authorized by proper corporate action on the part
of the Company (no action by the shareholders of the Company being required
by law, by the Certificate of Incorporation or Bylaws of the Company or
otherwise), executed and delivered by the Company and the Agreement, the
Notes and the Warrants constitute the legal, valid and binding obligations,
contracts and agreements of the Company enforceable in accordance with
their respective terms.
7. Indebtedness. Annex B attached hereto correctly describes all Debt and
Long-Term Leases of the Company and its Subsidiaries outstanding on September
30, 1994.
8. Governmental Consent. No approval, consent or withholding of objection
on the part of any regulatory body, state, Federal or local, is necessary in
connection with the execution and delivery by the Company of the Agreement, the
Notes or the Warrants or compliance by the Company with any of the provisions of
the Agreement, the Notes or the Warrants.
9. Use of Proceeds. The net proceeds from the sale of the Notes and
Warrants will be used by the Company to make a capital contribution to New PRN
in the amount of $10,000,000 for the purpose of enabling New PRN to consummate
the acquisition described in the Asset Purchase Agreement. None of the
transactions contemplated in the Agreement (including, without limitation
thereof, the use of proceeds from the issuance of the Notes and Warrants) will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulation issued pursuant thereto, including, without
limitation, Regulations G, T and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary
owns or intends to carry or purchase any 'margin stock' within the meaning of
said Regulation G. None of the proceeds from the sale of the Notes or the
Warrants will be used to purchase, or refinance any borrowing the
<PAGE>
proceeds of which were used to purchase, any 'security' within the meaning of
the Securities Exchange Act of 1934, as amended.
10. Private Offering. Neither the Company, directly or indirectly, nor any
agent on its behalf has offered or will offer the Notes or Warrants or any
similar Security to or has solicited or will solicit an offer to acquire the
Notes or Warrants or any similar Security from or has otherwise approached or
negotiated or will approach or negotiate in respect of the Notes or Warrants or
any similar Security with any person other than the Purchasers. Neither the
Company, directly or indirectly, nor any agent on its behalf has offered or will
offer the Notes or Warrants or any similar Security to or has solicited or will
solicit an offer to acquire the Notes or Warrants or any similar Security from
any person so as to bring the issuance and sale of the Notes and Warrants within
the provisions of Section 5 of the Securities Act.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Funded Debt or Current Debt or in default under any instrument
or instruments or agreements under and subject to which any Funded Debt or
Current Debt has been issued and no event has occurred and is continuing under
the provisions of any such instrument or agreement which with the lapse of time
or the giving of notice, or both, would constitute an event of default
thereunder.
12. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or its
Subsidiaries in any court or before any governmental authority or arbitration
board or tribunal which involve the reasonable probability of materially and
adversely affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Company or its Subsidiaries or which might
affect the ability of the Company to enter into the Agreement or to sell the
Notes or Warrants. Neither the Company nor any Subsidiary is in default with
respect to any order of any court or governmental authority or arbitration board
or tribunal.
13. Title to Properties. The Company and each Subsidiary has good
title in fee simple (or its equivalent under applicable law) to all the real
property and has good title to all the other property it purports to own,
including that reflected in the most recent balance sheet referred to in
paragraph 5, except as sold or otherwise disposed of in the ordinary course of
business and liens securing Debt described in Annex B to Exhibit B.
14. Patents and Trademarks. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks, copyrights,
licenses and rights with respect to the foregoing which are material to the
present and planned future conduct of its business, without any known conflict
with the rights of others.
15. Taxes. All tax returns required to be filed by the Company or any
Subsidiary with the Federal government and with any other jurisdiction have, in
fact, been filed. All taxes, assessments, fees and other governmental charges
upon the Company or any Subsidiary or upon any of their respective properties,
income or franchises, which are shown to be due and payable in such returns have
been paid. For all taxable years ending on or before September 30, 1988, the
Federal income tax liability of the Company and its Subsidiaries has been
satisfied and either the period of limitations on assessment of additional
Federal income tax has expired or the Company and its Subsidiaries have entered
into an agreement with the Internal Revenue Service closing conclusively the
total tax liability for the taxable year. The Company does not know of any
proposed additional tax assessment against it for which adequate provision has
not been made on its accounts and no material controversy in respect of
additional Federal or state income taxes due since said date is pending or to
the knowledge of the Company threatened. The provision for taxes on the books of
the Company is adequate for all open years, and for its current fiscal period.
16. ERISA. Each Plan complies in all material respects with all applicable
statutes and governmental rules and regulations, and (a) no Reportable Event has
occurred and is continuing with respect to any Plan, (b) neither the Company nor
any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or
instituted steps to do so, and (c) no steps have been instituted to terminate
any Plan. No condition exists or event or transaction has occurred in connection
with any Plan which could result in the incurrence by the Company or any ERISA
Affiliate of any material liability, fine or penalty. No Plan maintained by the
Company or any ERISA Affiliate, nor any trust created thereunder,
<PAGE>
has incurred any 'accumulated funding deficiency' as defined in Section 302 of
ERISA nor does the present value of all benefits vested under all Plans exceed,
as of the last annual valuation date, the value of the assets of the Plans
allocable to such vested benefits. Neither the Company nor any ERISA Affiliate
has any contingent liability with respect to any post-retirement 'welfare
benefit plan' (as such term is defined in ERISA) except as has been disclosed to
the Purchasers.
17. Compliance with Law. Neither the Company nor any Subsidiary (a) is in
violation of any law, ordinance, franchise, governmental rule or regulation to
which it is subject or (b) has failed to obtain any license, permit, franchise
or other governmental authorization necessary to the ownership of its property
or to the conduct of its business, which violation or failure to obtain would
materially adversely affect the business, prospects, profits, properties or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, or impair the ability of the Company to perform its obligations
contained in the Agreement, the Notes or the Warrants. Neither the Company nor
any Subsidiary is in default with respect to any order of any court or
governmental authority or arbitration board or tribunal.
