UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 1996 Commission File Number: 1-8147
MEDIQ Incorporated
(Exact name of registrant as specified in its charter)
Delaware 51-0219413
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One MEDIQ Plaza, Pennsauken, New Jersey 08110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 665-9300
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
<S> <C>
Common Stock, Par Value $1.00 American Stock Exchange
Series A Preferred Stock, Par Value $.50 American Stock Exchange
7.25% Convertible Subordinated Debentures due 2006 American Stock Exchange
7.50% Exchangeable Subordinated Debentures due 2003 American Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days. YES X NO ____
---
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of December 20, 1996 (reference is made to
the final paragraph of Part I herein for a statement of the assumptions upon
which this calculation is based):
Common Stock $84,412,000
Series A Preferred Stock $13,828,000
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The number of shares outstanding of each of the registrant's classes of stock as
of December 20, 1996:
Class
Common Stock 18,496,755 Shares
Series A Preferred Stock 6,330,501 Shares
Documents Incorporated by Reference
Certain portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on March 5, 1997 (which is expected to be
filed with the Commission not later than 120 days after the end of the
registrant's last fiscal year) are incorporated by reference into Part III of
this report.
Exhibit Index appears on page 41.
<PAGE>
PART I
ITEM 1. BUSINESS
General
MEDIQ Incorporated ("MEDIQ" or the "Company"), through its wholly-owned
subsidiary, MEDIQ/PRN Life Support Services, Inc. ("MEDIQ/PRN"), operates the
largest movable critical care and life support medical equipment rental business
in the United States. MEDIQ/PRN rents a wide variety of movable equipment for
use by acute care hospitals, alternative care facilities, nursing homes, and
home health care companies. MEDIQ/PRN constitutes the Company's principal
business, accounting for 98% and 97% of consolidated revenues from continuing
operations in 1996 and 1995, respectively. MEDIQ/PRN also participates in a
joint venture through a limited liability company. MEDIQ PRN/HNE, L.L.C., d/b/a
SpectraCair, which rents health care providers mattress systems designed to
treat, prevent or manage pressure ulcers. The Company's other operating
subsidiary, MEDIQ Management Services, Inc., is a provider of health care
management and consulting services to health care providers and management and
other administrative services to diagnostic imaging centers. During fiscal 1996,
the Company continued to pursue its previously announced strategy of divesting
substantially all operating assets other than MEDIQ/PRN and MEDIQ Management
Services and using the proceeds thereof to reduce indebtedness.
In September 1996, the Company entered into an agreement with NutraMax
Products, Inc. ("NutraMax") pursuant to which NutraMax agreed to repurchase all
of its shares owned by the Company, for a purchase price of approximately $36.3
million, or $9.00 per share, and the Company sold its ownership interest in
HealthQuest, Inc. for $75,000 which approximated carrying value. In October
1996, PCI Services, Inc. ("PCI") was acquired by Cardinal Health, Inc.
("Cardinal"). In that transaction the Company received 1,449,000 shares
(adjusted for stock split) of Cardinal stock in exchange for its 46% ownership
interest in PCI. The Company anticipates selling its Cardinal shares during
fiscal 1997. In November 1996, the Company sold substantially all of the assets
of MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray") for $5.3 million in cash
and shares of Integrated Health Services ("IHS") common stock with a value of
$5.2 million with the possibility of the Company receiving additional cash
consideration based upon the occurrence of certain future events. These
transactions essentially complete the implementation of the Company's strategic
plan to dispose of its non-core assets.
On October 1, 1996, the Company together with its wholly-owned
subsidiary, MEDIQ/PRN entered into a $260 million Credit Agreement with a group
of lenders. The facility comprises a $25 million working capital line of credit,
$135 million in term loans and a $100 million acquisition facility. Initial
drawings on the facility were used to prepay all of the Company's senior debt
(except capital leases) including MEDIQ/PRN's outstanding $100 million 12-1/8%
Senior Secured Notes due 1999, and MEDIQ/PRN's subordinated obligations. The new
facility may also be used, among other things, to finance the redemption or
repurchase of the Company's other publicly-traded debt, or to finance strategic
acquisitions.
The Company also intends to expand its core businesses through strategic
acquisitions, which would be financed, at least in part, by drawings under its
new credit facility. However, there can be no assurance that any transactions
will occur, or if they occur that they will be successfully integrated with the
Company's existing operations.
The Company was incorporated in 1977. Its principal offices are located
at One MEDIQ Plaza, Pennsauken, New Jersey.
MEDIQ/PRN Life Support Services, Inc.
MEDIQ/PRN provides essential cost-effective services to its customers.
In order to maximize operating efficiency, health care providers often choose to
rent movable medical equipment rather than incur the capital costs required to
finance equipment purchases and the on-going expenses required for maintenance
and repair. In addition, renting patient-ready equipment provides a vital
adjunct that permits health care providers to meet periods of increased patient
census without the need for investing capital in stand-by equipment. MEDIQ/PRN
meets these needs by renting a wide variety of equipment to health care
providers across the continuum of care. As of September 30, 1996, MEDIQ/PRN had
available for rent over 650 different types of medical equipment, including
adult and infant ventilators, adult, infant, neonatal and fetal monitors,
infusion and suction pumps, incubators, infant warmers, pulse oximeters,
sequential compression devices, oxygen concentrators and other movable critical
care
2
<PAGE>
equipment for use in respiratory care, intensive care, labor and delivery,
pediatric, neonatal intensive care and other departments of acute care general
hospitals and for use in alternative care facilities, nursing homes, and by home
health care providers. MEDIQ/PRN's customers rent equipment, which is delivered
in most cases within two hours of a request, 24 hours a day, 365 days a year
through 74 branch offices in major cities nationwide and 11 independent
distributors. MEDIQ/PRN offers its customers a wide selection of rental programs
including (i) daily, weekly or monthly rentals with fixed rate terms, (ii)
longer-term rentals with pricing related to the length of the rental term, and
(iii) "usage" rentals on a per use, per hour or per day basis.
MEDIQ/PRN also offers its Comprehensive Asset Management Program (CAMP),
which analyzes a customer's total critical care equipment activity from all
sources for the previous year. CAMP includes a menu of logistics and outsourcing
services for movable medical equipment assets including equipment, personnel,
maintance, documentation and tracking. MEDIQ/PRN also has programs where it
acquires all or part of the customer's equipment and rents the equipment back to
the customer, eliminating the customer's burdens of ownership, under utilization
and seasonal usage. MEDIQ/PRN's customers can benefit from the use of CAMP
through the reduction of biomedical and other hospital staff, lower equipment
maintenance expenses and the elimination or reduction of capital expenditures
for equipment. MEDIQ/PRN also offers its CAMP (Registered) Plus logistics
program that provides similar management services for multi-site health care
networks to manage, service and transport movable patient care equipment. A
proprietary bar-code based asset management system provides customers maximum
utilization of owned equipment. The system provides information used to track
equipment, capture lost patient charges, control inventory and equipment
migration, reduce the need for supplemental rentals and manage overall capital
planning.
MEDIQ/PRN provides a logistics and distribution service to equipment
manufacturers to reduce their transportation costs through utilization of
MEDIQ/PRN's national branch office network.
MEDIQ/PRN also distributes a variety of disposables, accessories, and
repair parts used with critical care equipment. MEDIQ/PRN provides one-stop
shopping for supplies from all the leading manufacturers, and is the exclusive
distributor of accessories and supplies for all the respiratory care equipment
manufactured by Siemens Medical Systems, Inc.
MEDIQ/PRN also provides complete service, including
annual/major/electrical safety inspections, preventive maintenance and repairs
for most brands and models of critical care equipment through a nationwide team
of over 140 trained, experienced biomedical technicians. Service and repairs can
be performed on-site, or pick up and delivery is available for servicing at one
of MEDIQ/PRN's 85 locations or two major service centers.
MEDIQ/PRN meets the needs of its customers for pre-owned equipment with
a complete remarketing program of every major equipment category. Health care
facilities can acquire pre-owned critical care equipment substantially below the
cost of purchasing new units.
MEDIQ/PRN also offers its customers complete programs for ventilator
reconditioning including replacement of parts, calibration, operational
verification and cosmetics.
No single customer accounted for more than 10% of MEDIQ/PRN's revenues
during fiscal 1996 or 1995.
Seasonality
MEDIQ/PRN's business is seasonal, with demand historically peaking
during periods of increased hospital census, which generally occurs in the
winter months during the Company's second fiscal quarter.
3
<PAGE>
Quality Assurance
Quality control/quality assurance and risk management procedures are
conducted for all of MEDIQ/PRN's medical equipment by trained biomedical
technicians to ensure compliance with safety, testing and performance standards
at all branch offices. All equipment is serviced and tested prior to delivery to
customers in accordance with MEDIQ/PRN's Pre-Delivery Inspection Program, which
is primarily derived from the Emergency Care Research Institute's ("ECRI's")
programs. Most types of medical equipment rented by MEDIQ/PRN require routine
servicing at scheduled intervals based upon hours of usage or passage of time,
including complete testing and inspection of all components that may need to be
replaced or refurbished. Routine servicing is conducted by MEDIQ/PRN's trained
personnel at all of its branch locations. Major repairs are performed at
MEDIQ/PRN's Pennsauken, New Jersey or Santa Fe Springs, California maintenance
facilities by its biomedical equipment technicians.
Suppliers
MEDIQ/PRN acquires substantially all of its medical equipment, repair
parts, accessories or disposable products from approximately 100 suppliers.
MEDIQ/PRN has entered into a long-term agreement with a vendor to purchase $7
million of certain products. MEDIQ/PRN is not dependent upon any single supplier
and believes that alternative purchasing sources of medical equipment are
available to MEDIQ/PRN should they be needed.
Competition
The medical equipment rental industry is highly competitive, and
MEDIQ/PRN encounters competition in all regions in which it operates.
MEDIQ/PRN's competitors include (i) national and regional medical equipment
rental and leasing companies and medical equipment distributors which rent
medical equipment to health care providers; (ii) medical equipment manufacturers
which sell medical equipment directly to health care providers; and (iii)
general leasing and financing companies and financial institutions, such as
banks, which finance the acquisition of medical equipment by health care
providers. MEDIQ/PRN believes that key factors influencing the decision
regarding the selection of a medical equipment rental vendor include
availability and quality of medical equipment, service and price.
Discontinued Operations
In the fourth quarter of fiscal 1996, the Company entered into an
agreement with NutraMax (NASDAQ:NMPC), a leading private label health and
personal care products company. Pursuant to this agreement, the Company
anticipates selling to NutraMax all of the 4,037,258 shares of NutraMax common
stock owned by the Company at a price of $9.00 per share. Under the terms of the
agreement, the Company will receive from NutraMax $19.9 million in cash and an
interest-bearing promissory note in the amount of $16.4 million. The note is
payable when NutraMax shares owned by the Company, which currently are held in
escrow in support of the Company's 7.50% Exchangeable Subordinated Debentures,
are released from that escrow. The NutraMax shares are to be released from
escrow upon the purchase or redemption of the 7.50% debentures. Upon closing of
the transaction, the Company will realize an after-tax gain of $6.2 million. The
cash proceeds from this transaction will be used to reduce debt.
On October 11, 1996, PCI, a leading provider of integrated
pharmaceutical packaging services, was acquired by Cardinal. As a result, the
Company received 966,000 shares of Cardinal stock which, based on the closing
price on October 11, 1996 had a market value of $79.2 million. The Company
recognized an after tax gain of $31.8 million in the first quarter of fiscal
1997. In December 1996, Cardinal's common stock split 3 for 2 and, accordingly,
the Company now owns 1,449,000 shares of Cardinal which have an aggregate market
value of $81.3 million based upon the closing price of $56.125 per share on
December 20, 1996. The Company anticipates selling its Cardinal shares in fiscal
1997 and using the proceeds to reduce debt.
4
<PAGE>
In the second quarter of fiscal 1995, the Company adopted a plan to sell
the following four non-core businesses: Medifac, Inc. ("Medifac"), a provider of
health care facility planning, architectural and development services; Health
Examinetics, Inc. ("Health Examinetics"), a provider of mobile health testing
services; MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray"), a provider of
portable X-ray and EKG services; and MEDIQ Imaging Services, Inc. ("MEDIQ
Imaging"), a provider of diagnostic imaging services in mobile and fixed sites.
In the fourth quarter of fiscal 1995, the Company revised the plan to include
the operations of HealthQuest, Inc. ("HealthQuest"), a provider of case
management and utilization review services. As a result, operating results and
net assets of these five businesses have been reported as discontinued
operations. Discontinued operations also include the Company's equity investment
in InnoServ Technologies, Inc. ("InnoServ") (NASDAQ:ISER) which, through its
various subsidiaries, provides hospitals, clinics and private physicians'
offices with maintenance services for diagnostic imaging equipment, shared
mobile computed tomography and cardiac catheterization services and other
radiological parts and supplies. The Company owns 2,030,000 shares of InnoServ
common stock, or approximately 40% of the outstanding shares. The present
business operations of InnoServ include the business of the Company's former
subsidiary, MEDIQ Equipment and Maintenance Services, Inc., which was merged
with InnoServ in 1994. The Company anticipates divesting its investment in
InnoServ in fiscal 1997. See footnote B to the Company's consolidated financial
statements for certain financial information about discontinued operations.
In November 1996, the Company sold substantially all of the assets of
Mobile X-Ray to Symphony Diagnostics, Inc., a subsidiary of Integrated Health
Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares of Integrated
Health Services common stock with a value of $5.2 million at the closing with
the possibility of the Company receiving additional cash consideration based
upon the occurrence of certain future events.
In September 1996, the Company sold its ownership interest in
HealthQuest, Inc. for cash of $75,000 which approximated its carrying value.
In August 1995, the Company sold the assets of MEDIQ Imaging to NMC
Diagnostic Services, Inc., a division of W. R. Grace and Co. for approximately
$17 million in cash and the assumption of $9.7 million of debt.
In June 1995, the Company sold Medifac and certain related assets to the
management of Medifac for approximately $11 million in cash and notes, and the
assumption of $26.9 million of non-recourse debt.
The Company expects to sell Health Examinetics to its management for
cash and an interest bearing note aggregating $1.7 million. The Company
presently anticipates that the sale transaction will be completed in
fiscal 1997.
Financial Information about Industry Segments
The Company operates primarily in one business segment, exclusive of
discontinued operations. The Company, through MEDIQ/PRN, rents medical equipment
on a short-term basis nationwide. In fiscal 1996, this segment represented more
than 90% of the consolidated revenues, operating profits and assets exclusive of
corporate assets, which include net assets of discontinued operations of $54.7
million at September 30, 1996.
Government Regulations
The Company's businesses are subject to Federal, state and local
regulations relating to the operation of such businesses. The Company is unable
to predict whether, or to what extent, new legislation or regulations affecting
its businesses will be enacted and, if enacted, what impact they will have on
the Company. In addition, government reimbursement of medical expenses are, to
an increasing extent, made at fixed rates unrelated to actual costs.
Consequently, hospitals and other health care
5
<PAGE>
providers are expected to continue to emphasize cost-containment and
cost-efficiency measures, which the Company believes will increase the demand
for its products and services. The following is a summary of some of the
significant regulations currently affecting the operations of MEDIQ/PRN and the
Company's other operations.
Compliance with FDA Regulations - The FDA regulates companies which
manufacture, prepare, propagate, compound or process medical devices. Device
manufacturers must comply with registration and labeling regulations, submit
premarket notifications or obtain premarketing approvals, comply with medical
device reporting, tracking and post-market surveillance regulations and with
device good manufacturing practices ("GMPs"), and are subject to FDA inspection.
The GMP regulations specify the minimum standards for the manufacture, packing,
storage, and installation of medical devices, and impose certain record keeping
requirements. The FDA currently does not regulate MEDIQ/PRN or organizations
which provide similar services as MEDIQ/PRN as device manufacturers. However,
any company which services, repairs or reconditions medical devices could be
subject to regulatory action by the FDA if its activities cause the devices to
become adulterated or mislabeled. In addition, no assurance can be given that in
the future the FDA will not regulate as device manufacturers companies such as
MEDIQ/PRN, which acquire ownership of devices, recondition or rebuild such
devices and rent them to customers or which service, repair or recondition
devices owned by others. The Company is unable to predict the cost of compliance
if any such regulations were to be adopted. MEDIQ/PRN is required to comply with
certain other device tracking and reporting regulations administered by the FDA.
See also "Legal Proceedings" herein for certain additional information.
Employees
As of December 1, 1996, the Company and its wholly-owned subsidiaries
have approximately 800 employees, of which approximately 100 are employees of
discontinued operations. The Company believes relations with employees are
satisfactory.
ITEM 2. PROPERTIES
The Company's principal facility is located in Pennsauken, New Jersey,
where the Company's corporate offices and a portion of its operating activities
are located, including MEDIQ/PRN's corporate offices. The Company and its
wholly-owned subsidiaries also lease office and warehouse space in approximately
80 locations throughout the United States for local and regional operations. The
properties owned and leased by the Company and its wholly-owned subsidiaries are
believed to be adequate for the Company's operations.