18. Compliance with Environmental Laws. The Company is not in violation of
any applicable Federal, state, or local laws, statutes, rules, regulations or
ordinances relating to public health, safety or the environment, including,
without limitation, relating to releases, discharges, emissions or disposals to
air, water, land or ground water, to the withdrawal or use of ground water, to
the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or
urea formaldehyde, to the treatment, storage, disposal or management of
hazardous substances (including, without limitation, petroleum, crude oil or any
fraction thereof, or other hydrocarbons), pollutants or contaminants, to
exposure to toxic, hazardous or other controlled, prohibited or regulated
substances which violation could have a material adverse effect on the business,
prospects, profits, properties or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole. The Company does not know of any
liability or class of liability of the Company or any Subsidiary under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.).
19. Solvency. On the Closing Date, after giving effect to the transactions
contemplated by the Note Agreement, (a) the present fair saleable value of the
assets of the Company on a going concern basis is in excess of the total amount
of its liabilities (including for purposes of this definition all liabilities,
whether or not reflected on a balance sheet prepared in accordance with GAAP,
and whether direct or indirect, fixed or contingent, secured or unsecured,
disputed or undisputed); (b) the Company will be able to pay its debts and
obligations as they mature in the ordinary course of its business as proposed to
be conducted; and (c) the Company does not have unreasonably small capital to
carry out its business as proposed to be conducted. For the purpose of this
paragraph 19, 'present fair saleable value' means the value which would be
realized from an interested purchaser aware of all relevant information relating
to the assets or group of assets being sold and who is willing to purchase under
ordinary selling conditions in an existing and not theoretical market if the
assets or group of assets are disposed of within a period of six months to one
year.
<PAGE>
SUBSIDIARIES OF THE COMPANY
<TABLE>
<S> <C> <C>
PERCENTAGE OF VOTING
JURISDICTION OF STOCK OWNED BY COMPANY
NAME OF SUBSIDIARY INCORPORATION AND EACH OTHER SUBSIDIARY
Mediq/PRN Life Delaware 100%
Support Services
Mediq/PRN Life Delaware 100%
Support Services-I, Inc.
</TABLE>
<PAGE>
DESCRIPTION OF DEBT AND LEASES
AS OF AUGUST 31, 1994
<TABLE>
<S> <C>
PRINCIPAL
1. CURRENT DEBT BALANCE
Congress Financial - Line of Credit $ 948,743
----------------
Total Availability $ 8,000,000
2. FUNDED DEBT
Senior Secured Notes $ 100,000,000
Bank Hapoalim 1,071,262
Wm. & Sus. White, and M. Melchert 2,140,851
Mellon Bank--Mortgage 635,702
----------------
$ 103,847,815
----------------
----------------
3. CAPITALIZED LEASES
Amplicon $ 27,356
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 5,651
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 4,739
Bankers Leasing Assoc. 336
Dana Comm. Cr--Ohio 177,770
Dana Comm. Cr--Ohio 43,116
Dana Comm. Cr--Ohio 43,305
Dana Comm. Cr--Troy, MI 101,766
Dana Comm. Cr--Troy, MI 11,894
</TABLE>
ANNEX B
(to Exhibit C)
<PAGE>
<TABLE>
<S> <C>
GE Capital #1 164,613
GE Medical/Chrysler $ 80,235
GE Medical/Chrysler 81,490
GE Medical/Chrysler 29,483
GE Medical/Chrysler 28,661
GE Medical/Chrysler 9,543
GE Medical/Chrysler 364,521
Winthrop 9,566
Charter--ITT 1,342,791
Charter--ITT 1,178,670
Haworth 72,144
Aloha 786
Aloha 768
Sharp 1,060
Capelco 1,361,487
Helier 901,020
</TABLE>
<PAGE>
<TABLE>
<S> <C>
NYNEX 195,156
NYNEX 129,166
NYNEX 2,270,271
NYNEX 418,725
Execulease 489,244
----------------
$ 9,640,662
----------------
----------------
4. LONG-TERM LEASES
THE COMPANY AND ITS SUBSIDIARIES HAVE CERTAIN LONG-TERM LEASES FOR VEHICLES AND EQUIPMENT WITH
AN AGGREGATE MONTHLY RENTAL OF APPROXIMATELY $431,000 AS OF AUGUST 31, 1994.
</TABLE>
<PAGE>
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 12.2 of the Note Agreement, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good standing
under the laws of the State of Delaware, and has the corporate power and
the corporate authority to execute and deliver the Note Agreement and
Warrants and to issue the Notes, and to issue its shares of Common Stock
upon exercise of the Warrants.
2. The Note Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless
of whether the application of such principles is considered in a proceeding
in equity or at law).
3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, and the Notes being delivered on the
date hereof have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors'
rights generally and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
4. The Warrants have been duly authorized by proper corporate action
on the part of the Company, have been duly executed by authorized officers
of the Company and delivered and constitute the legal, valid and binding
contracts and agreements of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general principles
of equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law), provided that no opinion
is expressed as to whether the enforcement of the indemnity provisions of
Section 9.9 of the Warrants may be limited under certain circumstances by
public policy considerations.
5. The issuance, sale and delivery of the Notes and Warrants under the
circumstances contemplated by the Note Agreement do not, under existing
law, require the registration of the Notes or Warrants under the Securities
Act, or the qualification of an indenture under the Trust Indenture Act of
1939, as amended.
EXHIBIT D
(to Note Agreement)
<PAGE>
The opinion of Chapman and Cutler shall also state that the opinion of Alan
S. Einhorn and Steve J. Feder is satisfactory in scope and form to Chapman and
Cutler and that, in their opinion, the Purchasers are justified in relying
thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler
may rely, as to matters referred to in paragraph 1, solely upon an examination
of the Certificate of Incorporation certified by, and a certificate of good
standing of the Company from, the Secretary of State of the State of Delaware,
the Bylaws of the Company and the general business corporation law of the State
of Delaware.
With respect to matters of fact upon which such opinion is based, Chapman
and Cutler may rely on appropriate certificates of public officials and officers
of the Company and upon representations of the Company and the Purchasers
delivered in connection with the issuance and sale of the Notes.
DESCRIPTION OF CLOSING OPINION OF COUNSEL
TO THE COMPANY
The closing opinion of Alan S. Einhorn and Steve J. Feder, Corporate
Counsel for the Company, which is called for by Section 12.2 of the Note
Agreement, shall be dated the Closing Date and addressed to the Purchasers,
shall be satisfactory in scope and form to the Purchasers and shall be to the
effect that:
<PAGE>
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power and the corporate authority to execute and perform the Note
Agreement and Warrants and to issue the Notes and has the full corporate
power and the corporate authority to conduct the activities in which it is
now engaged and is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business transacted
by it makes such licensing or qualification necessary.
2. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation,
has the full corporate power and authority to execute and perform the
Subsidiary Guaranty and has the full corporate power and authority to
conduct the activities in which it is now engaged and is duly licensed or
qualified and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the
business transacted by it makes such licensing or qualification necessary
except where the failure to be so licensed or qualified would not
materially and adversely affect the condition, financial or otherwise, of
the Company and such Subsidiaries taken as a whole. All of the issued and
outstanding shares of capital stock of each such Subsidiary have been duly
issued, are fully paid and non-assessable and are owned by the Company.
3. The Note Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless
of whether the application of such principles is considered in a proceeding
in equity or at law).
4. The Warrants have been duly authorized by proper corporate action
on the part of the Company, have been duly executed by authorized officers
of the Company and delivered and constitute the legal, valid and binding
contracts and agreements of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general principles
of equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law), provided that no opinion
is expressed as to whether the enforcement of the indemnity
EXHIBIT E
(to Note Agreement)
<PAGE>
provisions of Section 9.8 of the Warrants may be limited under certain
circumstances by public policy considerations.
5. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, and the Notes being delivered on the
date hereof have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
6. The Subsidiary Guaranty has been duly authorized by all necessary
corporate action on the part of New PRN which is named as a party thereto,
has been duly executed and delivered by New PRN and constitutes the legal,
valid and binding contract and agreement of New PRN enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights generally, and
general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
7. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal
or state, is necessary in connection with the execution and delivery of the
Note Agreement, the Notes or the Warrants.
8. The issuance and sale of the Notes and Warrants and the execution,
delivery and performance by the Company of the Note Agreement and Warrants
do not conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation or imposition of any
lien upon any of the property of the Company pursuant to the provisions of
the
<PAGE>
Certificate of Incorporation or Bylaws of the Company or any agreement or
other instrument known to such counsel to which the Company is a party or
by which the Company may be bound.
9. The issuance, sale and delivery of the Notes and Warrants under the
circumstances contemplated by the Note Agreement do not, under existing
law, require the registration of the Notes or Warrants under the Securities
Act of 1933, as amended, or the qualification of an indenture under the
Trust Indenture Act of 1939, as amended.
10. The Company has duly authorized Common Stock consisting of 2,000
shares of Common Stock, $.01 per share par value, of which 1,000 shares
have been issued and are outstanding. All such outstanding shares have been
duly and validly issued and are fully paid and non-assessable.
11. The Underlying Shares when issued in accordance with the terms of
the Warrants will be duly authorized, fully paid, validly issued and
nonassessable shares of the Company.
12. None of the transactions contemplated by the Note Agreement or
Warrants including, without limitation, the use of the proceeds from the
issuance of the Notes and Warrants will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any
regulation issued pursuant thereto, or Regulations G, T and X of the Board
of Governors of the Federal Reserve System, 12 C.F.R., Chap. II.
The opinion of such corporate counsel shall cover such other matters
relating to the sale of the Notes and Warrants as the Purchasers may
reasonably request. With respect to matters of fact on which such opinion
is based, such counsel shall be entitled to rely on appropriate certificates
of public officials and officers of the Company.
<PAGE>
- - --------------------------------------------------------------------------------
This Warrant and the Common Stock issuable upon exercise hereof have not been
registered or qualified for sale under the Securities Act of 1933, as amended,
or any State securities law and may not be sold or transferred in the absence of
such registration or an exemption therefrom under said Act or any such State
laws which may be applicable and are transferable only in accordance with the
provisions herein.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
PRN HOLDINGS, INC.
Void after October 1, 2004
No. R-1 2.75% ORIGINAL APPLICABLE
PERCENTAGE
2.75% APPLICABLE PERCENTAGE
- - --------------------------------------------------------------------------------
PPN 69357@11 0
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
SECTION HEADING PAGE
- - ------------------ --------------------------------------------------------------------------------------- ---------
Section 1 Exercise of Warrant.................................................................... 2
Section 2 Reservation of Common Stock............................................................ 2
Section 3 Mergers, Consolidations, Sales......................................................... 2
Section 4 Dissolution or Liquidation............................................................. 3
Section 5 Notice of Extraordinary Dividends...................................................... 3
Section 6 Fractional Shares...................................................................... 4
Section 8 Closing of Transfer Books.............................................................. 4
Section 9 Restrictions on Transferability of Warrants and Shares; Compliance with Laws........... 4
Section 9.1 In General............................................................................. 4
Section 9.2 Restrictive Legends.................................................................... 5
Section 9.3 Notice of Proposed Transfer; Registration Not Required................................. 5
Section 9.4 Required Registration and Notice....................................................... 6
Section 9.5 Conditions to Required Registration.................................................... 7
Section 9.6 Incidental Registration................................................................ 8
Section 9.7 Limitations............................................................................ 8
Section 9.8 Expenses............................................................................... 9
Section 9.9 Indemnification........................................................................ 10
Section 9.10 Miscellaneous.......................................................................... 11
Section 10 Partial Exercise....................................................................... 11
Section 11 Definitions............................................................................ 12
Section 12 Lost, Stolen Warrants, etc............................................................. 13
Section 13 Warrant Holder Not Shareholder......................................................... 14
Section 14 Notices................................................................................ 14
Section 15 Severability........................................................................... 14
Section 16 Index and Captions..................................................................... 14
</TABLE>
<PAGE>
This Warrant and the Common Stock issuable upon exercise hereof have not been
registered or qualified for sale under the Securities Act of 1933, as amended,
or any State securities law and may not be sold or transferred in the absence of
such registration or an exemption therefrom under said Act or any such State
laws which may be applicable and are transferable only in accordance with the
provisions herein.
No. R-1 2.75% ORIGINAL APPLICABLE
PERCENTAGE
2.75% APPLICABLE PERCENTAGE
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
PRN HOLDINGS, INC.