ITEM 3. LEGAL PROCEEDINGS
MEDIQ Imaging, the assets of which were sold by the Company in August
1995, is presently the subject of a criminal and civil investigation by the
United States Attorney's Office for the District of New Jersey and the
Department of Health and Human Services. The investigation has focused on advice
given by certain MEDIQ Imaging employees to physician customers of MEDIQ Imaging
relating to the reassignment of certain Medicare claims. The Company and MEDIQ
Imaging voluntarily reported the issue to the U.S. Government in January 1995
after learning that the advice given by the employees may have been inconsistent
with the regulations relating to reassignment. The Company and MEDIQ Imaging
have been cooperating in the investigation. In August 1995, in connection with
the sale of MEDIQ Imaging, the Company provided the U.S. Government with a
guarantee of approximately $7.1 million in connection with any settlement or
judgment obtained by the U.S. Government. Management believes that there has
been no violation of any statute or regulation by MEDIQ Imaging or any of its
officers, directors or employees. Although the Company believes there has been
no violation, if the U.S. Government obtains a judgment, the amount of the
judgment against MEDIQ Imaging may exceed the guarantee amount. However,
6
<PAGE>
management and outside counsel are not aware of any evidence that would enable
the U.S. Government to proceed against the Company beyond the limits of the
guarantee.
MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray"), the assets of which
the Company sold in November 1996, is presently the subject of an investigation
by the Wage and Hour Division of the United States Department of Labor (the
"DOL"). The DOL has indicated that it believes that the practice of treating
technologists as exempt professionals is incorrect. The Company maintains that
the practice of treating x-ray technologists as exempt is correct and proper. A
request for an official position statement has been sent to the Wage and Hour
Administrator of the DOL. The DOL has indicated that it will broaden the scope
of the investigation to include technologists at all other Mobile X-Ray
locations. Potential liability is retroactive from the day a lawsuit is
initiated by the Solicitor of Labor and could include double liquidated damages
and penalties. No suit has been filed at this time.
On November 28, 1995, in the United States District Court for the Middle
District of Pennsylvania, ATS Medical Servces, Inc. ("ATS"), a former subsidiary
of the Company, and the president of ATS each pled guilty to one count of
misprision of a felony in violation of Title 18, United States Code, Section 4.
In addition, ATS agreed to repay the government $2.1 million for excess
reimbursement received by ATS from the Medicare Program from 1988 through 1992.
The payment is part of a settlement agreement entered into between ATS, the
United States Government and Gerard Callie, a former ATS employee, who had filed
a civil lawsuit on behalf of the government against ATS pursuant to the False
Claim Act, Title 31, United States Code, Sections 3729 - et seq., relating to
ATS's alleged excess reimbursement. The court sentenced ATS, on June 24, 1996,
to a term of probation of two years. The court imposed no fine on ATS. A
mandatory special assessment of $200 was imposed and paid by ATS. In November
1996, in connection with the sale of Mobile X-Ray, the outstanding balance of
this obligation was paid with a portion of the proceeds of the sale.
On June 12, 1996, the Company, ATS and Mobile X-Ray Services were sued
in the United States District Court for the Middle District of Pennsylvania by
Gerard and Sharon Callie, who are both former employees of ATS. The lawsuit
alleges that the Callies were wrongfully terminated and asserts claims pursuant
to the whistleblower provisions of the False Claims Act and the Pennsylvania
Wage Payment and Collection Law. The plaintiffs made a demand for damages
totaling nearly $800,000. The Company believes it has no liability and intends
to vigorously defend this case.
In addition, the Company has pending several legal claims incurred in
the normal course of business, which in the opinion of management, will not have
material effect on the consolidated financial statements. See Note I to the
Company's Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended September 30, 1996.
-----------------------------------------------------------------------------
For the purposes of calculating the aggregate market value of the shares
of common stock of the Company held by nonaffiliates, as shown on the cover page
of this report, it has been assumed that all the outstanding shares were held by
nonaffiliates except for the shares beneficially owned by directors and
executive officers of the Company. However, this should not be deemed to
constitute an admission that all directors and executive officers of the Company
are, in fact, affiliates of the Company, or that there are not other persons who
may be deemed to be affiliates of the Company. Further information concerning
shareholdings of officers, directors and principal shareholders is included in
the Company's definitive proxy statement filed or to be filed with the
Securities and Exchange Commission.
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock and its Series A Preferred Stock, which is
convertible into Common Stock, are listed on the American Stock Exchange. The
following table sets forth the high and low sales prices for the Company's
Common and Preferred Stocks on the American Stock Exchange for the past two
fiscal years.
Common Stock Preferred Stock
------------ ---------------
Fiscal year ended September 30, High Low High Low
- ------------------------------- ---- --- ---- ---
1996:
First Quarter $5.438 $4.000 $4.500 $4.125
Second Quarter 5.438 4.000 5.000 4.000
Third Quarter 6.500 4.938 6.125 4.875
Fourth Quarter 6.000 5.500 5.625 5.500
1995:
First Quarter $4.063 $3.563 $3.813 $3.625
Second Quarter 5.750 3.750 5.500 3.750
Third Quarter 6.188 5.125 5.750 5.063
Fourth Quarter 6.188 5.063 5.875 5.375
As of December 1996, there were approximately 2,000 holders of record of
the Company's Common Stock and approximately 350 holders of record of the
Company's Preferred Stock. Since a portion of the Company's Common Stock and
Preferred Stock is held in "street" or nominee name, the Company is unable to
determine the exact number of beneficial holders.
The Company did not pay any dividends in fiscal 1996 or 1995. The terms
of the Company's Credit Agreement, entered into on October 1, 1996, preclude the
payment of cash dividends until October 1, 1997.
8
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below has been
derived from the audited financial statements of the Company. This data is
qualified in its entirety by reference to, and should be read in conjunction
with the Company's Consolidated Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations included elsewhere
herein.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------
1996 1995(2) 1994 1993 1992
---- ------- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summary Statement of Operations Data:
Revenues $ 136,066 $ 132,241 $ 81,498 $ 89,994 $ 102,195
Operating income 25,446 24,202 1,354 8,614 4,573
Interest expense (27,307) (29,241) (21,335) (21,043) (18,815)
Other (1) (4,695) 1,381 7,381 1,918 (6,810)
Loss from continuing operations
before income tax expense (benefit) (6,556) (3,658) (12,600) (10,511) (21,052)
Loss from continuing operations (6,178) (3,346) (8,254) (5,145) (11,220)
Per Share Data:
Loss from continuing operations $ (.25) $ (.14) $ (.34) $ (.21) $ (.47)
Cash dividends per common share $ -- $ -- $ .09 $ .12 $ .06
Cash dividends per preferred share $ -- $ -- $ .05 $ .07 $ .03
Weighted average shares outstanding 24,967 24,604 24,405 24,366 24,007
September 30,
-----------------------------------------------------
1996 1995 1994(2) 1993 1992
---- ---- ------- ---- ----
(in thousands)
Summary Balance Sheet Data:
Current assets $ 44,793 $ 44,436 $ 35,041 $ 42,500 $ 48,431
Investments in discontinued operations 54,717 70,162 99,911 98,095 116,598
Property, plant and equipment 122,706 132,823 149,051 117,748 112,621
Total assets 297,863 334,169 377,795 308,827 315,280
Current liabilities 35,054 64,685 59,610 47,001 45,303
Senior debt, net of current portion 192,461 136,949 162,436 115,604 131,014
Subordinated debt, net of current portion 41,229 81,907 103,388 86,229 63,539
Stockholders' equity 17,445 31,517 36,280 44,574 58,748
</TABLE>
Notes to Selected Consolidated Financial Data
(1) The Company recorded a $6 million reserve on the note receivable from MHM
Services, Inc. ("MHM") in 1996. Net gains (losses) from the sale of assets
were $.6 million, ($.4) million, $4.7 million, ($.3) million and $3.0
million in 1996, 1995, 1994, 1993 and 1992, respectively. In 1992, the
Company recorded a loss reserve of $10.6 million for an investment in a
real estate limited partnership.
(2) On September 30, 1994, MEDIQ/PRN acquired the critical care and life
support rental equipment inventory of KCI. The purchase price, which was
primarily financed with long-term debt, approximated $88 million, including
transaction costs and the assumption of certain capital lease obligations.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
During fiscal 1996 the Company continued to pursue its previously
announced strategy of divesting substantially all operating assets other than
MEDIQ/PRN and MEDIQ Management Services and using the proceeds thereof to reduce
indebtedness.
In September 1996, the Company entered into an agreement with NutraMax
Products, Inc. ("NutraMax") pursuant to which NutraMax agreed to repurchase all
of its shares owned by the Company, for a purchase price of approximately $36.3
million, or $9.00 per share, and the Company sold its ownership interest in
HealthQuest, Inc. for $75,000 which approximated carrying value. In October
1996, PCI Services, Inc. ("PCI") was acquired by Cardinal Health, Inc.
("Cardinal"). In that transaction the Company received 1,449,000 shares
(adjusted for stock split) of Cardinal stock in exchange for its 46% ownership
interest in PCI. The Cardinal shares are anticipated to be sold during fiscal
1997. Accordingly, the Company's equity investments and equity in earnings of
PCI and NutraMax have been classified as discontinued operations in the
Company's consolidated financial statements. In November 1996, the Company sold
substantially all of the assets of MEDIQ Mobile X-Ray Services, Inc. ("Mobile
X-Ray") for $5.3 million in cash and shares of Integrated Health Services
("IHS") common stock with a value of $5.2 million with the possibility of the
Company receiving additional cash consideration based upon the occurrence of
certain future events. These transactions essentially complete the
implementation of the Company's strategic plan to dispose of its non-core
assets.
With the $88 million acquisition in 1994 of the movable medical
equipment of KCI Therapeutic Services, Inc., a subsidiary of Kinetic Concepts,
Inc. ("KCI"), MEDIQ/PRN, the Company's core business, strengthened its position
as the leading company in the United States renting movable critical care to
acute care hospitals, alternative care facilities, nursing homes and health care
providers on an "as-needed basis." With the successful integration of these
assets into its 85 office distribution network, MEDIQ/PRN expanded its market
presence into all 50 states, increased market share and improved its service
standards.
The Company intends to continue to seek to expand its core businesses
through other strategic acquisitions. However, there can be no assurances that
the Company will be successful in identifying suitable acquisition candidates,
consummating any transactions or, if it completes any acquisition transaction,
in successfully integrating the operations of any acquired entity.
The Company's other operating subsidiary is MEDIQ Management Services,
Inc., a provider of management and consulting services to health care providers
and management and other administrative support services to diagnostic imaging
centers. MEDIQ/PRN also participates in a joint venture through a limited
liability company, MEDIQ PRN/HNE, L.L.C., d/b/a SpectraCair, which rents health
care providers mattress systems designed to treat, prevent or manage
pressure ulcers.
Discontinued Operations
In the fourth quarter of fiscal 1996, the Company entered into an
agreement with NutraMax (NASDAQ:NMPC), a leading private label health and
personal care products company. Pursuant to this agreement the Company
anticipates selling to NutraMax all of the 4,037,258 shares of NutraMax common
stock owned by the Company at a price of $9.00 per share. Under the terms of the
agreement, the Company will receive from NutraMax $19.9 million in cash and an
interest-bearing promissory note in the amount of $16.4 million. The note is
payable when NutraMax shares owned by the Company, which currently are held in
escrow in support of the Company's 7.50% Exchangeable Subordinated Debentures,
are released from that escrow. The NutraMax shares are to be released from
escrow upon the purchase or redemption of the 7.50% debentures. Upon the closing
of the transaction, the Company will realize an after-tax gain of $6.2 million.
The cash proceeds from this transaction will be used to reduce debt.
10
<PAGE>
On October 11, 1996, PCI, a leading provider of integrated
pharmaceutical packaging services, was acquired by Cardinal. As a result, the
Company received 966,000 shares of Cardinal stock which, based on the closing
price on October 11, 1996 had a market value of $79.2 million. The Company
realized an after tax gain of $31.8 million in the first quarter of fiscal 1997.
In December 1996, Cardinal's common stock split 3 for 2 and the Company now owns
1,449,000 shares which have an aggregate market value of $81.3 million based
upon the closing price of $56.125 per share on December 20, 1996. The Company
anticipates selling its Cardinal shares in fiscal 1997 and using the proceeds to
reduce debt.
In the second quarter of fiscal 1995, the Company adopted a plan to sell
the following four non-core businesses: Medifac, Inc. ("Medifac"), a provider of
health care facility planning, architectural and development services; Health
Examinetics, Inc. ("Health Examinetics"), a provider of mobile health testing
services; MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray"), a provider of
portable X-ray and EKG services; and MEDIQ Imaging Services, Inc. ("MEDIQ
Imaging"), a provider of diagnostic imaging services in mobile and fixed sites.
In the fourth quarter of fiscal 1995, the Company revised the plan to include
the operations of HealthQuest, Inc. ("HealthQuest"), a provider of case
management and utilization review services. As a result, operating results for
fiscal 1995 and net assets of these five businesses for fiscal 1995 and 1996
have been reported as discontinued operations. Discontinued operations also
include the Company's equity investment in InnoServ Technologies, Inc. which is
anticipated to be divested during fiscal 1997.
In November 1996, the Company sold substantially all of the assets of
Mobile X-Ray to Symphony Diagnostics, Inc., a subsidiary of Integrated Health
Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares of Integrated
Health Services common stock with a value of $5.2 million at the closing with
the possibility of the Company receiving additional cash consideration based
upon the occurrence of certain future events.
In September 1996, the Company sold its ownership interest in
HealthQuest, Inc. for $.75,000 which approximated its carrying value.
In August 1995, the Company sold the assets of MEDIQ Imaging to NMC
Diagnostic Services, Inc., a division of W.R. Grace & Co., for approximately $17
million in cash and the assumption of $9.7 million of debt.
In June 1995, the Company sold Medifac and certain related assets to the
management of Medifac for approximately $11 million, consisting of $6 million in
cash and $5 million in notes, and the assumption of $26.9 million of
non-recourse debt.
The Company expects to sell Health Examinetics to its management for
cash and an interest bearing note aggregating $1.7 million. The Company
presently anticipates that the sale transaction will be completed in fiscal
1997.
Results of Operations
Fiscal Year 1996 Compared with Fiscal Year 1995
Revenues from continuing operations were $136.1 million, as compared to
$132.2 million in the prior year, an increase of $3.9 million, or 3%. Revenue
growth aggregating $6.2 million was primarily attributable to the sale of repair
parts, accessories and disposable products, outsourcing services and sales of
equipment. This growth was partially offset by lower equipment rentals as a
result of the absence in fiscal 1996 of a sustained flu season, the non-renewal
of a number of long-term rental
11
<PAGE>
contracts as a result of customer purchases and a trend in the marketplace of
better utilization of equipment of customers partially offset by an increase in
the number or rental customers. The Company expects this trend to continue, with
increased potential for its CAMP and CAMP Plus programs as customers seek to
reduce capital and operating expenses.
Operating income from continuing operations was $25.4 million, as
compared to $24.2 million in 1995, an increase of $1.2 million, or 5%. The
improvement in operating income was attributable to reductions in corporate
overhead of $4.1 million, as compared to fiscal 1995, as a result of
non-recurring expenses in fiscal 1995 associated with the activities of the
Special Committee of the Board of Directors and the reduction in corporate
personnel in connection with the corporate restructuring plan adopted in the
first quarter of fiscal 1996. This reduction was partially offset by a
restructuring charge of $2.2 million for employee severance costs incurred in
connection with a plan approved by the Board of Directors to downsize corporate
functions and consolidate certain activities with the operations of MEDIQ/PRN.
Interest expense decreased 7%, to $27.3 million, from $29.2 million in
1995. The decrease was primarily attributable to a net reduction in indebtedness
and was partially offset by an increase in the interest rate of MEDIQ/PRN's $100
million Senior Secured Notes from 11-1/8% to 12-1/8% effective October 1, 1995.
Interest income of $1.5 million was consistent with the prior year and
was primarily derived from the Company's note receivable from MHM Services,
Inc., ("MHM" formerly a wholly-owned subsidiary of the Company which was
spun-off to shareholders in August 1993).
Other charges and credits for 1996 included the establishment of a
reserve on the note receivable from MHM of $6 million as a result of the
Company's analysis of the financial condition of MHM and a charge of $.6 million
related to the excess of the purchase price over the carrying value of a warrant
issued by MEDIQ/PRN in 1992 to a lender in connection with the financing of an
acquisition. The purchase price of the warrant was $1.6 million. These charges
were partially offset by gains on the sales of operating assets of $.6 million.
Fiscal 1995 included a loss of $1.1 million from the sale of the Company's
equity interest in New West Eyeworks, Inc. in April 1995 for $3.0 million, and
income of $.6 million representing a portion of the contingent proceeds earned
in 1995 from the prior year sale of the Company's interest in a kidney stone
treatment center.
The pretax loss from continuing operations before extraordinary item was
$6.6 million for 1996, as compared to a pretax loss of $3.7 million in the prior
year. The increase in pretax loss was attributable to the reserve on the note
receivable from MHM, the restructuring charge and the charge related to the
repurchase of the MEDIQ/PRN warrant partially offset by net reductions in
interest expense and corporate overhead. The pretax loss in 1995 included
non-recurring expenses of $1.7 million related to the strategic activities of
the Board of Directors and a loss of $1.1 million on the sale of the Company's
equity interest in New West Eyeworks.
The income tax benefit related to continuing operations was $.4 million,
as compared to a benefit of $.3 million in the prior year. The Company's
effective tax rates were disproportionate compared to the statutory rates as a
result of goodwill amortization and the non-recognition for state income tax
purposes of certain operating losses.
Revenues from discontinued operations (excluding equity investors) were
$36.8 million in 1996, as compared to $78.4 million in 1995. The net loss from
discontinued operations was $10.7 million in 1996, as compared to $1.6 million
in 1995, and consisted principally of revisions to the estimates of sales
proceeds for the disposal of the Company's investments in discontinued
operations, including reserves relating to investigations as discussed in Item
3. "Legal Proceedings" and Note I to the Consolidated Financial Statements.
In connection with repayments of debt, the Company realized an
extraordinary gain of $1.7 million, or $1.1 million net of taxes in 1996.
12
<PAGE>
Fiscal Year 1995 Compared with Fiscal Year 1994
Revenues from continuing operations were $132.2 million, as compared to
$81.5 million in the prior year, an increase of $50.7 million, or 62%. This
revenue growth was primarily attributable to the KCI acquisition. The Company
incorporated the additional movable medical equipment obtained from the
acquisition on September 30, 1994 into its national distribution network with
the addition of six branch offices, which resulted in substantially higher
revenues.
Operating income from continuing operations was $24.2 million, as
compared to $1.4 million in 1994. The improvement in operating income was
attributable to additional revenues and improved operating margins resulting
from the KCI acquisition. Non-operating activities, including corporate
overhead, accounted for operating losses of $7.8 million in 1995, as compared to
$6.1 million in 1994.
Operating income from continuing operations in 1995 was adversely
affected by corporate general and administrative expenses of approximately $1.7
million incurred in connection with the Company's corporate strategic activities
during the year. These activities, which included the formation and activities
of a Special Committee of the Board of Directors to explore alternative ways of
maximizing shareholder value, were concluded in October 1995 when the Board
accepted the recommendation of the Special Committee to reject two outstanding
offers to acquire the Company and terminate any further efforts to sell the
Company at that time.
Interest expense increased 37%, to $29.2 million, from $21.3 million in
1994. Increased debt associated with financing MEDIQ/PRN's acquisition of KCI on
September 30, 1994, resulted in higher interest expense, partially offset by
lower interest at the corporate level. Net cash proceeds from the sale of
discontinued operations in June and August 1995 aggregating approximately $24
million were used to reduce notes payable to banks and other long-term debt.
Interest income was $1.5 million in 1995 and $1.4 million in 1994 and
was primarily derived from the Company's note receivable from MHM.
Other charges and credits for 1995 included a loss of $1.1 million from
the sale of the Company's equity interest in New West Eyeworks, Inc. in April
1995 for $3.0 million, and income of $.6 million representing a portion of the
contingent proceeds earned in 1995 from the prior year sale of the Company's
interest in a kidney stone treatment center. Fiscal 1994 included a gain of $4.0
million related to the sale of the kidney stone treatment center and gains
totaling $1.4 million from dividends and the sale of other assets, including a
portion of the Company's equity interest in New West Eyeworks.
The pretax loss was $3.7 million for 1995, as compared to a pretax loss
of $12.6 million in the prior year. The improvement in pretax income was
attributable to MEDIQ/PRN and the success of its integration of the assets
acquired in the KCI acquisition into its nationwide distribution network. Fiscal
1995 included non-recurring expenses of $1.7 million related to the strategic
activities of the Board of Directors and a loss of $1.1 million on the sale of
the Company's equity interest in New West Eyeworks. The pretax loss in 1994
included gains from the sale of the Company's interest in a kidney stone
treatment center and other assets totaling $5.4 million.
The income tax benefit related to continuing operations was $.3 million,
as compared to $4.3 million in the prior year. The Company's effective tax rates
were disproportionate compared to the statutory rates as a result of goodwill
amortization and the non-recognition for state income tax purposes of certain
operating losses.
13
<PAGE>
Revenues from discontinued operations were $78.4 million in 1995, as
compared to $86.6 million in 1994. The net loss from discontinued operations was
$1.6 million in 1995, consisting of net income of $3.1 million from operations
partially offset by a net loss on disposal of $4.7 million as compared to net
income of $1.0 million in the prior year.
Liquidity and Capital Resources
In 1996, cash provided by operating activities increased to $29.1
million, as compared to $24.7 million in the prior year. This increase was
principally the result of increased operating income and reduced working capital
requirements.
Net cash used in investing activities was $16.9 million for 1996,
primarily attributable to expenditures for rental medical equipment totaling
$18.1 million, the repurchase of the MEDIQ/PRN warrant for $1.6 million
partially offset by proceeds from the sale of assets and discontinued operations
of $5.5 million. The Company presently anticipates capital expenditures of
approximately $14 million during fiscal 1997, primarily for rental medical
equipment. The Company intends to finance the rental medical equipment
expenditures with cash from operations.
Net cash used in financing activities was $11.9 million for 1996 and
consisted primarily of debt repayments of $39 million partially offset by
borrowings of $25.7 million and proceeds from exercise of stock options of $1.4
million.
On October 1, 1996, the Company, together with MEDIQ/PRN entered into a
$260 million Credit Agreement with a group of lenders led by Banque Nationale de
Paris as Administrative Agent and Initial Issuing Bank and NationsBank, N.A. as
the Documentation Agent (the "Credit Agreement"). The Credit Agreement provides
for four separate loans, a Term A loan ($35 million), a Term B loan ($100
million), an Acquisition Revolver ($100 million) and a Working Capital Revolver
($25 million). The amounts available under the Credit Agreement allowed the
Company to refinance substantially all of its existing senior debt, its
outstanding lines of credit, all of MEDIQ/PRN's subordinated debt, and
MEDIQ/PRN's $100 million 12-1/8% Senior Secured Notes due 1999. Upon completion
of the financing, the Company had $40 million available under the Acquisition
Revolver and $10 million available under the Working Capital Revolver both of
which were available to the Company upon continued compliance with certain
financial covenants and/or ratios.
The loans bear interest at either the prime rate plus a factor or at a
Eurodollar rate plus a factor. The factor changes quarterly based upon the
Company's leverage ratio. On October 1, 1996, the Company's interest rate on the
Term A loan, the Acquisition Revolver and the Working Capital Revolver was prime
(8.25% at September 30, 1996) plus 1.25% or Eurodollar (5.38 % at September 30,
1996) plus 2.75% and the interest rate on the Term B loan was prime plus 1.75%
or Eurodollar plus 3.25%. The loans are collateralized by substantially all of
the assets of the Company. The proceeds from the sales of PCI, NutraMax, Mobile
X-Ray and Health Examinetics aggregating approximately $128 million, must be
utilized to repay outstanding advances under the Acquisition Revolver upon
receipt.
The Term A loan is payable in quarterly installments of $1.2 million
beginning December 31, 1996 through September 30, 2001 and in quarterly
installments of $2.75 million from December 31, 2001 through September 30, 2002.
The Term B loan is payable in quarterly installments of $.25 million beginning
December 31, 1996 through September 30, 2002, quarterly installments of $8.5
million in fiscal 2003 and quarterly installments of $15 million in fiscal 2004.
The Company can borrow and repay under the Acquisition Revolver until March 31,
1998 in accordance with the Credit Agreement. On March 31, 1998, the Acquisition
Revolver converts to a term loan which will be repaid in quarterly installments
beginning on June 30, 1998. The first two installments will be at 5.0% of the
converted
14
<PAGE>
balance and all remaining quarterly payments will be at 5.625% of the converted
balance. The Working Capital Revolver terminates on September 30, 2002 at which
time all outstanding balances are due.
The Credit Agreement requires the Company to maintain certain financial
ratios and imposes certain other financial and dividend limitations. The terms
of the Company's Credit Agreement preclude the payment of dividends until
October 1, 1997.
As a result of the refinancing, the Company recognized in the first
quarter of 1997, an extraordinary charge of $13 million before taxes resulting
from the write-off of deferred charges and premiums incurred related principally
to the tender offer to purchase the $100 million Senior Secured Notes, and a
non-recurring charge of $11 million for the purchase of a warrant to purchase
10% of MEDIQ/PRN issued in connection with financing the KCI acquisition.
Accordingly, the Company has reflected the outstanding balances of its
lines of credit, subordinated debt and Senior Secured Notes as long-term senior
debt on its Consolidated Balance Sheet at September 30, 1996.
The Company may also use a portion of the new credit facility to redeem
or repurchase its 7.25% convertible subordinated debentures and its 7.50%
exchangeable subordinated debentures. However, except to the extent required by
the terms of the indentures pursuant to which these debentures were issued,
there can be no assurance that any such redemption or repurchase will occur.
In accordance with the terms of the Credit Agreement, effective November
15, 1996, the Company entered into interest rate hedge transactions which
terminate in January 2000. Under one of these transactions, on $50 million of
borrowings, the Company's base Eurodollar borrowing rate is fixed at 6.26% per
annum, instead of a floating Eurodollar rate. Under the second hedge
transaction, on an additional $50 million of borrowings, the Company's base
Eurodollar rate cannot be lower than 5.25% or greater than 7.43%.
The Company's 7.25% convertible subordinated debentures due 2006 require
the Company to offer to repurchase a portion of the debentures if stockholders'
equity is $40 million or less at the end of two consecutive fiscal quarters.
Since June 30, 1994, the Company's stockholders' equity has been less than $40
million. The Company repurchased $22.5 million principal amount of debentures in
fiscal 1996. As of September 30, 1996, the Company is required to either
repurchase or offer to redeer $11.25 million of debentures in fiscal 1997. These
debentures were reclassified to long-term senior debt in connection with the
terms of the refinancing discussed above since the redemption of the 7.25%
debentures must be made from drawings on the Acquisition Revolver. In November
and December 1996, the Company repurchased an aggregate of $2.2 million of the
debentures at approximately face value in the open market. The Company is
required to either repurchase or offer to redeem $9.05 million of debentures
prior to January 30, 1997 pursuant to the terms of the mandatory redemption
provisions of the indenture. Additionally, the Company is required to either
repurchase or offer to redeem $11.25 million of debentures prior to July 30,
1997 and semi-annually thereafter until all of the debentures are repurchased or
stockholders' equity is more than $40 million. Accordingly, the Company has
classified $22.5 million as senior debt in accordance with the terms of the
Credit Agreement.
As of September 30, 1996, the Company had lines of credit aggregating
$31 million, bearing interest at rates ranging from prime (8.25% at September
30, 1996) to prime plus 1.5%. At September 30, 1996, the Company had $26.4
million in borrowings and $2.0 million of letters of credit outstanding under
these facilities. As a result of the refinancing discussed above, the
outstanding amounts under these facilities are reflected as long-term senior
debt in the Company's Consolidated Balance Sheet at September 30, 1996.
15
<PAGE>
The Company expects that its primary sources of liquidity for operating
activities will be generated through cash flows from MEDIQ/PRN. Proceeds from
the sale of discontinued operations and miscellaneous assets will be used to
repay long-term debt. The Company believes that sufficient funds will be
available from operating cash flows, the sale of assets and the new credit
facility to meet the Company's anticipated operating and capital requirements,
including obligations to redeem or repurchase in the open market a portion or
all of the 7.25% and/or 7.50% debentures as previously discussed.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Independent Auditors' Report 18
Consolidated Statements of Operations -
Three Years Ended September 30, 1996 19
Consolidated Balance Sheets - September 30, 1996 and 1995 20
Consolidated Statements of Stockholders' Equity -
Three Years Ended September 30, 1996 21
Consolidated Statements of Cash Flows -
Three Years Ended September 30, 1996 22
Notes to Consolidated Financial Statements 23-37
17
<PAGE>
Independent Auditors' Report
Board of Directors and Stockholders
MEDIQ Incorporated
Pennsauken, New Jersey
We have audited the accompanying consolidated balance sheets of MEDIQ
Incorporated and subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended September 30, 1996. Our audits also
include the financial statement schedules listed in the index at Item 14(a)(2).
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of MEDIQ Incorporated and
subsidiaries as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
December 26, 1996
18
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------
1996 1995 1994
---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues $ 136,066 $ 132,241 $ 81,498
Costs and Expenses:
Operating 57,468 53,164 38,654
Selling and administrative 20,795 24,714 20,364
Restructuring 2,200 -- --
Depreciation and amortization 30,157 30,161 21,126
----------- ----------- -----------
110,620 108,039 80,144
----------- ----------- -----------
Operating Income 25,446 24,202 1,354
Other (Charges) Credits:
Interest expense (27,307) (29,241) (21,335)
Interest income 1,452 1,502 1,395
Other (6,147) (121) 5,986
----------- ----------- -----------
Loss from Continuing Operations before
Income Tax Benefit and Extraordinary Charge (6,556) (3,658) (12,600)
Income Tax Benefit (378) (312) (4,346)
----------- ----------- -----------
Loss from Continuing Operations before
Discontinued Operations and Extraordinary Charge (6,178) (3,346) (8,254)
Discontinued Operations:
Income from operations (net of income taxes of
$2,025,000 in 1996; $3,393,000 in 1995 and $301,000 in 1994) 3,929 3,132 936
Loss on disposal (net of income taxes of ($5,406,000)
in 1996 and $953,000 in 1995) (14,598) (4,733) --
----------- ----------- -----------
(10,669) (1,601) 936
----------- ----------- -----------
Loss before Extraordinary Charge (16,847) (4,947) (7,318)
Extraordinary Gain, Early Retirement of Debt
(net of income tax expense of $587,000) 1,143 -- --
----------- ----------- -----------
Net Loss $ (15,704) $ (4,947) $ (7,318)
=========== =========== ===========
Earnings Per Share:
Income (Loss) from:
Continuing Operations $ (.25) $ (.14) $ (.34)
Discontinued Operations (.43) (.06) .04
----------- ----------- -----------
Loss before Extraordinary Gain (.68) (.20) (.30)
Extraordinary Gain .05 -- --
----------- ----------- -----------
Net Loss $ (.63) $ (.20) $ (.30)
=========== =========== ===========
Weighted Average Shares Outstanding 24,967 24,604 24,405
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
----------------
1996 1995
---- ----
(in thousands)
Assets
------
<S> <C> <C>
Current Assets:
Cash $ 3,219 $ 2,966
Accounts receivable (net of allowance of $2,383,000 in
1996 and $2,207,000 in 1995) 30,233 27,884
Inventories 6,614 4,181
Deferred income taxes 2,447 4,310
Other current assets 2,280 5,095
--------- ---------
Total Current Assets 44,793 44,436
Investment in discontinued operations - restricted 54,717 70,162
Note receivable from MHM 3,967 10,733
Property, plant and equipment 122,706 132,823
Goodwill 58,321 61,744
Other assets 13,359 14,271
--------- ---------
Total Assets $ 297,863 $ 334,169
========= =========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 8,907 $ 6,694
Accrued expenses 17,169 20,230
Other current liabilities 458 461
Current portion of long-term debt 8,520 37,300
--------- ---------
Total Current Liabilities 35,054 64,685
Senior debt 192,461 136,949
Subordinated debt 41,229 81,907
Deferred income taxes 7,254 13,414
Other liabilities 4,420 5,697
Commitments and contingencies -- --
Stockholders' Equity:
Preferred stock ($.50 par value: Authorized 20,000,000 shares;
issued Series A: 6,688,000 in 1996 and 6,752,000 in 1995) 3,344 3,376
Common stock ($1 par value: Authorized 40,000,000 shares;
issued 19,191,000 in 1996 and 19,127,000 in 1995) 19,191 19,127
Capital in excess of par value 21,517 22,124
Accumulated deficit (21,771) (6,067)
Treasury stock, at cost (preferred shares: 377,000 in 1996 and
377,000 in 1995; common shares: 772,000 in 1996 and 1,275,000
in 1995)
(4,836) (7,043)
--------- ---------
Total Stockholders' Equity 17,445 31,517
--------- ---------
Total Liabilities and Stockholders' Equity $ 297,863 $ 334,169
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
20
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Retained
--------------- ---------------- Capital in Earnings
Shares Shares Excess of (Accumulated Treasury
Issued Amount Issued Amount Par Value Deficit) Stock
------ ------- ------ ------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 1, 1993 6,838 $ 3,419 19,042 $19,042 $23,349 $ 8,281 $ (9,517)
Net loss (7,318)
Dividends (2,083)
Conversion of preferred stock
to common stock (22) (11) 22 22 (11)
Issuance of stock (600) 1,309
Stock options exercised (381) 779
----- ------- ------ ------- ------- -------- --------
Balance September 30, 1994 6,816 3,408 19,064 19,064 22,357 (1,120) (7,429)
Net loss (4,947)
Conversion of preferred stock
to common stock (64) (32) 63 63 (31)
Stock options exercised (202) 386
----- ------- ------ ------- ------- -------- --------
Balance September 30, 1995 6,752 3,376 19,127 19,127 22,124 (6,067) (7,043)
Net loss (15,704)
Conversion of preferred stock
to common stock (64) (32) 64 64 (32)
Stock options exercised (575) 2,207
----- ------- ------ ------- ------- -------- --------
Balance September 30, 1996 6,688 $ 3,344 19,191 $19,191 $21,517 $(21,771) $ (4,836)
===== ======= ====== ======= ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
21
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities (in thousands)
Net loss $(15,704) $ (4,947) $ (7,318)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 30,157 30,161 21,126
Provision for doubtful accounts 1,237 993 984
Provision for deferred income taxes (benefit) 209 1,182 (3,146)
Accretion of acquisition indebtedness 621 1,402 --
Reserve on note receivable from MHM 6,000 -- --
Cash provided by discontinued operations 3,240 7,532 3,073
(Income) loss from discontinued operations 10,669 1,601 (936)
Extraordinary item, early extinguishment of debt (1,730) -- --
Other 488 373 (4,468)
Increase (decrease), net of effects from acquisitions:
Accounts receivable (2,428) (11,305) 1,527
Inventories (2,433) 1,758 175
Accounts payable 2,213 (108) (1,615)
Accrued expenses (2,973) (3,036) 2,303
Other current assets and liabilities (498) (907) 1,839
-------- -------- --------
Net cash provided by operating activities 29,068 24,699 13,544
Cash Flows From Investing Activities
Proceeds from sale of assets 3,976 10,957 8,251
Proceeds from sale of discontinued operations 1,500 23,858 --
Purchase of equipment (18,073) (11,548) (7,320)
Acquisitions -- -- (70,528)
Note receivable from SpectraCair (3,250) -- --
Payment of Note receivable from SpectraCair 3,250 -- --
Repurchase of MEDIQ/PRN warrant (1,625) -- --
Other (2,727) (5,016) (3,775)
-------- -------- --------
Net cash provided by (used in) investing activities (16,949) 18,251 (73,372)
Cash Flows From Financing Activities
Borrowings 25,747 1,190 67,540
Debt repayments (39,045) (42,853) (19,299)
Dividends -- -- (2,722)
Proceeds from exercise of options 1,432 184 398
-------- -------- --------
Net cash provided by (used in) financing activities (11,866) (41,479) 45,917
-------- -------- --------
Increase (decrease) in cash 253 1,471 (13,911)
Cash:
Beginning balance 2,966 1,495 15,406
-------- -------- --------
Ending balance $ 3,219 $ 2,966 $ 1,495
======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 25,563 $ 26,200 $ 20,440
======== ======== ========
Income taxes paid (refunded) $ 557 $ 205 $ (2,886)
======== ======== ========
Supplemental disclosure of non-cash investing and financing activities:
Equipment financed with long-term debt and capital leases $ 840 1,808 $ 5,937
======== ======== ========
Portion of acquisitions financed by sellers $ -- $ -- $ 19,384
======== ======== ========
Liabilities assumed in connection with acquisitions $ -- $ -- $ 2,804
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
22
<PAGE>
Note A - Summary of Significant Accounting Policies
Principles of consolidation - The consolidated financial statements
include the accounts of MEDIQ Incorporated and its subsidiaries (the "Company").