Void after October 1, 2004
This is to certify that, for value received and subject to the provisions
hereinafter set forth,
Massachusetts Mutual Life Insurance Company
or assigns,
is entitled to purchase from PRN Holdings, Inc., a Delaware corporation (the
'Company'), at any time to and including 5 P.M. E.D.T. October 1, 2004 (the
'Expiration Date'), Common Stock of the Company of the par value of $.01 per
share, on the terms and conditions hereinafter set forth.
The exercise price for each share of Common Stock to be issued to the
holder of this Warrant upon the exercise of this Warrant is $.01 per share and
shall not be subject to adjustment. The number of shares of Common Stock to be
received by the holder of this Warrant upon the exercise of this Warrant in
whole equals the number of Pro Forma Shares determined as of the date of
exercise of this Warrant multiplied by the Original Applicable Percentage of
this Warrant (or if this Warrant has been previously exercised in part,
multiplied by the Applicable Percentage for this Warrant then in effect). The
number of shares of Common Stock to be received by the holder of this Warrant
upon the exercise in part of this Warrant equals the number of Pro Forma Shares
determined as of the date of exercise of this Warrant multiplied by the portion
of the Original Applicable Percentage of this Warrant (or if this Warrant has
been previously exercised in part, multiplied by the Applicable Percentage for
this Warrant then in effect) designated by the holder of this Warrant.
The terms which are capitalized herein shall have the meanings specified
in Section 11 unless the context shall otherwise require.
SECTION 1. EXERCISE OF WARRANT.
Subject to the conditions hereinafter set forth, prior to the Expiration
Date this Warrant may be exercised (i) for all shares of Common Stock which may
then be purchased hereunder, and (ii) for any part of the shares of Common Stock
which may then be purchased hereunder on not more than two occasions. Upon any
such exercise, the holder shall surrender this Warrant (with the subscription
form at the end hereof duly executed) at the principal office of the Company in
Pennsauken, New Jersey, and shall pay to the Company the price per share for the
shares so purchased in funds current in Pennsauken, New Jersey. In the event the
number of Underlying Shares or Restricted Shares which the holder of this
Warrant is permitted to register pursuant to Section 9.4 or 9.6 is reduced in
accordance with the provisions of Section 9.7, any partial exercise resulting
from such reduction shall not be included for purposes of the limitation on the
right to exercise this Warrant set forth in the preceding sentence. If this
Warrant is exercised in respect of less than all of the shares of said Common
Stock at the time purchasable hereunder, the holder hereof shall be entitled to
receive a new Warrant covering the Applicable Percentage of Common Stock in
respect of which this Warrant shall not have been exercised; provided, however,
that this Warrant and all rights and options hereunder shall expire on the
Expiration Date, and shall be wholly null and void to the extent this Warrant is
not exercised before it expires.
SECTION 2. RESERVATION OF COMMON STOCK.
<PAGE>
The Company covenants and agrees that at all times prior to the Expiration
Date it will have authorized, and in reserve, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by the
unexercised portion of this Warrant.
SECTION 3. MERGERS, CONSOLIDATIONS, SALES.
In the case of any consolidation or merger of the Company with another
entity, or the sale of all or substantially all of its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable hereunder
such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place; provided that if securities
which are not traded on a National Securities Exchange are issued to holders of
Common Stock in any such transaction (excluding a merger in which the Company
shall be the survivor) then at the election of the holder in lieu of such
securities the holder hereof shall be entitled to receive cash equal to the fair
market value of the securities which such Holder is entitled to receive. The
fair market value of such securities shall be determined by a nationally
recognized investment banking firm reasonably satisfactory to the holder. The
cost of any such determination shall be borne by the Company. The Company shall
not effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor entity (if other
than the Company) resulting from such consolidation or merger or the entity
purchasing such assets shall assume by written instrument executed and mailed or
delivered to the holder of this Warrant, the obligation to deliver to such
holder such shares of stock, securities, cash or other assets as, in accordance
with the foregoing provisions, such holder may be entitled to receive.
SECTION 4. DISSOLUTION OR LIQUIDATION.
In the event of any proposed distribution of the assets of the Company in
dissolution or liquidation except under circumstances when the foregoing Section
3 shall be applicable, the Company shall mail notice thereof to the holder of
this Warrant and shall make no distribution to shareholders until the expiration
of 20 days from the date of mailing of the aforesaid notice and, in any such
case, the holder of this Warrant may exercise the purchase rights with respect
to this Warrant within 20 days from the date of mailing such notice and all
rights herein granted not so exercised within such 20day period shall thereafter
become null and void.
SECTION 5. NOTICE OF EXTRAORDINARY DIVIDENDS
If the Board of Directors of the Company shall declare any dividend or
other distribution on its Common Stock except out of earned surplus or by way of
a stock dividend payable on its Common Stock, the Company shall mail notice
thereof to the holder of this Warrant not less than 20 days prior to the record
date fixed for determining shareholders entitled to participate in such dividend
or other distribution and the holder of this Warrant shall not participate in
such dividend or other distribution or be entitled to any rights on account or
as a result thereof unless and to the extent that this Warrant is exercised
prior to such record date. The provisions of this paragraph shall not apply to
distributions made in connection with transactions covered by Section 3.
SECTION 6. FRACTIONAL SHARES
In the event that any exercise of this Warrant would result in the issuance
by the Company of a fractional share of Common Stock, the Company shall pay to
the holder of this Warrant upon such exercise an amount in cash equal to the
market price, as determined by the Company, of one whole share of the Common
Stock multiplied by such fractional share.
SECTION 7. FULLY PAID STOCK; TAXES.
The Company covenants and agrees that the shares of Common Stock to be
delivered on the exercise of the purchase rights herein provided for shall, at
the time of such delivery, be validly issued and be fully paid and
nonassessable. The Company further covenants and agrees that it will pay when
due and payable any and all Federal and State transfer, stamp excise or similar
taxes which may be
<PAGE>
payable in respect of this Warrant or any Common Stock upon the exercise of the
purchase rights herein provided for pursuant to the provisions hereof. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the transfer and delivery of Common Stock
(and the certificates evidencing ownership thereof) in any name other than that
of the holder exercising this Warrant, and any such tax shall be paid by such
holder at the time of such transfer.