Investments in companies owned 20% to 50% are accounted for under the equity
method of accounting. All other investments are stated at the lower of cost or
net realizable value. In consolidation, all significant intercompany
transactions and balances have been eliminated.
Inventories - Inventories, which consist primarily of repair parts for
rental equipment and finished goods held for sale, are stated at the lower of
cost (first-in, first-out method) or market.
Property, plant and equipment - Rental equipment, machinery and
equipment, buildings and improvements, and land are recorded at cost. Capital
leases are recorded at the lower of fair market value or the present value of
future lease payments. The Company provides straight-line depreciation and
amortization over the estimated useful lives (rental equipment and machinery and
equipment - 3 to 10 years and buildings and improvements - 10 to 25 years).
Goodwill - The cost of acquired businesses in excess of net assets is
amortized on a straight-line basis primarily over periods of 20 years.
Accumulated amortization was $15.3 million and $12 million as of September 30,
1996 and 1995, respectively.
Carrying value of long-term assets - The Company evaluates the carrying
value of long-term assets, including rental equipment, goodwill and other
intangible assets, based upon current and anticipated undiscounted cash flows,
and recognizes an impairment when it is probable that such estimated cash flows
will be less than the carrying value of the asset. Measurement of the amount of
impairment, if any, is based upon the difference between carrying value and fair
value.
Revenue recognition policy - Rental revenue is recognized in accordance
with the terms of the related rental agreement and the usage of the related
rental equipment. Revenues from other operating activities are recognized as
services are rendered or as income is earned.
Subsidiary and unconsolidated affiliate stock transactions - Gains
(losses) resulting from the issuance or repurchase of stock by subsidiaries and
unconsolidated affiliates are recognized by the Company as equity participation
in the Consolidated Statements of Operations.
Earnings (loss) per share - Primary net earnings (loss) per share are
computed by dividing net earnings (loss) by the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period. Common stock equivalents include shares issuable upon conversion of the
Company's convertible preferred stock, convertible subordinated debt and
exercise of outstanding stock options.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates and assumptions.
New Accounting Pronouncements - In October 1995, the Financial
Accounting Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123"), which will be adopted
by the Company in fiscal year 1997 as required by the statement. The Company has
elected to continue to measure such compensation expense using the method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees,"as permitted by SFAS 123. When adopted, SFAS 123 will not
have a significant effect on the Company's financial position or results of
operations but will require the Company to provide expanded disclosure regarding
its stock-based employee compensation plans.
23
<PAGE>
Note A - Summary of Significant Accounting Policies (Continued)
Reclassification of accounts - Certain reclassifications have been made
to conform prior years' balances to the current year presentation.
Note B - Dispositions
During fiscal 1996, the Company continued to pursue its previously
announced strategy of divesting substantially all operating assets other than
MEDIQ/PRN and Management Services, Inc. and using the proceeds thereof to reduce
indebtedness.
Discontinued Operations
In the fourth quarter of fiscal 1996, the Company entered into an
agreement with NutraMax (NASDAQ:NMPC), a leading private label health and
personal care products company. Pursuant to this agreement, the Company
anticipates selling to NutraMax all of the 4,037,258 shares of NutraMax common
stock owned by the Company at a price of $9.00 per share. Under the terms of the
agreement, the Company will receive from NutraMax $19.9 million in cash and an
interest-bearing promissory note in the amount of $16.4 million. The note is
payable when NutraMax shares owned by the Company, which currently are held in
escrow in support of the Company's 7.50% Exchangeable Subordinated Debentures,
are released from that escrow. The NutraMax shares are to be released from
escrow upon the purchase or redemption of the 7.50% debentures. Upon closing of
the transaction, the Company will realize an after-tax gain of $6.2 million. The
cash proceeds from this transaction will be used to reduce debt.
On October 11, 1996, PCI, a leading provider of integrated
pharmaceutical packaging services, was acquired by Cardinal. As a result, the
Company received 966,000 shares of Cardinal stock which, based on the closing
price on October 11, 1996 had a market value of $79.2 million. The Company
recognized an after tax gain of $31.8 million in the first quarter of fiscal
1997. In December 1996, Cardinal's common stock split 3 for 2 and, accordingly
the Company now owns 1,449,000 shares which have an aggregate market value of
$81.3 million based upon the closing price of $56.125 per share on December 20,
1996. The Company anticipates selling its Cardinal shares in fiscal 1997 and
using the proceeds to reduce debt.
In the second quarter of fiscal 1995, the Company adopted a plan to
sell the following four non-core businesses: Medifac, Inc. ("Medifac"), a
provider of health care facility planning, architectural and development
services; Health Examinetics, Inc. ("Health Examinetics"), a provider of mobile
health testing services; MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray"), a
provider of portable X-ray and EKG services; and MEDIQ Imaging Services, Inc.
("MEDIQ Imaging"), a provider of diagnostic imaging services in mobile and fixed
sites. In the fourth quarter of fiscal 1995, the Company revised the plan to
include the operations of HealthQuest, Inc. ("HealthQuest"), a provider of case
management and utilization review services and the Company's equity investment
in InnoServ Technologies, Inc. which is anticipated to be divested during fiscal
1997.
The Company's prior year consolidated financial statements have been
restated to report the net assets and operating results of these businesses and
equity investments as discontinued operations.
In November 1996, the Company sold substantially all of the assets of
Mobile X-Ray to Symphony Diagnostics, Inc., a subsidiary of Integrated Health
Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares of Integrated
Health Services common stock with a value of $5.2 million at the closing with
the possibility of the Company receiving additional cash consideration based
upon the occurrence of certain future events.
24
<PAGE>
Note B - Dispositions (Continued)
In September 1996, the Company sold its common stock investment in
HealthQuest, Inc. to management for approximately $75,000 which approximated its
carrying value.
In August 1995, the Company sold the assets of MEDIQ Imaging Services,
Inc., the Company's mobile and fixed site ultrasound and nuclear imaging
business, to NMC Diagnostic Services Inc., a division of W.R. Grace & Co., for
approximately $17 million in cash, and the assumption of $9.7 million of debt.
In June 1995, the Company sold Medifac, Inc., a health care facility
planning, design and project management firm, and related assets to the
management of Medifac for approximately $11 million, consisting of $6 million in
cash and $5 million in notes, and the assumption of $26.9 million of
non-recourse debt.
In August 1994, the Company merged its MEDIQ Equipment and Maintenance
Services, Inc. ("MEMS") subsidiary with InnoServ, and the Company received
2,030,000 shares of InnoServ common stock, or approximately 40% of the
outstanding shares, and warrants to purchase at $6.25 per share an additional
325,000 shares of common stock. No gain or loss resulted from the merger. The
Company anticipates divesting its investment in InnoServ in fiscal 1997.
The Company expects to sell Health Examinetics to its management for
cash and an interest bearing note aggregating $1.7 million. The Company
presently anticipates that the sale transaction will be completed in the second
quarter of fiscal 1997.
The investment in discontinued operations as of September 30, 1996 consisted of
(in thousands):
September 30,
---------------------
1996 1995
------- -------
Current assets $50,331 $55,362
Current liabilities 9,185 8,841
------- -------
Net current assets 41,146 46,521
Net fixed assets 5,387 4,726
Other noncurrent assets 8,184 18,915
------- -------
$54,717 $70,162
======= =======
Revenues from discontinued operations (excluding equity investees) were $36.8
million, $78.4 million and $86.6 million in 1996, 1995 and 1994 respectively.
Sale of Other Assets
In December 1993, the Company exercised warrants to purchase 229,518
shares of common stock of New West Eyeworks, Inc. ("New West") in connection
with New West's initial public offering. The warrants were issued to the Company
in 1988 together with $5.1 million of New West preferred stock as partial
consideration for the sale of a business. In connection with the offering, the
Company received $1.9 million, representing a partial redemption of the
preferred shares, net proceeds from the sale of 82,500 shares of common stock
and partial payment of accumulated preferred stock dividends and accrued
interest. The Company received an additional 57,143 shares of New West common
stock in payment of the balance of accumulated dividends and interest. The
Company recorded income of $1.2 million in 1994 related to the sale of New West
common stock and the payment of dividends and interest. In April 1995, the
Company sold its remaining investments in New West common stock and preferred
stock for aggregate consideration of $3 million resulting in a $1.1 million
pretax loss.
In September 1994, the Company sold its rights under a management
contract related to a kidney stone treatment center for $4 million in cash and
$3 million contingent upon future results of operations. The sale resulted in a
pretax gain of $4 million in 1994 and $.6 million in 1995 representing a portion
of the contingent proceeds.
25
<PAGE>
Note C - Restructuring Charge
In the first quarter of fiscal 1996, the Company recorded a
restructuring charge of $2.2 million for employee severance costs incurred in
connection with a plan approved by the Board of Directors to downsize corporate
functions and consolidate certain activities with the operations of MEDIQ/PRN.
The plan resulted in the termination of 29 employees in fiscal 1996. The Company
paid approximately $.9 million of severance benefits in fiscal 1996 with the
balance of the restructuring obligation due over the next two fiscal years.
Note D - Acquisition
On September 30, 1994, the Company acquired the critical care and life
support rental equipment inventory of KCI Therapeutic Services, Inc., a
subsidiary of Kinetic Concepts, Inc. ("KCI"). The purchase price was
approximately $88 million, including transaction costs and the assumption of
certain capitalized lease obligations. The purchase price was allocated to
assets acquired and liabilities assumed based on fair values at the date of the
acquisition. The excess of the purchase price over fair values of the net assets
acquired of $44.5 million was recorded as goodwill and is being amortized over
twenty years.
Note E - Property, Plant and Equipment
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Rental equipment $211,948 $205,773
Equipment and fixtures 11,460 10,316
Building and improvements 7,486 7,272
Land 149 149
-------- --------
231,043 223,510
Less accumulated depreciation
and amortization (108,337) (90,687)
-------- --------
$122,706 $132,823
======== ========
</TABLE>
Depreciation and amortization expense related to property, plant and equipment
was $26.3 million, $26.1 million and $19.7 million in 1996, 1995 and 1994,
respectively.
Note F - Accrued Expenses
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Interest $ 5,359 $ 5,301
Payroll and related taxes 3,255 3,093
Pension 2,188 2,875
Property and other taxes 1,872 2,128
Other 4,495 6,833
-------- --------
$ 17,169 $ 20,230
======== ========
</TABLE>
Note G - Notes Payable to Financial Institutions
As of September 30, 1996, the Company had $31 million of lines of credit which
bear interest at rates ranging from prime (8.25% at September 30, 1996) to prime
plus 1.5% and are secured primarily by a portion of the shares of common stock
of NutraMax and PCI owned by the company, certain accounts receivable, a pledge
of the common stock of MEDIQ/PRN and a second mortgage on real estate. At
September 30, 1996, $26.0 million in borrowings and $2.0 million of letters of
credit were outstanding under these facilities. The amount of available credit
fluctuated based upon the amount of eligible accounts receivable. The average
amount outstanding under lines of credit in 1996 was $17.7 million and the
weighted average interest rate computed on the monthly outstanding balance was
9.3%.
26
<PAGE>
Pursuant to the Company's Credit Agreement more fully discussed in Note H, the
Company refinanced these lines of credit. The Credit Agreement includes a
working capital revolver of $25 million and expires on September 30, 2002.
Accordingly, the amounts outstanding under the existing lines of credit as of
September 30, 1996 have been reclassified to long-term senior debt in the
Company's Consolidated Balance Sheet.
Note H - Long-Term Debt
Senior debt consisted of the following:
<TABLE>
<CAPTION>
September 30,
-------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Corporate debt:
Lines of Credit $ 14,020 $ --
Revolving credit facility -- 567
Term loan -- 1,815
7.25% convertible subordinated debentures due 2006 22,500 --
Subsidiary debt:
Lines of Credit 12,010 --
Senior secured notes due 1999 100,000 100,000
Term loan payable monthly through 2000 at prime plus 2% 27,448 37,493
Term loans payable -- 2,828
Capital lease obligations payable in varying installments
through 1999 at fixed rates from 9% to 13.6% 6,204 9,046
10% subordinated notes due 2004 8,799 --
10% subordinated notes due 1999 10,000 --
-------- --------
200,981 151,749
Less current portion 8,520 14,800
-------- --------
$192,461 136,949
======== ========
</TABLE>
Subordinated debt consisted of the following:
September 30,
--------------------
1996 1995
-------- --------
(in thousands)
Corporate debt:
7.5% exchangeable subordinated debentures due 2003 $ 34,500 $ 34,500
7.25% convertible subordinated debentures due 2006 6,729 51,729
Subsidiary debt:
10% subordinated notes due 2004 -- 8,664
10% subordinated notes due 1999 -- 9,514
-------- --------
41,229 104,407
Less current portion -- 22,500
-------- --------
$ 41,229 $ 81,907
======== ========
On October 1, 1996, the Company, together with MEDIQ/PRN entered into a
$260 million Credit Agreement with a group of lenders led by Banque Nationale de
Paris as Administrative Agent and Initial Issuing Bank and NationsBank, N.A. as
the Documentation Agent (the "Credit Agreement"). The Credit Agreement provides
for four separate loans, a Term A loan ($35 million), a Term B loan ($100
million), an Acquisition Revolver ($100 million) and a Working Capital Revolver
($25 million). The amounts available under the Credit Agreement allowed the
Company to refinance substantially all of its existing senior debt, its
outstanding lines of credit, all of MEDIQ/PRN's subordinated debt, and
MEDIQ/PRN's $100 million 12-1/8% Senior Secured Notes due 1999. Upon completion
of the financing, the Company had $40 million available
27
<PAGE>
under the Acquisition Revolver and $10 million available under the Working
Capital Revolver both of which were available to the Company upon compliance
with certain financial covenants and/or ratios.
The loans bear interest at either the prime rate plus a factor or at a
Eurodollar rate plus a factor. The factor changes quarterly based upon the
Company's leverage ratio. The Company's interest rate on the Term A loan, the
Acquisition Revolver and the Working Capital Revolver is prime (8.25% at
September 30, 1996) plus 1.25% or Eurodollar (5.38 % at September 30, 1996) plus
2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar
plus 3.25%. The loans are collateralized by substantially all of the assets of
the Company. The proceeds from the sales of PCI, NutraMax, Mobile X-Ray and
Health Examinetics aggregating approximately $128 million must be utilized to
repay outstanding advances under the Acquisition Revolver upon receipt.
The Term A loan is payable in quarterly installments of $1.2 million
beginning December 31, 1996 through September 30, 2001 and in quarterly
installments of $2.75 million from December 31, 2001 through September 30, 2002.
The Term B loan is payable in quarterly installments of $.25 million beginning
December 31, 1996 through September 30, 2002, quarterly installments of $8.5
million in fiscal 2003 and quarterly installments of $15 million in fiscal 2004.
The Company can borrow and repay under the Acquisition Revolver until March 31,
1998 in accordance with the Credit Agreement. On March 31, 1998, the Acquisition
Revolver converts to a term loan which will be repaid in quarterly installments
beginning on June 30, 1998. The first two installments will be at 5.0% of the
converted balance and all remaining quarterly payments will be at 5.625% of the
converted balance. The Working Capital Revolver terminates on September 30, 2002
at which time all outstanding balances are due.
The Credit Agreement requires the Company to maintain certain financial
ratios and imposes certain other financial and dividend limitations. The terms
of the Company's Credit Agreement preclude the payment of cash dividends until
October 1, 1997.
As a result of the refinancing, the Company recognized in the first
quarter of 1997, an extraordinary charge of $13 million before taxes resulting
from the write-off of deferred charges and premiums incurred related principally
to the tender offer to purchase the $100 million 12-1/8% Senior Secured Notes
due 1999, and a non-recurring charge of $11 million for the purchase of a
warrant to purchase 10% of MEDIQ/PRN issued in connection with financing the KCI
acquisition.