SECTION 8. CLOSING OF TRANSFER BOOKS.
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company for its Common Stock may be closed.
The Company shall not be required, however, to deliver certificates of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered promptly upon the opening thereof, or as soon as practicable
thereafter.
SECTION 9. RESTRICTIONS ON TRANSFERABILITY OF WARRANTS AND SHARES; COMPLIANCE
WITH LAWS.
Section 9.1. In General. This Warrant and the Common Stock issued upon the
exercise hereof shall not be transferable except upon the conditions hereinafter
specified, which conditions are intended to insure compliance with the
provisions of the Securities Act of 1933 (or any similar Federal statute at the
time in effect) and any applicable State securities laws.
Section 9.2. Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant.
Each certificate for shares of Common Stock initially issued upon the
exercise of any Warrant and each certificate for shares of Common Stock issued
to a subsequent transferee of such certificate shall, unless otherwise
permitted by the provisions of this Section 9.2, bear on the face thereof a
legend reading substantially as follows:
'The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
State securities laws and may not be sold or transferred in the
absence of such registration or an exemption therefrom under
said Act and any such State laws which may be applicable and are
transferable only upon the conditions specified in the Warrant
pursuant to which such shares were issued.'
In the event that a registration statement covering the Underlying Shares
or the Restricted Stock shall become effective under the Securities Act and
under any applicable State securities laws or in the event that the Company
shall receive an opinion of its counsel that, in the opinion of such counsel,
such legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of the exemption afforded by Rule 144(k)
of the Regulations of the Commission), the Company shall, or shall instruct its
transfer agents and registrars to, remove such legend from the certificates
evidencing the Restricted Stock or issue new certificates without such legend in
lieu thereof. Upon the written request of the holder or holders of any Warrant
or of any Restricted Stock the Company covenants and agrees forthwith to request
its counsel to render an opinion with respect to the matters covered by this
Section 9.2 and to bear all expenses in connection with the same.
Section 9.3. Notice of Proposed Transfer; Registration Not Required. The
holder of each Warrant or any Restricted Stock, by acceptance thereof, agrees to
give prior written notice to the Company of such holder's intention to transfer
such Warrant or the Underlying Shares relating thereto or such Restricted Stock
(or any portion thereof), describing briefly the manner and circumstances of the
proposed transfer; provided, however, that no such notice shall be required for
a transfer under a registration, qualification or filing for exemption requested
in accordance with the provisions of Section 9.4 below. Promptly after receiving
such written notice, the Company shall present copies thereof to Company counsel
and to counsel designated by such holder, who may be an employee of such holder.
If in the opinion of each such counsel (which opinions shall be reasonably
acceptable to the Company) the proposed transfer may be effected without
registration or qualification under any Federal or State law of such Warrant or
the Underlying Shares or such Restricted Stock, the Company, as promptly as
practicable, shall notify such holder of such opinion and of the terms and
conditions, if
<PAGE>
any, to be observed, whereupon such holder shall be entitled to transfer such
Warrant or Underlying Shares or such Restricted Stock, all in accordance with
the terms of the notice delivered to such holder by the Company. If either of
such counsel is unable to render such an opinion (in which case said counsel
shall set forth in writing the basis for his legal conclusions in this regard)
or, if the Company shall not find either of such opinions reasonably acceptable,
(in which case the Company shall set forth in writing the reasons such opinion
is not acceptable), the proposed transfer described in the written notice given
pursuant to this subparagraph may not be effected without such registration or
qualification or without compliance with the conditions of an exemptive
regulation of the Commission or any applicable State securities regulatory
authority, the Company shall promptly notify such holder and thereafter such
holder shall not be entitled to effect such transfer until receipt of a
subsequent notice from the Company pursuant to the immediately preceding
sentence or until such registration or qualification, filing or compliance has
become effective. All fees and expenses of counsel (including reasonable fees
and expenses of one counsel for all holders of Warrants or Restricted Stock) in
connection with the rendition of the opinions provided for in this subparagraph
shall be paid by the Company.
Section 9.4. Required Registration and Notice. (a) Upon the written request
of any holder of any Warrant or Restricted Stock setting forth such holder's
intent to transfer such Warrant or the Underlying Shares relating thereto or
such Restricted Stock (or any portion thereof), describing briefly the manner
and circumstances of such transfer and requesting that the Company effect the
registration or qualification or filing for exemption under applicable Federal
or State law of such Underlying Shares or Restricted Stock, the Company shall
promptly give written notice to all holders of Warrants and Restricted Stock of
a proposed registration or qualification or filing for exemption, and shall,
subject to the conditions of Section 9.5, as expeditiously as possible,
endeavor, in good faith, to effect any such registration or qualification or
filing for exemption of:
(i) such Underlying Shares or such Restricted Stock, or both, and
(ii) all Underlying Shares and Restricted Stock of all holders of
Warrants or Restricted Stock which shall have advised the Company in
writing within 20 days after the giving of such written notice by the
Company of their desire to have their Underlying Shares or Restricted Stock
registered or qualified or exempted,
with, or notification to or approval of, any governmental authority under any
Federal or State law, which may be required reasonably to permit the sale or
other disposition of any such Underlying Shares or Restricted Stock which the
holders thereof propose to make promptly upon the effectiveness of such
registration, qualification or filing for exemption. In connection with any
registration pursuant to this Section 9.4, if requested by the holders of the
Underlying Shares or Restricted Stock which is being registered, the Company
shall use its best efforts to list its Common Stock on a National Securities
Exchange selected by the Company.