Accordingly, the Company has reflected the outstanding balances of its
lines of credit, certain subordinated debt and Senior Secured Notes as long-term
senior debt on its Consolidated Balance Sheet at September 30, 1996.
In accordance with the terms of the Credit Agreement, effective November
15, 1996, the Company entered into interest rate hedge transactions which
terminate in January 2000. Under one of these transactions, on $50 million of
borrowings, the Company's base Eurodollar borrowing rate is fixed at 6.26% per
annum, instead of a floating Eurodollar rate. Under the second hedge
transaction, on an additional $50 million of borrowings, the Company's base
Eurodollar rate cannot be lower than 5.25% or greater than 7.43%.
The 7.5% debentures are exchangeable for an aggregate of 2,255,000
shares of NutraMax common stock owned by the Company, or an equivalent of $15.30
per share, and are redeemable in whole or in part at the option of the Company
after July 1996. Interest is payable semi-annually on January 15 and July 15. On
October 1, 1996, the Company repurchased $6.7 million of its 7.5% debentures in
the open market at a discount resulting in a pretax gain of $.4 million. This
gain was recorded in the first quarter of fiscal 1997 as an extraordinary item.
28
<PAGE>
Note H - Long-Term Debt (Continued)
The 7.25% debentures are convertible at any time prior to maturity into
shares of the common stock of the Company at $7.50 per share. Interest is
payable semi-annually on June 1 and December 1. Annual sinking fund payments are
scheduled to commence in June 1997. However, because of prior open market
purchases of these debentures, the Company will not be required to make the
initial sinking fund payments. The Company is also required to offer to
repurchase a portion of the debentures if stockholders' equity is $40 million or
less at the end of two consecutive fiscal quarters. Since June 30, 1994, the
Company's stockholders' equity has been less than $40 million. As of September
30, 1996, the Company is required to either repurchase or offer to redeem $11.25
million of the debentures in fiscal 1997. These debentures were reclassified to
long-term senior debt in connection with the terms of the refinancing discussed
above since the redemption of the 7.25% debentures must be made from drawings on
the Acquisition Revolver. In November and December 1996, the Company repurchased
an aggregate of $2.2 million of the debentures at approximately face value in
the open market. The Company is required to either repurchase or offer to redeem
$9.05 million of debentures prior to January 30, 1997 pursuant to the terms of
the mandatory redemption provisions of the indenture. The Company is required to
either repurchase or offer to redeem an additional $11.25 million of debentures
prior to July 30, 1997 and semi-annually thereafter until all of the debentures
are repurchased or stockholders' equity is more than $40 million.
In connection with repayments of debt the Company realized an
extraordinary gain of $1.7 million, or $1.1 million net of taxes, in 1996.
Maturities of long-term debt giving effect to the refinancing described above
are as follows:
<TABLE>
<CAPTION>
Year Ending September 30, Senior Subordinated Total
- ------------------------- -------- ------------ --------
(in thousands)
<C> <C> <C> <C>
1997 $ 8,520 $ -- $ 8,520
1998 16,648 6,729 23,377
1999 27,073 -- 27,073
2000 25,838 -- 25,838
2001 4,892 -- 4,892
Thereafter 118,010 34,500 152,510
-------- --------- --------
$200,981 $ 41,229 $242,210
======== ========= ========
</TABLE>
Note I - Commitments and Contingencies
Leases - The Company leases certain equipment, automobiles and office space.
The future minimum lease payments under noncancelable operating leases and
capital leases are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending September 30, Leases Leases
- ------------------------- ------- ---------
(in thousands)
<C> <C> <C>
1997 $ 3,227 $ 4,506
1998 2,245 3,052
1999 1,435 1,537
2000 127 957
2001 and thereafter -- 325
-------- --------
Total minimum lease payments 7,034 $ 10,377
========
Amount representing interest 830
--------
Present value of minimum lease payments $ 6,204
========
</TABLE>
29
<PAGE>
Note I - Commitments and Contingencies (Continued)
Total rent expense under operating leases was $5.2 million, $5.4 million and
$5.2 million in 1996, 1995 and 1994, respectively. The leases, which are for
terms of up to 5 years, contain options to renew for additional periods.
At September 30, 1996, rental equipment and machinery and equipment included
assets under capitalized lease obligations of $11.8 million, less accumulated
amortization of $3.6 million.
Purchase Commitments - Pursuant to a Distribution Agreement with a vendor dated
April 1, 1996, as amended, MEDIQ/PRN has agreed to purchase $7 million of
certain products by March 31, 1997. Through September 30, 1996, MEDIQ/PRN
purchased $3.5 million under such agreement.
Guarantees - The Company guarantees a loan of MEDIQ PRN/HNE, L.L.C. in the
aggregate amount of $7.5 million. To support the guarantee the Company has a
certificate of deposit in the amount of $1.0 million with the lender.
Investigations and Legal Proceedings - MEDIQ Imaging, the assets of which were
sold by the Company in August 1995, is presently the subject of a criminal and
civil investigation by the United States Attorney's Office for the District of
New Jersey and the Department of Health and Human Services. The investigation
has focused on advice given by certain MEDIQ Imaging employees to physician
customers of MEDIQ Imaging relating to the reassignment of certain Medicare
claims. The Company and MEDIQ Imaging voluntarily reported the issue to the U.S.
Government in January 1995 after learning that the advice given by the employees
may have been inconsistent with the regulations relating to reassignment. The
Company and MEDIQ Imaging have been cooperating in the investigation. In August
1995, in connection with the sale of MEDIQ Imaging, the Company provided the
U.S. Government with a guarantee of approximately $7.1 million in connection
with any settlement or judgment obtained by the U.S. Government. Management
believes that there has been no violation of any statute or regulation by MEDIQ
Imaging or any of its officers, directors or employees. Although the Company
believes there has been no violation, if the U.S. Government obtains a judgment,
the amount of the judgment against MEDIQ Imaging may exceed the guarantee
amount. However, management and outside counsel are not aware of any evidence
that would enable the U.S. Government to proceed against the Company beyond the
limits of the guarantee.
MEDIQ Mobile X-Ray Services, Inc., the assets of which the Company sold in
November 1996, is presently the subject of an investigation by the Wage and Hour
Division of the United States Department of Labor (the "DOL"). The DOL has
indicated that it believes that the practice of treating technologists as exempt
professionals is incorrect. The Company maintains that the practice of treating
x-ray technologists as exempt is correct and proper. A request for an official
position statement has been sent to the Wage and Hour Administrator of the DOL.
The DOL has indicated that it will broaden the scope of the investigation to
include technologists at other Mobile X-Ray locations. Potential liability is
retroactive from the day a lawsuit is initiated by the Solicitor of Labor and
could include double liquidated damages and penalties.
On November 28, 1995, in the United States District Court for the Middle
District of Pennsylvania, ATS Medical Servces, Inc. ("ATS"), a former subsidiary
of the Company, and the president of ATS each pled guilty to one count of
misprision of a felony in violation of Title 18, United States Code, Section 4.
In addition, ATS agreed to repay the government $2.1 million, which was accrued
in fiscal 1994, for excess reimbursement received by ATS from the Medicare
Program from 1988 through 1992. The payment is part of a settlement agreement
entered into between ATS, the United States Government and Gerard Callie, a
former ATS employee, who had filed a civil lawsuit on behalf of the government
against ATS pursuant to the False Claim Act, Title 31, United States Code,
Sections 3729 - et seq., relating to ATS's alleged excess reimbursement. The
court sentenced ATS, on June 24, 1996, to a term of probation of two years. The
court imposed no fine on ATS. A mandatory special assessment of $200 was imposed
and paid by ATS. In November 1996, in connection with the sale of Mobile X-Ray,
the outstanding balance of this obligation was paid with a portion of the
proceeds of the sale.
On June 12, 1996, the Company, ATS and Mobile X-Ray were sued in the United
States District Court for the Middle District of Pennsylvania by Gerard and
Sharon Callie, who are both former employees of ATS. The lawsuit alleges that
the Callies were wrongfully terminated and asserts claims pursuant to the
whistleblower provisions of the False Claims Act and the Pennsylvania Wage
Payment and Collection Law. The plaintiffs made a demand for damages totaling
nearly $800,000. The Company believes it has no liability and intends to
vigorously defend this case.
30
<PAGE>
Although the Company has recorded additional reserves aggregating $4.0 million
in 1996 based upon management's estimate of the eventual outcome of the
investigations and lawsuit discussed above, the ultimate outcome of the
investigations and lawsuit cannot presently be determined. These reserves are
included in the Company's reserve for disposal of discontinued operations.
Accordingly, no provision for any other loss that may result upon resolution of
these matters has been made in the Company's consolidated financial statements.
In addition, the Company has pending several legal claims incurred in the normal
course of business, which in the opinion of management, will not have a material
effect on the consolidated financial statements.
Note J - Fair Value of Financial Instruments
Estimated fair value of financial instruments is provided in accordance with the
requirements of SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments". The estimated fair value amounts have been determined by the
Company using available market information and appropriate methodologies.
However, considerable judgment is necessarily required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Accounts receivable and accounts payable - The carrying amounts
of these items are an estimate of their fair values at September 30, 1996.
Long-term debt (excluding capital lease obligations) - The fair
value of the Company's publicly traded debt is based on quoted market prices.
Interest rates that are currently available to the Company for issuance of debt
with similar terms and remaining maturities are used to estimate fair value for
debt issues for which quoted market prices are not available. The carrying
amount and estimated fair value of long-term debt are $216.2 million and $218.7
million, respectively.
The fair value estimates presented herein are based on information available to
management as of September 30, 1996, and have not been comprehensively revalued
for purposes of these financial statements since that date. Current estimates of
fair value may differ significantly from the amounts presented herein.
Note K - Common and Preferred Stock
Series A preferred stock is convertible on a one-for-one basis into shares of
common stock, votes generally with the common stock as a single class, and in
all such votes, has ten votes per share. The preferred stock participates in
cash dividends at a rate equal to 60% of the amount paid on the common stock and
has a $.50 per share preference in the event of dissolution or liquidation.
31
<PAGE>
Note L - Income Taxes
Income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------
1996 1995 1994
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ --
State 272 122 40
------- ------- -------
272 122 40
------- ------- -------
Deferred:
Federal (810) (1,432) (5,211)
State 160 998 825
------- ------- -------
(650) (434) (4,386)
------- ------- -------
Total income tax benefit $ (378) $ (312) $(4,346)
======= ======= =======
</TABLE>
Note L - Income Taxes (Continued)
The differences between the Company's income tax expense (benefit) and the
income tax expense (benefit) computed using the U.S. federal income tax rate
were as follows:
Year Ended September 30,
------------------------------
1996 1995 1994
------ ------ ------
(in thousands)
Statutory federal tax expense (benefit) $(2,229) $(1,244) $(4,284)
State income taxes, net of federal income taxes 1,201 739 571
Goodwill amortization 368 344 370
Effects of dispositions of subsidiaries -- -- (1,174)
Other items - net 282 (151) 171
------- ------- -------
Income tax benefit $ (378) $ (312) $(4,346)
======= ======= =======
Significant components of the Company's deferred tax assets and liabilities were
as follows:
September 30,
----------------------
1996 1995
------ ------
Liabilities: (in thousands)
Depreciation $ 30,105 $ 31,148
Intangible assets 13,887 11,481
Accrued Expenses 4,720 3,812
Prepaid Expenses 76 217
Other 674 2,471
-------- --------
Gross deferred tax liabilities 49,462 49,129
Assets:
Net operating and capital loss carry forwards 29,478 27,662
Tax credit carry forwards 5,878 5,747
Accrued expenses and reserves 8,721 8,696
Intangible assets 231 429
Other 3,504 261
-------- --------
Gross deferred tax assets 47,812 42,795
Valuation allowance (3,157) (2,770)
-------- --------
44,655 40,025
-------- --------
Net deferred tax liability $ 4,807 $ 9,104
======== ========
Deferred taxes of $2.0 million, $1.6 million and $1.2 million were recorded in
1996, 1995 and 1994, respectively, for the undistributed earnings of
unconsolidated affiliates, which are reported as discontinued operations in
fiscal 1996.
32
<PAGE>
At September 30, 1996 for income tax purposes, the Company had alternative
minimum tax credit carry forwards of approximately $5.1 million, net operating
loss carry forwards of $51.7 million expiring through 2009, and capital loss
carry forwards of $25.5 million expiring in 1999. State net operating loss carry
forwards were $52.6 million, expiring through 2009. The Company also had a carry
forward of Investment Tax Credit and Rehabilitation Tax Credit of $.7 million
expiring through 2003.
Note M - Related Party Transactions
In connection with the spin-off of MHM Services, Inc. ("MHM") in fiscal 1993,
MHM was obligated to the Company pursuant to a promissory note with MHM in the
original amount of $11.5 million due in August 1998. The note bears interest at
the prime rate plus 1.5% and required interest payments only through fiscal
1995. Principal and interest payments commenced October 1, 1996. As a result of
the Company's analysis of MHM's financial condition, the Company established a
reserve of $6 million on the note as of September 30, 1996. The Company recorded
interest income related to the MHM note of $1.1 million, $1.2 million and $.9
million in 1996, 1995 and 1994, respectively.
In 1996, 1995 and 1994, the Company incurred legal fees of approximately
$657,000, $700,000 and $250,000 respectively, to a law firm in which the
Company's Chairman of the Board of Directors is a partner.
In 1996, the Company incurred consulting fees of approximately $126,000 to a law
firm of which another member of the Board of Directors is a partner.
The Company derived revenues of $175,000, $340,000 and $327,000 in 1996, 1995
and 1994, respectively, pursuant to agreements to provide financial management,
legal and risk management services to PCI, NutraMax and MHM.
Note N - Stock Option Plans
Under the Company's stock option plans, options may be granted to officers and
key employees of the Company and its subsidiaries. No option may be granted for
a term in excess of ten years from the date of grant. As of September 30, 1996,
633,000 of the outstanding stock options were exercisable under the plan. The
exercise prices of outstanding options represented the fair market value at
dates of grant. The Company's Board of Directors has reserved a sufficient
number of shares for the exercise of outstanding stock options.
A summary of the Company's stock option plan activity for common and preferred
shares for the three years ended September 30, 1996 follows:
Number of Option Price
Shares Per Share
----------------------------
(in thousands)
Outstanding at October 1, 1993 1,705 $2.73 to $4.51
Exercised (114) $3.06
Terminated (149) $2.73 to $4.51
-----
Outstanding at September 30, 1994 1,442 $2.73 to $4.51
Granted 21 $4.02 to $4.13
Exercised (60) $2.73 to $3.49
Terminated (292) $2.73 to $4.49
-----
Outstanding at September 30, 1995 1,111 $2.73 to $4.51
Granted 1,153 $4.00 to $5.31
Exercised (575) $2.84 to $3.49
Terminated (78) $3.49 to $4.53
-----
Outstanding at September 30, 1996 1,611 $2.73 to $5.31
=====
33
<PAGE>
Note O - Pension Plan
The Company maintains a noncontributory pension plan which provides retirement
benefits to substantially all employees. Employees generally are eligible to
participate in the plan after one year of service and become fully vested after
five years of service. The plan provides defined benefits based on years of
credited service and compensation. The Company makes contributions that are
sufficient to fully fund its actuarially determined cost, generally equal to the
minimum amounts required by ERISA. Assets of the plan consist primarily of
stocks, bonds and annuities.
Net periodic pension expense is comprised of the following:
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------------------
1996 1995 1994
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 609 $ 785 $ 1,193
Interest cost on projected benefit obligation 1,066 929 894
Actual return on plan assets (1,463) (1,642) (436)
Net amortization and deferrals 544 851 (331)
------- ------- -------
Net periodic pension expense $ 756 $ 923 $ 1,320
======= ======= =======
</TABLE>
The following table presents the funded status of the Company's pension plan and
the amounts reflected in the Consolidated Balance Sheets:
September 30,
---------------------
1996 1995
------ ------
(in thousands)
Actuarial present value of benefit obligations:
Vested benefits $(13,141) $(10,427)
======== ========
Accumulated benefit obligation $(13,713) $(11,291)
======== ========
Projected benefit obligation $(14,539) $(12,606)
Plan assets at fair value 13,663 11,493
Projected benefit obligation in excess of plan assets (876) (1,113)
Unrecognized net gain (1,673) (2,345)
Balance of unrecorded transition obligation 361 647
-------- --------
Accrued pension liability $ (2,188) $ (2,811)
======== ========
The actuarial assumptions used in determining net periodic pension costs were:
Year ended September 30,
------------------------
1996 1995 1994
------ ------ ------
Discount rate 8% 8% 8%
Expected long-term return on plan assets 8% 8% 8%
Weighted average rate of increase in
compensation levels 5% 4.5% 4.5%
34
<PAGE>
Note P - Business Segment Data
The Company operates primarily in one business segment, exclusive of
discontinued operations which include Mobile X-Ray, MEDIQ Imaging, Health
Examinetics, Medifac and HealthQuest. Discontinued operations also include the
Company's equity investments in PCI, NutraMax and InnoServ. The Company, through
its subsidiary MEDIQ/PRN, rents medical equipment on a short-term basis
nationwide. This segment represents more than 90% of the consolidated revenues,
operating profit and assets exclusive of corporate assets, which include net
assets of discontinued operations of $54.7 million.
Note Q - Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data (in thousands except per share data) for 1996
and 1995 is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues (A) $ 32,093 $ 36,999 $ 34,386 $ 32,588
Operating income (A) 2,912(B) 10,161 6,899 5,474
Income (loss) from continuing operations (2,370) 1,273 293 (5,374) (C)
Income (loss) from discontinued operations 1,002 1,542 (1,514) (11,699) (D)
Extraordinary item 1,001 -- 153 (11)
Net income (loss) (367) 2,815 (1,068) (17,084)
Earnings per share:
Income (loss) from continuing operations (.09) .05 .01 (.22)
Income (loss) from discontinued operations .04 .06 (.06) (.47)
Extraordinary item .04 .11 .01 --
Net income (.01) .11 (.04) (.69)
<CAPTION>
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues (A) $ 31,842 $ 37,036 $ 33,098 $ 30,265
Operating income (loss) (A) 4,742 10,310 6,547 2,603
Income (loss) from continuing operations (1,338) 869 (503) (2,374)
Income (loss) from discontinued operations 1,127 918 (689) (2,957)
Net income (loss) (211) 1,787 (1,192) (5,331)
Earnings per share:
Income (loss) from continuing operations (.05) .03 (.02) (.10)
Income (loss) from discontinued operations .04 .04 (.03) (.12)
Net income (loss) (.01) .07 (.05) (.22)
</TABLE>
(A) Reflects seasonal nature of MEDIQ/PRN's business.
(B) Includes non-recurring expenses related to the restructuring charge.
(C) Reflects $6 million reserve on MHM note receivable.
(D) Reflects adjustment of the Company's reserve for the disposal of
discontinued operations.
35
<PAGE>
Note R - Investments in Unconsolidated Affiliates
The Company's investments in unconsolidated affiliates, which are classified as
discontinued operations in the Company's Consolidated Financial Statements,
consist of NutraMax Products, Inc. and PCI Services, Inc. The following summary
presents the Company's approximate ownership interest, carrying value and market
value as of September 30.
1996 1995
--------------------------------- -------------------------------
Ownership Carrying Market Ownership Carrying Market
Interest Value Value Interest Value Value
-------- -------- ------ --------- -------- ------
(in thousands)
PCI 46% $28,127 $ 78,344 47% $24,494 $26,234
NutraMax 47% 20,919 37,345 47% 18,598 40,373
------- ------- ------- -------
$49,046 $115,689 $43,092 $66,607
======= ======== ======= =======
Summarized consolidated financial information for unconsolidated affiliates is
as follows:
NutraMax Products, Inc. -- Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
Sept. 28, Sept. 30,
1996 1995
---- ----
(in thousands)
<S> <C> <C>
ASSETS:
Total current assets $ 32,882 $ 23,552
Property and equipment, net 29,207 23,714
Goodwill, net 13,415 13,978
Other assets 7,374 1,830
-------- --------
$ 82,878 $ 63,074
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Total current liabilities $ 23,391 $ 9,400
Long term debt, less current maturities 11,780 12,550
Deferred income taxes and other liabilities 1,890 1,891
Stockholders' equity 45,817 39,233
-------- --------
$ 82,878 $ 63,074
======== ========
</TABLE>
NutraMax Products, Inc. -- Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------
Sept. 28, Sept. 30, Oct. 1,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net Sales $ 80,479 $ 63,111 $ 55,958
Cost of Sales 57,686 45,916 38,752
-------- -------- --------
Gross profit 22,793 17,195 17,206
Selling, general and administrative expenses 11,662 8,694 9,281
-------- -------- --------
Operating Income 11,131 8,501 7,925
Other credits (charges) (1,768) (1,111) (833)
-------- -------- --------
Income before income tax expense 9,363 7,390 7,092
Income tax expense 3,680 2,916 2,832
-------- -------- --------
Net income $ 5,683 $ 4,474 $ 4,260
======== ======== ========
</TABLE>
36
<PAGE>
Note R - Investments in Unconsolidated Affiliates (Continued)
PCI Services, Inc. - Condensed Consolidated Balance Sheets
June 30, Sept. 30
1996 1995
---- ----
ASSETS: (in thousands)
Total current assets $ 44,750 $ 36,214
Property, plant and equipment, net 84,733 61,901
Goodwill, net 18,843 10,182
Other assets 3,253 670
-------- --------
$151,579 $108,967
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 27,828 $ 24,034
Long-term debt, less current maturities 55,339 27,208
Deferred income taxes and other liabilities 7,033 4,189
Stockholders' equity 61,379 53,536
-------- --------
$151,579 $108,967
======== ========
PCI Services, Inc. - Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended June 30, September 30,
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Net revenue $121,819 $129,785 $121,177
Cost of goods sold 91,061 101,586 96,092
-------- -------- --------
Gross profit 30,758 28,199 25,085
Operating expenses 19,220 18,554 17,561
-------- -------- --------
Income before income tax expense 11,538 9,645 7,524
Income tax expense 3,901 4,073 2,168
-------- -------- --------
Net income $ 7,637 $ 5,572 $ 5,356
======== ======= ========
</TABLE>
The summarized consolidated financial information for the current year for PCI
presented above is for the nine months ended and as of June 30, 1996. On October
11, 1996, PCI was acquired by Cardinal. Accordingly, financial information as of
and for the period ended September 30, 1996 is not available.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
--------
Incorporated by Reference
The information called for by Item 10 "Directors and Executive
Officers of the Registrant", Item 11 "Executive Compensation", Item 12 "Security
Ownership of Certain Beneficial Owners and Management" and Item 13 "Certain
Relationships and Related Transactions" is incorporated herein reference to the
Company's definitive proxy statement for its Annual Meeting of Shareholders
scheduled to be held March 5, 1997, which definitive proxy statement is expected
to be filed with the Commission not later than 120 days after the end of the
fiscal year to which this report relates.
38
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a)(1) Financial Statements and Supplementary Data
Report of Independent Auditors 18
Consolidated Statement of Operations 19
Consolidated Balance Sheets 20
Consolidated Statements of Stockholders' Equity 21
Consolidated Statements of Cash Flows 22
Notes to Consolidated Financial Statements 23-37
The response to this portion of Item 14 is submitted as a separate
section of this report.
(a)(2) Financial Statement Schedules
Included in Part IV of this report:
Schedule II - Valuation and Qualifying Accounts and Reserves
Other Schedules are omitted because of the absence of conditions under
which they are required.
(a)(3) Exhibits
The exhibits are listed in the Index to Exhibits appearing below.
(b) The following reports on Form 8-K were filed during the quarter ended
September 30, 1996.
Date of Earliest Event Requiring Report: July 24, 1996
Date of Filing: July 30, 1996
Items Reported: Item 5
Subject: PCI Services, Inc. merger
with Cardinal Health, Inc.
Date of Earliest Event Requiring Report: August 22, 1996
Date of Filing: August 30, 1996
Items Reported: Item 5
Subject: Commencement of cash tender offer to
purchase all of MEDIQ/PRN's 12 1/8%
Senior Secured Notes Due 1999.
Date of Earliest Event Requiring Report: September 9, 1996 (Date of Report)
Date of Filing: September 23, 1996
Items Reported: Item 5
Subject: Agreement of sale with
NutraMax Products, Inc.
(c) Exhibits
39
<PAGE>
<TABLE>
<CAPTION>
Exhibit # Description Incorporation Reference
- --------- ----------- -----------------------
<S> <C> <C>
2.1 Agreement and Plan of Merger Exhibit 2.1 to Schedule 13D
among Cardinal Health, Inc., filed by Cardinal Health,
Panther Merger Corp., PCI Services, Inc. July 29, 1996
Inc. and MEDIQ dated July 23, 1996.
2.2 Amended and restated Stock Purchase Exhibit 2(a) to Form 10-K Annual
Agreement among MEDIQ, MEDIQ Investment Report filed by NutraMax Products,
Services, Inc. and NutraMax Products, Inc. for the fiscal year ended
Inc. dated November 20, 1996 September 28, 1996
2.3 Affiliate Letter to Cardinal Health, Exhibit 4 to Current Report on Form 8-K
Inc. from MEDIQ dated August 16, filed October 21, 1996
1996.
2.5 Asset Purchase Agreement by and Filed herewith
among MEDIQ Mobile X-Ray Services,
Inc., MEDIQ and Symphony Diagnostic
Services No. 1, Inc. dated
November 6, 1996.
3.1 Certificate of Incorporation. Exhibit 3.1 to Annual Report
on Form 10-K filed on
January 12, 1996
3.2 By-Laws. Exhibit 3.2 to Annual Report
on Form 10-K filed on
January 12, 1996
4.1 Credit Agreement among MEDIQ/PRN Filed herewith
Life Support Services, Inc., the
Lender Parties party thereto, Banque
Nationale de Paris, as Administrative
Agent and as Initial Issuing Bank,
and NationsBank, N.A., as
Documentation Agent dated October 1, 1996.
4.2 Security Agreement among MEDIQ/PRN Exhibit 4 to Schedule 13D
Life Support Services, Inc., the filed October 11, 1996
Lender Parties party thereto,
Banque Nationale de Paris, as
Administrative Agent and as Initial
Issuing Bank, and NationsBank, N.A.
as Documentation Agent dated
October 1, 1996
4.3 Indenture dated as of June 1, 1986 Exhibit 4.1 to S-2
between MEDIQ and Mellon Bank, N.A. Registration Statement
for 7.25% Convertible Subordinated No. 33-5089 originally filed
Debentures due 2006. on May 2, 1986, as amended
4.4 Convertible Subordinated Exhibit 4.2 to S-2
Debentures due 2006. Registration Statement
No. 33-5089 originally filed
on May 2, 1986, as amended
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Exhibit # Description Incorporation Reference
- --------- ----------- -----------------------
<S> <C> <C>
4.5 Indenture dated as of July 1, 1993 Exhibit 4.1 to S-2
between MEDIQ and First Union Bank, Registration Statement
N.A. (formerly First Fidelity Bank, No. 33-61724 originally filed
N.A.) for 7.50% Exchangeable on April 28, 1993, as amended
Subordinated Debentures due 2003.
4.6 7.50% Exchangeable Subordinated Exhibit 4.2 to S-2 Registration
Debentures due 2003 Statement No. 33-61724 originally
filed on April 28, 1993 as amended
4.7(a) Indenture dated as of July 6, 1992 Exhibit 4.1 to Form 10-K
by and between MEDIQ/PRN Life Annual Report of MEDIQ/PRN
Support Services, Inc. and United Life Support Services, Inc.
Jersey Bank, as Trustee. for fiscal 1992
4.7(b) Supplemental Indenture, dated as Exhibit 4.8(b) to Form 10-K
of September 30, 1994, between Annual Report for the fiscal
MEDIQ/PRN Life Support Services, year ended September 30, 1994.
Inc. and United Jersey Bank, as
Trustee.
4.7(c) Second Supplemental Indenture Filed herewith
between MEDIQ/PRN Life Support
Services, Inc. and Summit Bank
f/k/a United Jersey Bank, as Trustee
dated October 1, 1996.
4.7(d) Amendment to Security Agreement between Filed herewith
MEDIQ/PRN Life Support Services, Inc.
and Summit Bank f/k/a United Jersey
Bank and as Trustee dated October 1,
1996.
4.7(e) Defeasance Trust Agreement among Filed herewith
Summit Bank f/k/a United Jersey Bank
and MEDIQ/PRN Life Support Services,
Inc. dated October 1, 1996.
10.6 MEDIQ Executive Security Plan Exhibit 10.6 to Form 10-K
Annual Report filed on
January 12, 1996
10.7(a) 1987 Stock Option Plan Exhibit 10.7 to Form 10-K
Annual Report filed on
January 12, 1996
10.7(b) Amendment to 1987 Stock Option Filed herewith
Plan.
10.8 Employment contract with Michael F. Exhibit 10.8 to Form 10-K
Sandler dated as of June 26, 1995. Annual Report filed on
January 12, 1996
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Exhibit # Description Incorporation Reference
- --------- ----------- -----------------------
<S> <C> <C>
10.9 Employment contract with Thomas E. Exhibit 10.9 to Form 10-K
Carroll dated as of April 27, 1995. Annual Report filed on
January 12, 1996
10.10 Employment contract with Jay M. Exhibit 10.10 to Form 10-K
Kaplan dated as of June 20, 1995. Annual Report filed on
January 12, 1996
11 Statement re computation of per share Filed herewith
earnings.
21 Subsidiaries of the Registrant. Filed herewith
23 Consent of Deloitte & Touche LLP Filed herewith
27 Financial Data Schedule Filed herewith
99.1 Financial Statements of NutraMax Items 8 and 14 of the Annual Report on
Products, Inc. (approximately 47% Form 10-K of NutraMax Products, Inc.
owned by MEDIQ as of September 30, for the fiscal year ended September 28,
1996). 1996. (File No. 0-18671).
</TABLE>
(d) Financial Statements of Unconsolidated Affiliates:
The financial statements of NutraMax Products, Inc., an unconsolidated
affiliate of the company, which are required to be filed pursuant to Item 14(d)
of Form 10-K are filed herein through incorporation by reference under Rule
12b-23, promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"), to the Annual Report on Form 10-K of NutraMax Products, Inc. filed under
the Act, which are included as an exhibit to this Annual Report on Form 10-K
pursuant to Rule 12b-23(c), and such exhibit is incorporated by reference to
this Annual Report on Form 10-K under Rule 12b-32, promulgated under the act.
The financial statements of PCI Services, Inc., an unconsolidated
affiliate of the Company, which are required to be filed pursuant to Item 14(d)
of Form 10-K shall, pursuant to Rule 3-09(b) of Regulation S-X, will not be
filed as a result of the acquisition of PCI by Cardinal Health, Inc. on October
11, 1996.
42
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------
Additions
Description Balance at Charged to (1) Balance at
Beginning Costs and Charged to (2) End of
of Period Expenses Other Accounts Deductions Period
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1996:
Allowance for doubtful accounts $2,207 $ 1,237 $ -- $(1,061) $2,383
====== ======= ======== ======= ======
Year ended September 30, 1995:
Allowance for doubtful accounts $2,195 $ 993 $ -- $ 981 $2,207
====== ======= ======== ======= ======
Year ended September 30, 1994:
Allowance for doubtful accounts $1,968 $ 984 $ 246 $ 1,003 $2,195
====== ======= ======== ======= ======
</TABLE>
(1) Primarily represents allowances for doubtful accounts related to
acquisitions.
(2) Represents accounts directly written-off net of recoveries.
43
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: December 29, 1996 MEDIQ Incorporated
/s/Thomas E. Carroll
------------------------------
BY: Thomas E. Carroll
President and
Chief Executive Officer
/s/Michael F. Sandler
------------------------------
BY: Michael F. Sandler
Senior Vice President - Finance,
Treasurer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Thomas E. Carroll Director, Chief Executive December 29, 1996
- --------------------------- Officer and President
Thomas E. Carroll
/s/ Michael F. Sandler Director and Chief December 29, 1996
- --------------------------- Financial Officer
Michael F. Sandler
Director December 29, 1996
- ---------------------------
Sheldon M. Bonovitz
/s/ Lionel H. Felzer Director December 29, 1996
- ---------------------------
Lionel H. Felzer
Director December 29, 1996
- ---------------------------
Mark Levitan
Director December 29, 1996
- ---------------------------
H. Scott Miller
/s/ Michael J. Rotko Chairman of the Board December 29, 1996
- --------------------------- and Director
Michael J. Rotko
/s/ Jacob Shipon Vice Chairman of the December 29, 1996
- --------------------------- Board and Director
Jacob Shipon
</TABLE>
- ------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
By and Among
MEDIQ MOBILE X-RAY SERVICES, INC.,
MEDIQ INCORPORATED
and
SYMPHONY DIAGNOSTIC SERVICES NO. 1, INC.