(b) If the Company is required to effect a registration, qualification or
filing for exemption pursuant to this Section 9.4, the Company will:
(i) prepare and file with the Commission a registration statement with
respect to such Underlying Shares or Restricted Stock and use its best
efforts to cause such registration statement to become and remain
effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and current and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all shares
covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the method of disposition from
time to time intended by selling shareholders, but in no event for a period
longer than 6 months in the case of any registration effected through the
use of Form S-1 and 9 months in the case of any registration effected
through the use of Form S-3;
(iii) furnish to selling shareholders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other
<PAGE>
documents, as selling shareholders may reasonably request in order to
facilitate the public sale or other disposition of such shares;
(iv) use its best efforts to register or qualify the shares covered by
such registration statement under such other securities, Blue Sky or other
applicable laws of such jurisdictions within the United States as selling
shareholders request; and
(v) furnish to selling shareholders a signed counterpart, addressed to
selling shareholders, of (x) an opinion of counsel for the Company, dated
the effective date of the registration statement, and (y) a 'comfort'
letter signed by the independent public accountants who have certified the
Company's financial statements included in the registration statement; in
each case covering substantially the same matters with respect to the
registration statement and the prospectus included therein (and in the case
of the accountants' letter, with respect to events subsequent to the date
of the financial statements), as are customarily covered at the time of
such registration in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
Section 9.5. Conditions to Required Registration. The Company shall not be
required to register, qualify or file or to use its best efforts to effect any
registration, qualification or exemption of the Restricted Stock or Underlying
Shares under the Securities Act or any applicable State securities law or
regulation pursuant to Section 9.4:
(a) on more than two occasions; or
(b) at any time prior to September 30, 1997; or
(c) on more than one occasion in any period of six months; or
(d) unless a request therefor is made to the Company by the holders of
at least 25% of the aggregate number of the Underlying Shares and/or shares
of Restricted Stock; or
(e) at any time, for up to a maximum of three months, if, in the
reasonable judgment of the Company's Board of Directors, the timing of such
registration is not in the best interests of the Company due to the
pendency of an acquisition or other significant corporate transaction,
event or proceeding.
Notwithstanding anything to the contrary in Section 9.4 or 9.6, the Company
shall in no event be obligated to qualify to do business in any jurisdiction
where it is not so qualified or to take any action that would subject it to
taxation or to service of process in any State where it is not otherwise subject
to such taxation or service of process.
Section 9.6. Incidental Registration. The Company agrees that at any time
it proposes to register any of its Common Stock under the Securities Act (other
than pursuant to Section 9.4) on Form S1 or any other form of registration
statement then available for the registration under the Securities Act of
securities of the Company and which is appropriate for the inclusion therein of
the Underlying Shares and/or the Restricted Stock as herein contemplated, it
will give written notice to all holders of outstanding Warrants and Restricted
Stock of its intention so to do and upon the written request of the holder of
any such Warrants or Restricted Stock who intends to transfer such Warrants or
Restricted Stock promptly upon the effectiveness of such registration, given
within 20 days after receipt of any such notice from the Company, the Company
will in each instance use its best efforts to cause all Underlying Shares
relating to the Warrants held by any such requesting holder of Warrants and all
such Restricted Stock held by any requesting holder to be registered under said
Securities Act and registered or qualified under any State securities law, all
to the extent necessary to permit the sale or other disposition thereof in the
manner stated in such request by the prospective seller of the securities so
registered; provided, however, that the obligation to give such notice and to
use such best efforts shall not apply to any proposal of the Company to register
any of its securities under the Securities Act (i) on Form S8 (or any successor
form), (ii) in connection with dividend reinvestment plans, or (iii) for the
purpose of offering such securities to another business entity or the
shareholders of such entity in connection with the acquisition of assets or
shares of capital stock, respectively, of such entity. Any holder of such
Warrants or Restricted Stock requesting registration of the Underlying Shares
relating to such Warrants or such Restricted Stock shall in its request describe
briefly the manner of any proposed
<PAGE>
transfer of such Underlying Shares or Restricted Stock. Nothing in this Section
9.6 shall be deemed to require the Company to proceed with any registration
after giving the notice herein provided.
Section 9.7. Limitations.
(a) In the case of any registration pursuant to either Section 9.4 or
Section 9.6 in which the Company shall also participate, if the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Underlying
Shares or Restricted Stock and shares of Common Stock (the 'Parent Shares') held
by MEDIQ Incorporated (the 'Parent') pro rata among the holders of such
Underlying Shares and Restricted Stock and Parent Shares on the basis of the
number of shares requested to be included in such registration by each such
holder, and (iii) third, any other securities requested to be included in such
registration.
(b) If a particular registration is an underwritten registration on behalf
of any holder or holders of the Company's securities (other than Underlying
Shares or Restricted Stock), and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders initially
requesting such registration, the Company will include in such registration (i)
first, the securities requested to be included therein by the holders requesting
such registration, the Underlying Shares or Restricted Stock requested to be
included in such registration, and the Parent Shares requested to be included in
such registration, pro rata among the holders of such securities on the basis of
the number of securities so requested to be included therein, and (ii) second,
any other securities requested to be included in such registration.
(c) The holders of the Warrants and the Restricted Stock agree that in the
case of any offering of securities made by the Company that is registered
pursuant to the Securities Act, upon the request of the Company such holders
will not effect any public sale or distribution of Underlying Shares or
Restricted Stock, including a sale pursuant to Rule 144 under the Securities
Act, during the seven day period immediately prior to and during the 90-day
period beginning on the effective date of such offering (except to the extent
such Underlying Shares or Restricted Stock is sold in connection with such
registration pursuant to the terms of this Warrant); provided that the holders
shall not be obligated to agree to any such restriction unless each such holder
who desired to participate in such registration has been given an opportunity to
do so and shall have been given an opportunity to register at least one half of
the Underlying Shares and Restricted Stock which such holder shall have
initially requested to have registered in such offering.
(d) If a particular registration is an underwritten registration, the
holders of the Warrants and the Restricted Stock to be included in such
registration shall enter into an underwriting agreement with the underwriter or
underwriters selected by the Company.