Dated as of November 6, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Background...................................................................1
ARTICLE I PURCHASE AND SALE OF ASSETS........................................1
1.1 Assets Being Sold and Purchased...............................1
1.2 Excluded Assets...............................................3
1.3 Assumption of Liabilities.....................................4
1.4 Assignment of Assets..........................................6
ARTICLE II PURCHASE PRICE AND CLOSING........................................7
2.1 Purchase Price................................................7
2.2 Purchase Price Contingency....................................8
2.3 Post-Closing Purchase Price Adjustment........................9
2.4 Closing Date.................................................12
2.5 Closing Documents of Seller..................................12
2.6 Closing Documents of Parent..................................13
2.7 Closing Documents of Buyer...................................13
2.8 Legal Opinions...............................................14
2.9 IHS Stock....................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................20
3.1 Representations and Warranties of Seller and Parent..........20
(a) Authority...............................................20
(b) Organization and Standing of Seller and Parent..........20
(c) Ownership...............................................20
(d) Subsidiaries of the Seller..............................21
(e) Financial Statements....................................21
(f) Taxes...................................................21
(g) Assets Other than Real Property.........................22
(h) Title to Real Property..................................23
(i) Intellectual Property...................................23
(j) Contracts...............................................23
(k) Litigation; Decrees.....................................25
(l) Insurance...............................................25
(m) Benefit Plans...........................................26
(n) Absence of Changes or Events............................26
(o) Compliance with Applicable Laws.........................27
(p) Licenses; Permits.......................................28
(q) Environmental Matters...................................28
(r) Employee and Labor Relations............................28
(s) Special Fee Arrangements................................29
- i -
<PAGE>
Page
----
(t) Patient Volumes.........................................29
(u) Employees...............................................29
(v) Relationships...........................................29
(w) Questionable Payments...................................29
(x) Reimbursement Matters...................................29
(y) Medicare/Medicaid Participation.........................30
(z) Customer List...........................................30
(aa) Financial Statements and SEC Documents..................30
3.2 Representations and Warranties of Buyer......................31
(a) Authority...............................................31
(b) Sufficient Funds........................................31
(c) Organization and Standing of Buyer......................31
(d) Financial Statements and SEC Documents..................32
ARTICLE IV COVENANTS........................................................32
4.1 Covenants of Seller..........................................32
(a) Insurance...............................................32
(b) Employment Agreements...................................32
4.2 Covenants of Buyer...........................................33
(a) Financial Information...................................33
(b) Accounts................................................33
(c) Employees...............................................33
(d) Insurance...............................................33
4.3 Mutual Covenants.............................................34
(a) Records.................................................34
(b) Publicity...............................................35
ARTICLE V OTHER AGREEMENTS..................................................35
5.1 Certain Understandings.......................................35
5.2 Further Assurances...........................................35
5.3 Transfer Taxes...............................................35
5.4 Use of Mediq Name............................................35
5.5 Covenant Not to Compete......................................36
5.6 Restrictions.................................................38
5.7 Adjustments for Medicare Reimbursement Rate Increases........38
5.8 Audit........................................................39
5.9 Billing and Collection Agent.................................39
5.10 Benefits under Excluded Contracts............................39
ARTICLE VI INDEMNIFICATION..................................................40
6.1 Indemnification by Seller and Parent.........................40
6.2 Indemnification by Buyer.....................................41
6.3 Losses Net of Insurance, Etc.................................41
6.4 Termination of Indemnification...............................41
- ii -
<PAGE>
Page
----
6.5 Procedures Relating to Indemnification under Sections
6.1 and 6.2................................................42
ARTICLE VII DEFINITIONS.....................................................43
ARTICLE VIII MISCELLANEOUS..................................................47
8.1 Assignment...................................................47
8.2 No Third-Party Beneficiaries.................................48
8.3 Survival of Representations..................................48
8.4 Expenses.....................................................48
8.5 Amendments...................................................48
8.6 Notices......................................................48
8.7 Fees.........................................................50
8.8 Severability.................................................50
8.9 Interpretation...............................................50
8.10 Waiver.......................................................51
8.11 Counterparts.................................................51
8.12 Entire Agreement.............................................51
8.13 Governing Law................................................51
8.14 Joint and Several............................................51
- iii -
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 1.1(a)(vii) Third Party Consents
Schedule 1.3 Assumed Liabilities
Schedule 3.1(a) Authority Schedule
Schedule 3.1(b) Qualification to do Business Schedule
Schedule 3.1(e) Financial Statements Schedule
Schedule 3.1(f) Taxes Schedule
Schedule 3.1(g) Assets Other than Real Property Schedule
Schedule 3.1(h) Title to Real Property Schedule
Schedule 3.1(i) Intellectual Property Schedule
Schedule 3.1(j) Contracts Schedule
Schedule 3.1(j)-A Contracts Not in Effect Schedule
Schedule 3.1(j)-B Breaches and Defaults Schedule
Schedule 3.1(j)-C Contracts not Current in Payments Schedule
Schedule 3.1(j)-D Consents Schedule
Schedule 3.1(k) Litigation; Decrees Schedule
Schedule 3.1(l) Insurance Schedule
Schedule 3.1(m) Benefit Plans Schedule
Schedule 3.1(n) Absence of Changes or Events Schedule
Schedule 3.1(o) Compliance with Applicable Laws Schedule
Schedule 3.1(p) Licenses; Permits Schedule
Schedule 3.1(q) Environmental Matters Schedule
Schedule 3.1(r) Employee and Labor Relations Schedule
Schedule 3.1(s) Special Fee Arrangements Schedule
Schedule 3.1(t) Patient Volumes Schedule
Schedule 3.1(u) Employees Schedule
Schedule 3.1(v) Relationships Schedule
Schedule 3.1(w) Questionable Payments Schedule
Schedule 3.1(x) Reimbursement Matters Schedule
Schedule 3.1(y) Medicare/Medicaid Participation Schedule
Schedule 3.1(z)-A Facilities List Schedule
Schedule 3.1(z)-B Patients List Schedule
Schedule 5.5 Non-Competition Agreement Parties
LIST OF EXHIBITS
----------------
Exhibit 2.5(d)-1 Bill of Sale
Exhibit 2.5(d)-2 Assignment and Assumption of Contracts
Exhibit 2.7(i) Assumption Agreement
Exhibit 2.8(a) Legal Opinion of Dechert Price & Rhoads
Exhibit 2.8(b) Legal Opinion of Blass & Driggs, Esqs.
Exhibit 3.1(j)-A Customer Contract
Exhibit 3.1(j)-B Customer Contract
- iv -
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of November 6, 1996 by and
among MEDIQ Mobile X-Ray Services, Inc., a Delaware corporation ("Seller"),
MEDIQ Incorporated, a Delaware corporation ("Parent"), and Symphony Diagnostic
Services No. 1, Inc., a California corporation ("Buyer").
Background
WHEREAS, Seller operates a business which provides portable
X-ray, EKG and nutritional services to residents of nursing homes and other
institutions and home care patients, and ancillary services related thereto (the
"Business");
WHEREAS, Buyer wishes to purchase and assume from Seller and
Seller wishes to sell and transfer to Buyer certain assets used and liabilities
arising in the Business, all as more fully described herein;
WHEREAS, Parent owns 100% of the issued and outstanding capital
stock of Seller and is entering into this Agreement as an inducement to Buyer to
enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements contained in
this Agreement, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets Being Sold and Purchased.
(a) Subject to and upon the terms and conditions of this
Agreement, concurrently herewith Seller shall transfer, sell, convey, assign and
deliver to Buyer free and clear of all Liens, other than Permitted Liens (as
hereinafter defined), and Buyer shall purchase from Seller, all of Seller's
right and title to and interest in the following properties and assets as the
same exist on the date hereof:
(i) all tangible assets used in or useful or held for
use in connection with the ownership or operation of the Business whether owned
or leased, including, without limitation, all inventory, supplies, furnishings,
moveable and other equipment, instruments, machinery, tools, vehicles, furniture
and office equipment, all fixtures and leasehold improvements and other items of
personal property owned by Seller;
(ii) manufacturers' and vendors' warranties in
connection with the assets being transferred hereunder;
<PAGE>
(iii) except for Excluded Contracts (as defined in
Section 1.4), agreements to provide services or equipment, real estate leases,
equipment maintenance agreements, non-competition and proprietary information
agreements (other than such confidentiality agreements and letters of intent
that arose from the sale of the Business) and other agreements related to, and
incurred in the ordinary course of, the Business, including its contracts to
provide portable x-ray, EKG and other ancillary services and all other Contracts
(as such term is hereinafter defined in Section 3.1(j));
(iv) trade names, including but not limited to, "MMXR"
and the names, service marks, trademarks, copyrights, copyright applications,
trademark applications, patents, and patent applications used or useful or held
for use in connection with the ownership or operation of the Business and the
right to use the logos, except for the name and service mark "MEDIQ" and any
derivations thereof;
(v) all prepaid expenses and deposits used or useful or
held for use in connection with the ownership or operation of the Assets being
transferred hereunder (the "Prepaid Expenses"), which excludes those prepaid
expenses and deposits (which expenses and deposits remain the property of
Seller) relating to those liabilities that are not Assumed Liabilities;
(vi) all original agreements, documents, books,
instruments, papers, records, and files of all kind and nature relating to the
Business (collectively, the "Records"), but excluding its charter, minute books,
stock record books and corporate seal;
(vii) all consents, licenses, permits, certifications
and approvals granted by any governmental or non-governmental third party
(collectively, the "Third Party Consents"), to the extent transferable in
accordance with applicable law, including without limitation, those specified on
Schedule 1.1(a)(vii);
(viii) its past and present customer lists and all
telephone numbers, patient records, including without limitation, patient x-ray
films and EKGs, and files and other confidential or proprietary information
(other than confidentiality agreements and letters of intent that arose from the
sale of the Business), in each case only to the extent transferable in
accordance with applicable law;
(ix) its cash, cash equivalents, accounts and notes
receivable and the proceeds of any Non-Assignable Receivables (as defined
below);
(x) any provider or participation agreements and
provider numbers relating to Medicare or Medicaid to which Seller is a party
(including, without limitation, any hereafter issued with respect to Michigan)
and any IPL numbers;
(xi) its goodwill and going concern value; and
- 2 -
<PAGE>
(xii) all other assets that are used, useful or held for
use in connection with the ownership or operation of the Business.
(b) The assets being sold and purchased hereunder are
hereinafter collectively referred to as the "Assets".
1.2 Excluded Assets. Notwithstanding anything contained in
Section 1.1 hereof to the contrary, Seller is not selling, assigning,
transferring or conveying to Buyer any asset or item not described in Section
1.1. Without limiting the foregoing, the following assets, rights and properties
are excluded from the transactions contemplated in this Agreement (the "Excluded
Assets"):
(a) the ownership interest in equipment and other personal
property, wherever located, leased, licensed or rented by the Company and owned
by third parties who are not affiliated with Seller;
(b) refunds for Taxes (as hereinafter defined in Section
3.1(f)(i)) paid;
(c) prepaid expenses and deposits relating to those
liabilities that are not Assumed Liabilities (as hereinafter defined);
(d) inter-company accounts receivable from Affiliates of
Seller, and Seller's pension, profit-sharing or other funded employee benefit
plan assets;
(e) the capital stock of Seller owned or held by Parent;
(f) banking or financial institution accounts or any deposit
or concentration accounts or safety deposit boxes (it being understood that the
foregoing does not apply to any funds or other assets held in any such accounts,
all of which are included in the Assets);
(g) Seller's rights under any Excluded Contracts except
under the Agreement between Lawrence M. Smith and Parent, dated as of February
27, 1996 (which rights are expressly included as Assets) or except as expressly
provided in Section 5.5(f);
(h) Medicare Provider Numbers for Pennsylvania, Ohio,
Florida, Maryland, Rhode Island and Washington, D.C.;
(i) the name and service mark "MEDIQ" and any derivations
thereof (the "Name");
(j) Seller's rights under this Agreement or any other
Transaction Documents (as hereinafter defined); and
- 3 -
<PAGE>
(k) all Accounts Receivable of Seller from governmental
payors that by law may not be assigned to Buyer ("Non-Assignable Receivables")
(it being understood however, that for purposes of Section 2.3 of this Agreement
the Non-Assignable Receivables shall be deemed to be Accounts Receivable).
1.3 Assumption of Liabilities. (a) At Closing, Seller shall
transfer to Buyer, and Buyer shall assume and shall thereafter pay, perform and
discharge, to the extent not paid, performed and discharged at the Closing, all
of the Assumed Liabilities.
For purposes of this Agreement "Assumed Liabilities" shall mean,
without duplication:
(i) all operating trade payables, other liabilities and
accrued expenses of Seller that would be classified as current liabilities
("Current Liabilities") on a balance sheet of Seller as of the Closing Date
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the balance sheet delivered to Buyer and included in the
financial statements of Seller as at August 31, 1996 referred to in Section
3.1(e) ("GAAP"), other than: (A) any liabilities that Buyer is expressly not
assuming as provided in this Agreement (other than payables under Excluded
Contracts that are reflected on the Closing Balance Sheet and that constitute
Current Liabilities), (B) any liability due to Parent of the type included under
the heading "Intercompany Advance-Parent" on Seller's balance sheet or any other
fee, loan, advance or other similar item due by Seller to Parent that does not
represent a Current Liability that is a reimbursement for expenses actually
incurred by Parent on Seller's behalf, (it being understood, however, that any
other Liabilities due to Parent or any of its Affiliates constituting Current
Liabilities shall be Assumed Liabilities), (C) any liability for taxes (other
than Buyer Taxes), (D) any obligation or liability arising out of any of the
Seller's Benefit Plans (as defined in Section 3.1(m)) except as provided in
Section 4.2(d), and (E) any obligation or liability to any Designated Employee
(as defined in Section 4.2(c)).
(ii) those obligations that arise or accrue under the
Contracts assigned by Seller to Buyer, with respect to, and only with respect
to, services to be rendered or goods to be supplied or benefits to be conferred
to or by Buyer or otherwise arising or accruing on or after the date that such
Contracts are assigned to Buyer. Notwithstanding the foregoing, Liabilities
under such Contracts that have accrued, or the performance of which is due, on
or prior to such date of assignment or which are in payment or consideration for
Excluded Assets, or that arise out of breaches that occurred prior to Closing,
shall remain the sole responsibility of Seller except to the extent such
liabilities constitute Current Liabilities; and
(iii) liabilities for severance or other payments related to
the termination of employment (as opposed to accrued compensation for services
rendered to Buyer) ("Employee Termination Payments") with respect to each
employee of Seller (other than the Subject Employees as hereinafter defined in
Section 4.1(b)) that Buyer employs as of the Closing Date through a date that
ends at least sixty (60) days after the Closing Date. Within ten (10) days of
request, Seller shall reimburse Buyer for any Employee Termination Payments paid
or incurred by it for any employee of Seller that Buyer terminates prior to the
end of such sixty (60) day period except to the extent such Employee Termination
Payments exceed $150,000. Subject to
- 4 -
<PAGE>
the aforesaid reimbursement obligation of Seller, Buyer shall be responsible for
the payment of all Employee Termination Payments for all of Buyer's employees
that are so terminated. If Buyer shall terminate the employment of any such
employee prior to the end of such sixty (60) day period, then the Employee
Termination Payment with respect to such terminated employee shall include any
severance obligations with respect to such employee included in any Benefit
Plans, severance or employment agreement disclosed in the Disclosure Schedule
(and not constituting an Excluded Contract). If Buyer shall terminate the
employment of any such employee on or after the end of such sixty (60) day
period, then the Employee Termination Payment with respect to such terminated
employee shall exclude any severance obligations included in any Benefit Plan
but shall include any severance obligations with respect to such employees
included in any severance or employment agreement disclosed in the Disclosure
Schedule (and not constituting a Excluded Contract and not otherwise expressing
assumed by Seller pursuant to said agreement).
(b) Buyer will not assume any, and Seller shall remain liable for
each, Liability of Seller existing on the Closing Date, other than the Assumed
Liabilities (the "Excluded Liabilities"). For purposes of this Agreement the
term "Liability" means any claim, lawsuit, liability, obligation or debt of any
kind or nature whatsoever, whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition, and whether or not of a type which
would be reflected as a liability on a balance sheet in accordance with
generally accepted accounting principles, including without limitation (i)
malpractice claims asserted by patients or any other tort claims asserted,
claims for breach of contract, or any claims of any kind asserted by patients,
former patients, employees or any other party that are based on acts or
omissions occurring on or before the Closing Date; (ii) amounts due or that may
become due to Medicare or Medicaid or any other health care reimbursement or
payment intermediary on account of Medicare or Medicaid cost report adjustments
or other payment adjustments attributable to any period on or prior to the
Closing Date (including, without limitation, any of the same which becomes due
to any nursing home, hospital, other facility or other third party pursuant to
any Contract directly, by reason of offset or indemnification, or otherwise, or
any other form of Medicare or other health care reimbursement denial, recapture,
adjustment or overpayment whatsoever with respect to any period on or prior to
the Closing Date), or any liabilities arising out of the Middle District of
Pennsylvania investigation of Seller, or out of any Questionable Payment (as
defined in Section 3.1(w)) ("Reimbursement Liabilities"), (iii) any obligation
or liability arising out of any Excluded Contract, unless and until it is
assigned to and assumed by Buyer in accordance with Section 1.4 and any
Liabilities arising out of any Excluded Asset, (iv) any obligation or liability
arising out of any United States Department of Labor (or any similar State
agency or department) investigation or claim with regard to any employment
matters of the Business, (v) any obligation or liability arising out of any
Seller's Benefit Plan (as such term is hereinafter defined in Section 3.1(m)),
(vi) any liabilities arising out of Taxes due or owing by Seller, including,
without limitation, to the extent such Taxes are accrued on the Closing Balance
Sheet, (vii) any obligation or liability arising out of any of the matters
described on Schedule 3.1(k) (viii) any obligation for bonus, unpaid vacation or
salary of any Subject Employee (as hereinafter defined) outstanding on the
Closing Date, except to the extent included as a Current Liability; (ix) any
liability or obligation arising out of any noncompliance with law
- 5 -
<PAGE>
described in the Memorandum, dated April 26, 1996, to Harvey Z. Werblowsky from
Anne L. Thompson and Richard Wright; and (x) any liabilities due to Parent for
management fees for repayment of working capital or other advances, to the
extent such liabilities are not accrued on the Closing Balance Sheet.
1.4 Assignment of Assets.
(a) Buyer agrees to assume and Seller agrees to assign to
Buyer all of the Contracts set forth on Schedule 3.1(j), except for the
Contracts set forth on Schedule 1.4(a) ("Excluded Contracts"). Notwithstanding
the foregoing, to the extent that any lease, contract, license, permit,
agreement, sales or purchase order, commitment, property interest, qualification
or other Asset described in Section 1.1, and not constituting an Excluded
Contract or otherwise excluded in Section 1.2, to be sold, assigned or conveyed
to Buyer, cannot be sold, assigned or conveyed, without the approval, consent or
waiver of any third person, or if such sale, assignment or conveyance or
attempted sale, assignment or conveyance would constitute a breach thereof or a
violation of any law, decree, order, regulation or other governmental edict
(collectively, "Impracticalities"), this Agreement shall not (unless and until
such Impracticality is resolved) constitute or require a sale, assignment or
conveyance thereof, or an attempted sale, assignment or conveyance thereof, and
each Contract covered by the foregoing sentence (a "Temporary Excluded
Contract") shall be deemed to be an Excluded Contract unless and until the
Impracticalities applicable to it are resolved. The foregoing sentence shall not
be deemed to limit any representation or warranty made by Seller pursuant to
this Agreement.