Section 9.8. Expenses. The Company will pay all expenses (including without
limitation registration fees, qualification fees, legal expenses, including the
reasonable fees and expenses of one counsel for all of the holders of Warrants
or Restricted Stock whose Underlying Shares relating to such Warrants or whose
Restricted Stock is being registered, printing expenses, the costs of special
audits or 'cold comfort' letters and 'Blue Sky' expenses of underwriters
including reasonable legal expenses relating thereto, NASD filing fees and
including the reasonable fees and expenses of any necessary special experts but
excluding underwriters' discounts and commissions) in connection with the first
registration pursuant to Section 9.4 and related qualifications, notifications
or exemptions by each such holder of the Restricted Stock which is being
registered in such registration pursuant to Section 9.4 and all registrations,
qualifications, notifications or exemptions pursuant to Section 9.6. If less
than all of the Underlying Shares or Restricted Shares which shall have been the
subject of the request for registration pursuant to Section 9.4 shall have been
registered pursuant to such request pursuant to Section 9.7(a), then such
registration shall be deemed an incidental registration pursuant to Section 9.6
and not a demand registration pursuant to Section 9.4. The expense of the second
registration pursuant to Section 9.4 shall be borne pro rata by the holder or
holders making the request. The determination of such pro rata portion shall be
made on the basis of the relative amounts of net proceeds received by
<PAGE>
such holder or holders (as reflected in the prospectus or prospectuses included
in the registration statement filed in connection with such registration) for
all such Underlying Shares and Restricted Stock as are included in such
registration.
Section 9.9. Indemnification. In connection with any registration,
qualification, notification, or exemption of securities under Section 9.4 or
9.6, the Company hereby agrees to indemnify the holder of the Warrants and/or
Restricted Stock, and each underwriter thereof including each person, if any,
who controls such Warrant holder or stockholder within the meaning of Section 15
of the Securities Act, against all losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement of a material fact contained
in any registration statement or prospectus or notification or offering circular
(and as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus or caused by
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 or liabilities are caused by any
untrue statement or alleged untrue statement or omission based upon information
furnished in writing to the Company by such holder or, as the case may be, any
such underwriter expressly for use therein, and the Company and each officer,
director and controlling person of the Company shall be indemnified by each
holder of Warrants and/or Restricted Stock for all such losses, claims, damages
and liabilities caused by any untrue, or alleged untrue, statement or omission,
or alleged omission, based upon information furnished in writing to the Company
by such holder for any such use.
Promptly upon receipt by a party indemnified under this Section 9.9 of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9.9, such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Section 9.9. In case notice of commencement of any such action shall be given to
the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party 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 (other than reasonable costs of
investigation) shall be paid by the indemnified party unless the indemnifying
party either agrees to pay the same or fails to assume the defense of such
action with counsel reasonably satisfactory to the indemnified party. No
indemnifying party shall be liable for any settlement entered into without its
consent.
If the indemnification provided for in this Section 9.9 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses to which such
indemnified party would be otherwise entitled hereunder, then the 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 fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding. In no
event shall any person be required to contribute an amount greater than the
dollar amount of the proceeds received by such person with respect to the sale
of any Common Stock.
<PAGE>
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 9.9 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. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The contribution
provided for in this Section 9.9 shall survive, with respect to a holder of
Common Stock, the transfer of Common Stock by such holder and with respect to a
holder of Common Stock, shall remain in full force and effect regardless of any
investigation made by or on behalf of any indemnified party.
Section 9.10. Miscellaneous. Following the registration of the Common Stock
under the Securities Act, the Company shall comply with all reporting
requirements set forth or referred to in Rule 144 promulgated under the
Securities Act.
The Company shall at its expense provide the holders of the Warrants or
Restricted Stock with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them
under the Securities Act or the Securities Exchange Act of 1934 or any Rule
promulgated by the Commission thereunder.
SECTION 10. PARTIAL EXERCISE.
Except in the case of the transfer of a portion of this Warrant in
connection with a partial exercise hereof, this Warrant may only be transferred
in whole and not in part. If this Warrant is exercised in part only, the holder
hereof shall be entitled to receive a new Warrant covering the Applicable
Percentage of Common Stock in respect of which this Warrant shall not have been
exercised as provided in Section 1. If this Warrant is exercised in part, this
Warrant shall be surrendered at the principal office of the Company in
Pennsauken, New Jersey (with the partial assignment form at the end hereof duly
executed), and thereupon a new Warrant shall be issued to the holder hereof
covering the Applicable Percentage of Common Stock to which such holder shall be
entitled.
SECTION 11. DEFINITIONS.
In addition to the terms defined elsewhere in this Warrant, the following
terms have the following respective meanings:
The term 'Applicable Percentage' shall initially mean the Original
Applicable Percentage and shall be subject to adjustment as follows: in the
event the holder of this Warrant shall exercise this Warrant in part, the
Applicable Percentage shall be reduced to an amount determined by
multiplying the Original Applicable Percentage by a fraction the numerator
of which is the Unexercised Portion of the Warrant and the denominator of
which is the Original Applicable Percentage.
The term 'Commission' shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act or the Trust Indenture Act, as the case may be.
The term 'Common Stock' as used herein shall include any class of
capital stock of the Company now or hereafter authorized, the right of
which to share in distributions either of earnings or assets of the Company
is without limit as to any amount or percentage; provided, however, that
the shares of Common Stock deliverable upon the exercise of the rights
granted under this Warrant shall include only Common Stock of the Company
having a par value of $.01 per share authorized at the date hereof and any
class of Common Stock issued in substitution therefor.
The term 'Convertible Securities' shall mean evidences of
indebtedness, shares of stock or other securities which are convertible
into or exchangeable for Additional Shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event.
The term 'National Securities Exchange' shall mean the National
Association of Securities Dealers Automated Quotation System (National
Market or Small Capitalization System), the American Stock Exchange or the
New York Stock Exchange.
<PAGE>
The term 'Original Applicable Percentage' for this Warrant shall be as
set forth on page 1 of this Warrant. The Original Applicable Percentage for
this Warrant together with the Original Applicable Percentage of all
Related Warrants is 10%.
The term 'Pro Forma Shares' shall mean, as of the date of any
determination thereof, the sum of (i) the total number of outstanding
shares of Common Stock of the Company and (ii) the total number of shares
of Common Stock issuable upon exercise of this Warrant, the Related
Warrants and any other warrants, options or other rights and upon the
exercise of any conversion or exchange rights with respect to Convertible
Securities.
The term 'Related Warrant' shall mean the warrants initially issued
pursuant to the terms and provisions of the Note Agreement dated as of
September 30, 1994 among the Company and Massachusetts Mutual Life
Insurance Company, MassMutual Participation Investors and MassMutual
Corporate Investors.
The term 'Restricted Stock' shall mean the shares of Common Stock of
the Company issued upon the exercise of any of the Warrants and evidenced
by a certificate required to bear the legend specified in Section 9.2.
The term 'Securities Act' shall mean the Securities Act of 1933, or
any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
The term 'Trust Indenture Act' shall mean the Trust Indenture Act of
1939, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
The term 'Underlying Shares' shall mean the shares of Common Stock of
the Company issuable upon exercise of any of the Warrants.
The term 'Unexercised Portion of the Warrant' shall mean the Original
Applicable Percentage of this Warrant minus the aggregate percentage of Pro
Forma Shares received by the holder (or any prior holder) of this Warrant
upon the exercise of its rights hereunder prior to the date of
determination hereunder (in each case determined as of the date of exercise
of such rights).
The term 'Warrants' as used herein shall mean this Warrant and the
Related Warrants and all warrants hereafter issued in exchange or
substitution for this Warrant or any Related Warrants.
SECTION 12. LOST, STOLEN WARRANTS, ETC.
In case this Warrant shall be mutilated, lost, stolen or destroyed, the
Company may issue a new Warrant of like date, tenor and denomination and deliver
the same in exchange and substitution for and upon surrender and cancellation of
the mutilated Warrant, or in lieu of the Warrant lost, stolen or destroyed, upon
receipt of evidence satisfactory to the Company of the loss, theft or
destruction of such Warrant, and upon receipt of indemnity satisfactory to the
Company. If an institutional holder is the owner of any such lost, stolen or
destroyed Warrant, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction and of its ownership of
such Warrant at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Warrant other than the written
agreement of such owner to indemnify the Company.
SECTION 13. WARRANT HOLDER NOT SHAREHOLDER.
This Warrant does not confer upon the holder hereof any right to vote or to
consent or to receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof as hereinbefore provided.
SECTION 14. NOTICES.
All communications provided for hereunder shall be in writing and, if to
the holder of this Warrant, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to the holder hereof at such address as such holder may designate
to the Company in writing, and if to the Company, delivered or mailed by
registered or
<PAGE>
certified mail or overnight courier, or by facsimile communication, to the
Company at One MEDIQ Plaza, Pennsauken, New Jersey 08110, Attention: Chief
Financial Officer, or to such other address as the Company may designate to the
holder hereof in writing; provided, however, that a notice to the holder by
overnight air courier shall only be effective if delivered to such holder at a
street address designated for such purpose in accordance with this Section, and
a notice to such holder by facsimile communication shall only be effective if
made by confirmed transmission to such holder at a telephone number designated
for such purpose in accordance with this Section and promptly followed by
delivery of such notice by registered or certified mail or overnight air
courier, as set forth above. The person in whose name any Warrant shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes of this Warrant.
SECTION 15. SEVERABILITY.
Should any part of this Warrant for any reason be declared invalid, such
decision shall not affect the validity of any remaining portion, which remaining
portion shall remain in force and effect as if this Warrant had been executed
with the invalid portion thereof eliminated, and it is hereby declared the
intention of the parties hereto that they would have executed and accepted the
remaining portion of this Warrant without including therein any such part, parts
or portion which may, for any reason, be hereafter declared invalid.
SECTION 16. INDEX AND CAPTIONS.
The index and the descriptive headings of the various sections of this
Warrant are for convenience only and shall not affect the meaning or
construction of the provisions hereof.
In Witness Whereof, PRN Holdings, Inc. has caused this Warrant to be signed
by its President or one of its Vice Presidents and its Secretary or one of its
Assistant Secretaries and this Warrant to be dated September 30, 1994.
PRN Holdings, Inc.
By ___________________________________
Vice President
By ___________________________________
Secretary
<PAGE>
SUBSCRIPTION
PRN Holdings, Inc.
The undersigned, ____________________, pursuant to the provisions of the
within Warrant, hereby elects to purchase ____ % of the Pro Forma Shares of
Common Stock of PRN Holdings, Inc., a Delaware corporation, covered by the
within Warrant.
Signature ____________________________
Address ______________________________
Dated ________________________________
<PAGE>
ASSIGNMENT
For value received ____________________ hereby sells, assigns and transfers
unto ____________________ the within Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint ____________________, attorney, to
transfer the said Warrant on the books of the within-named Company.
__________________________________________
Dated ________________________________
PARTIAL ASSIGNMENT IN CONNECTION WITH PARTIAL EXERCISE
For value received ____________________ hereby sells, assigns and transfers
unto ____________________ that portion of the within Warrant and the rights
evidenced thereby which will on the date hereof entitle the holder to purchase
_____% of the Pro Forma Shares of Common Stock of PRN Holdings, Inc., a Delaware
corporation, and does hereby irrevocably constitute and appoint
____________________, attorney, to transfer that part of the said Warrant on the
books of the within-named Company.
__________________________________________
Dated ________________________________
<PAGE>
EXHIBIT 99
September 30, 1994
Michael F. Sandler
Senior Vice President -- Finance
MEDIQ Incorporated
609-665-9399
MEDIQ INCORPORATED COMPLETES ACQUISITION
OF ASSETS OF KCI MEDICAL SERVICES
PENNSAUKEN, NJ -- MEDIQ Incorporated (AMEX-MED) announced today the
completion of the acquisition by MEDIQ of certain of the assets of KCI Medical
Services (the medical equipment rental division of Kinetic Concepts, Inc.) for a
purchase price of approximately $65 million in cash and approximately $19
million principal amount of notes payable to KCI.
MEDIQ provides essential healthcare services in a cost effective manner to
a variety of healthcare providers. MEDIQ's principal businesses include
MEDIQ/PRN Life Support Services, Inc., the country's leading provider of life
support and critical care equipment on a rental basis, and the Diagnostic
Imaging Services Group, which provides portable x-ray, nuclear imaging and
ultrasound services. MEDIQ also owns significant equity interests in publicly
traded companies, NutraMax Products, Inc. (NASDAQ-NMPC), PCI Services, Inc.
(NASDAQ-PCIS) and MMI Medical, Inc. (NASDAQ-MMIM). MEDIQ's securities trade on
the American Stock Exchange under these symbols: common stock (MED), preferred
stock (MED.Pr), convertible debentures (MED.C) and subordinated debentures
(MED.NP) exchangeable into shares of NutraMax.
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