(b) Buyer and Seller shall each use commercially reasonable
efforts, and shall cooperate with each other, to resolve any Impracticalities
necessary to sell, assign or convey the Assets to Buyer as soon as practicable,
provided that neither Seller nor Buyer shall be required to expend money,
commence any litigation or offer or grant any accommodation (financial or
otherwise) to any third party.
(c) With respect to any asset, contract, lease, agreement,
permit, license, interest or other right of Seller (other than any Excluded
Contract) which is not included in the Assets assigned to Buyer at the Closing
by reason of the immediately preceding paragraphs of this Section 1.4, after the
Closing), (i) the parties shall cooperate with each other, upon written request,
in endeavoring to obtain the requisite third-party consent(s) to the assignment
thereof to Buyer (or the resolution of any other Impracticalities), without
either party being obligated, however, to make any payment to any such third
party which is not otherwise due in order to obtain such consent or resolution,
unless Buyer shall make such payment or agree to reimburse Seller for such
payment, and (ii) if any such requisite consent cannot be obtained, Seller shall
use its commercially reasonable efforts in endeavoring to obtain for Buyer, at
no cost to Seller, an arrangement reasonably acceptable to Buyer designed to
provide for Buyer the benefits thereof (subject to assumption and performance of
all related liabilities in some other manner reasonably acceptable to Buyer and
Seller to the extent they otherwise would be assumed by Buyer in accordance with
this Agreement but for the failure to obtain such consent or resolve such
Impracticality). A Temporary Excluded Contract shall cease to be an
- 6 -
<PAGE>
Excluded Contract for the purposes of this Agreement and shall be assigned to
the Buyer when the Impracticalities applicable to it are resolved.
(d) Provided that Seller complies with its obligations under
Sections 1.4(b) and (c) above, Buyer agrees that Seller shall not have any
liability whatsoever arising out of or relating to the failure to obtain any of
the consents set forth on Schedule 3.1(j)-D.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 Purchase Price.
(a) The aggregate purchase price for the Assets and for the
NonCompetition Agreement (as hereinafter defined in Section 5.5) shall be equal
to the sum of: (a) $10,502,347 payable at Closing (as hereinafter defined)
subject to the adjustment provided in Section 2.3 , which amount shall be
payable as follows: (i) FIVE MILLION THREE HUNDRED AND TWO THOUSAND THREE
HUNDRED AND FORTY-SEVEN DOLLARS ($5,302,347) shall be payable in cash; and (ii)
FIVE MILLION TWO HUNDRED THOUSAND DOLLARS ($5,200,000) shall be paid at the
Closing by delivery to Seller of newly issued shares of the Common Stock, par
value $.001 per share, of IHS (the "IHS Stock"), based upon the valuation and
subject to the terms and conditions of Section 2.9 below; and (b) the Contingent
Payment, as defined in Section 2.2(a) (collectively, the "Purchase Price"). The
cash portion of the Purchase Price shall be paid by wire transfer to an account
designated by Seller. Of the cash portion of the Purchase Price payable at
Closing, the outstanding balance of the $2,100,000 amount due to the United
States Government pursuant to the Settlement Agreement, dated as of September
25, 1995, shall be paid into an escrow account to be released to the United
States Government on behalf of Seller and Parent at Closing.
(b) The Purchase Price as adjusted pursuant to this
Agreement (and all other capitalizable costs) shall be allocated among the
Assets as shall be determined by Buyer, subject to the consent of Seller (which
consent shall not unreasonably be withheld, delayed or conditioned), in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"). Each of the parties hereto agrees to prepare and file all tax
returns (including Form 8594) in a manner consistent with such allocation and to
report this transaction for Federal and state income tax purposes in accordance
with such allocation of the Purchase Price.
2.2 Purchase Price Contingency.
- 7 -
<PAGE>
(a) A contingent payment of $2,000,000 (the "Contingent
Payment") shall be payable, if at all, only in the following amounts and as set
forth in Section 2.2(d):
(i) if there occurs any EKG Transportation Reimbursement
Change (defined below) with respect to any period prior to February 1, 1998,
then no portion of the Contingent Payment shall be paid;
(ii) if no EKG Transportation Reimbursement Change
occurs with respect to the period prior to February 1, 1999, then fifty percent
(50%) of the Contingent Payment shall be paid; and
(iii) if no EKG Transportation Reimbursement Change
occurs with respect to the period prior to February 1, 2000, then the balance of
the Contingent Payment shall be paid.
(b) If any portion of the Contingent Payment shall become
due in accordance with subparagraph (a) above, then the payment of such portion
shall be made thirty (30) days after the Date of Determination (hereinafter
defined) that such portion has become due. As used herein, the phrase "Date of
Determination" shall mean, with respect to any period in question, the earliest
to occur of: (i) the date on which the Health Care Finance Administration
("HCFA") or any other Applicable Authority (defined below) makes a final
determination (that is not in conflict with or being contested or appealed by
any action or proceeding by or before or threatened by any other Applicable
Authority) that any pending, threatened or currently contemplated EKG
Transportation Reimbursement Change will not be enacted, promulgated or
otherwise effectuated with respect to the period in question, and (ii) the last
day of the period in question if no EKG Transportation Reimbursement Change
shall have occurred or be so pending, threatened or currently contemplated with
respect to such period in question.
(c) As used herein, the phrase "EKG Transportation
Reimbursement Change" shall mean an alteration, modification or other change in
the amount of EKG transportation reimbursement paid with respect to the
operation of the Business before, on or after the Closing Date, from either
Medicare Part A or Part B, third party billing, facility billing or direct
billing, which alteration, modification or change: (i) results from any actions
taken by HCFA, Medicare, U.S. Congress or any U.S. Court (an "Applicable
Authority"); and (ii) has the effect of eliminating or reducing the
reimbursement amount which Seller (prior to Closing) or Buyer (after the
Closing) is paid for its services. Notwithstanding anything to the contrary
contained in this Section 2.2, no EKG Transportation Reimbursement Change shall
be deemed to have occurred if it shall only affect payments made or due to
Seller prior to Closing and that do not constitute any part of the Assets.
(d) If there shall be an EKG Transportation Change, but such
EKG Transportation Reimbursement Change shall be a reduction in the amount of
EKG transportation reimbursement paid with respect to the operation of the
Business as aforesaid by less than 40% of the amount payable on the date hereof,
then, in addition to the portion of the Contingent Payment which shall be paid
in accordance with subsection (a) above, if any, within thirty (30)
- 8 -
<PAGE>
days after the Date of Determination of the amount of such EKG Transportation
Change, Buyer shall pay to Seller a portion of the Contingent Payment which has
not previously been paid in accordance with subsection (a), which portion shall
be equal to the percentage set forth in Column "Y" below of the amount not
previously paid which corresponds to the range of percentage reduction in EKG
transportation reimbursement set forth in column "X" below.
================================================================================
"X" "Y"
Range of % Reduction in EKG % Payment of
Transportation Reimbursement Remaining Contingent Payment
- --------------------------------------------------------------------------------
More than 40% Reduction 0
- --------------------------------------------------------------------------------
Less than or equal to 40% Reduction/ 25%
More than 30% Reduction
- --------------------------------------------------------------------------------
Less than or equal to 30% Reduction/ 35%
More than 20% Reduction
- --------------------------------------------------------------------------------
Less than or equal to 20% Reduction/ 45%
More than 10% Reduction
- --------------------------------------------------------------------------------
Less than or equal to 10% Reduction 55%
================================================================================
2.3 Post-Closing Purchase Price Adjustment.
(a) In addition to any adjustment to the Purchase Price
arising under Section 2.2, the Purchase Price shall be further subject to
adjustment after Closing as follows: (i) if the Closing Date Working Capital (as
hereinafter defined) of Seller is less than $2,700,000 (the "Required Amount")
then the Purchase Price shall be reduced dollar-for-dollar by the amount of such
deficiency; and (ii) if the Closing Date Working Capital of Seller shall exceed
$2,700,000 then the Purchase Price shall be increased dollar-for-dollar by the
amount of such excess to the extent payable as provided in Section 2.3(b)(ii).
If the Closing Date Working Capital equals $2,700,000 there will be no
adjustment to the Purchase Price under this Section 2.3(a). As used herein, the
"Closing Date Working Capital" of Seller shall mean the excess of (x) the
aggregate amount of cash and accounts receivable, inventories and prepaid
expenses and other current assets of Seller, in each case, included in the
Assets on the Closing Balance Sheet (as such term is hereinafter defined) over
(y) the aggregate amount of current liabilities reflected on the Closing Balance
Sheet (excluding therefrom any portion thereof constituting Excluded
Liabilities). There shall be no accrual on the Closing Balance Sheet for any
bonuses due to any Subject Employee or for any bonuses arising out of the
consummation of the transactions contemplated by this Agreement, and all of such
liabilities shall be Excluded Liabilities. No accrual shall be made for Employee
Termination Payments.
(b) Regarding the Closing Balance Sheet. (i) At the Closing,
Seller shall deliver to Buyer the balance sheet of Seller and a calculation of
the amount of the Closing
- 9 -
<PAGE>
Date Working Capital, certified by the Chief Financial Officer of the Seller to
be his or her best good faith estimate of such balance sheet and Closing Date
Working Capital as of the Closing (the "Preliminary Closing Date Balance
Sheet"). The Preliminary Closing Date Balance Sheet shall be prepared in
accordance with GAAP (the "Accounting Principles"). Buyer shall complete, at its
own expense, a review of such calculation of the Closing Date Working Capital
and shall deliver to Seller within ninety (90) days after the Closing, its
written report (the "Working Capital Review") setting forth the amount of such
Closing Date Working Capital as confirmed or determined in accordance with such
review. The Working Capital Review must be done in accordance with the same
Accounting Principles used by Seller. In the event that the Working Capital
Review delivered to Seller in accordance with the provisions of this Agreement
discloses that the Closing Date Working Capital was greater than $2,700,000, the
Purchase Price shall be deemed to have been increased by the amount of such
excess (the "Working Capital Increase"), provided that Buyer collects in respect
of Accounts Receivable (hereinafter defined) at least the Target Amount
(hereinafter defined). The "Target Amount" shall mean the amount of accounts
receivable that must be included as current assets in the Closing Date Working
Capital in order to obtain a Closing Date Working Capital amount equal to
$2,700,000. Any payment by Seller to Buyer of a Purchase Price adjustment
pursuant to clause (ii) below shall decrease the Target Amount by the principal
amount of such payment. In the event that the Working Capital Review delivered
to Seller in accordance with the provisions of this Agreement discloses that the
Closing Date Working Capital was less than $2,700,000, the Purchase Price shall
be deemed to have been reduced by the amount of such deficiency and Seller, upon
demand, shall immediately pay the amount of such deficiency to Buyer. If Seller
shall dispute the amount set forth in the Working Capital Review, it shall give
notice to Buyer (a "Delay Payment Notice") within thirty (30) days after
delivery to it of the Working Capital Review that the adjusting payment required
above should not then be made and setting forth in reasonable detail its
objections and the basis therefor, in which case the parties shall meet and in
good faith attempt to resolve any disagreements within thirty (30) days after
delivery to Buyer of the Delay Payment Notice. If Seller shall not have
delivered a Delay Payment Notice within such thirty (30) day period, Seller
shall be deemed to conclusively have accepted the determination of Buyer of the
amount of Working Capital as of the Closing Date, in which case such
determination shall be final and shall not be subject to further review,
challenge or adjustment, absent fraud. If Seller and Buyer cannot resolve any
such disputes, such disputes shall be resolved by KPMG Peat Marwick LLP or if
such firm is unable to so act or is not at the time independent of both Seller
and Buyer, by an independent nationally recognized accounting firm selected by
KPMG Peat Marwick LLP, which accounting firm is reasonably acceptable to both
Seller and Buyer (the accounting firm so engaged shall hereinafter be referred
to as the "Independent Accounting Firm"); provided, the Independent Accounting
Firm shall only resolve disputes properly raised in accordance with the
provisions of this Section 2.3. The Independent Accounting Firm shall be
directed to make its determination as promptly as practicable (and no later than
30 days after referral to it of such dispute by Seller and Buyer) and such
determination shall be final and binding upon Seller and Buyer. The expenses
relating to the engagement of the Independent Accounting Firm shall be borne by
the party against whom the Independent Accounting Firm shall rule; provided that
if it does not clearly rule in favor of either party, the expenses shall be
shared one-half by Seller and one-half by Buyer. For purposes of this Agreement,
the Closing Balance Sheet shall be as set forth in the Working Capital Review,
as accepted by Seller as set
- 10 -
<PAGE>
forth above, or as modified by resolution of Seller and Buyer or by the
Independent Accounting Firm.
(ii) Any adjustment to the Purchase Price due to Buyer
pursuant to this Section shall be paid by Seller to Buyer (together with
interest on such amount from the date on which it shall become due to Buyer in
accordance with this Agreement until paid at a rate equal to 7% per annum)
within 10 days after the final determination of such adjustment is made. Subject
to subsection (c)(ii) below, any Excess Collections (hereinafter defined) shall
be paid by Buyer to Seller on the fifteenth business day of each calendar month
in an amount equal to all Excess Collections (hereinafter defined) during the
calendar month then most recently ended, and any such payments shall be first
applied against any Working Capital Increases and any excess shall thereafter be
paid to Seller. "Excess Collections" means the amount of Accounts Receivable
collected in excess of the Target Amount. If Buyer shall fail to timely pay any
such amount in accordance with the foregoing two sentences, then such amount
shall bear interest from the date on which it shall become so due to Seller
until paid at a rate equal to 7% per annum, and such interest shall be payable
upon demand.
(c) Accounts Receivable Collection and Reporting. (i)
Commencing 90 days after the Closing Date and continuing until the first
anniversary of the Closing Date, or if earlier, until all Accounts Receivable
shall have been collected, Buyer shall provide quarterly reports to Seller
regarding the amounts collected on the accounts receivable of the Business
outstanding as of the Closing Date (the "Accounts Receivable") and Buyer's
efforts to collect such accounts. Buyer shall, at Buyer's election, either (i)
apply at least the same efforts in the collection of the Accounts Receivable as
Buyer applies in the collection of its own accounts receivable or (ii) use
substantially the same personnel and procedures to collect the Accounts
Receivable as were used by the Business immediately prior to the Closing Date,
in the substantially same positions, with the substantially same
responsibilities and at the substantially same salaries and hours. Buyer shall
have no liability or responsibility to collect Accounts Receivable to the extent
Seller fails to deliver to Buyer such documentation as Buyer shall reasonably
request with respect thereto. The collection of all Accounts Receivable received
from an account debtor of the Business as of the Closing Date shall be applied
to the oldest outstanding invoice with such account debtor which is not then in
dispute consistent with Buyer's general overpayment policies; provided, however,
notwithstanding the foregoing, any payments made by an account debtor in respect
of a designated account shall be applied to the account so designated. For
purposes of the preceding sentence, a disputed invoice is an invoice that is the
subject of a written dispute from the account debtor which is reasonably
recognized by Buyer as disputed in accordance with its general policies; upon
the resolution of any such dispute, such invoice shall no longer be considered
disputed and collections from the account debtor shall be applied in accordance
with the previous sentence as if such dispute had not arisen. Provided that
Buyer has collected in respect of Accounts Receivable at least the Target
Amount, then on the fifteenth (15th) business day of each calendar month until
one month after the first anniversary of the Closing Date, Buyer shall provide
reports to Seller regarding the amounts collected on such Accounts Receivable
with respect to the preceding calendar month, and Buyer's efforts to collect
such accounts.
- 11 -
<PAGE>
(ii) In the event that Buyer has complied with its
collection obligations set forth in this paragraph (c) but has not collected at
least the Target Amount by the first anniversary of the Closing Date, (i) Buyer
shall notify Seller of the amount of such Accounts Receivable actually collected
by Buyer, (ii) Seller shall promptly remit to Buyer the amount, if any, by which
the amount of such Accounts Receivable actually collected is less than the
Target Amount (to the extent not already paid), and (iii) Buyer shall promptly
remit to Seller all amounts thereafter collected by Buyer in respect of the
Accounts Receivable.
2.4 Closing Date. The closing (the "Closing") of the purchase and
sale of the Assets shall be held pursuant to overnight courier and escrow
arrangements acceptable to all parties hereto as of 12:01 a.m. on November 6,
1996 or on such other date or in such other manner as the parties may mutually
agree. The date on which the Closing shall occur is hereinafter referred to as
the "Closing Date".
2.5 Closing Documents of Seller. At the Closing, Seller shall
deliver or cause to be delivered to Buyer the following documents:
(a) copies of the Certificate of Incorporation of Seller as
amended to the Closing Date, certified by its Secretary and the Secretary of
State of the State of Delaware;
(b) copies of the By-laws of Seller as amended to the
Closing Date, certified by its Secretary;
(c) long form corporate good standing certificate with
respect to Seller from the Secretary of State of the State of Delaware, dated no
earlier than five (5) days prior to the Closing Date;
(d) a duly executed bill of sale (the "Bill of Sale"), in
the form attached hereto as Exhibit 2.5(d)-1 and an assignment and assumption of
Contracts in the form of Exhibit 2.5(d)-2, and such documents as shall be
reasonably necessary to convey title to all owned motor vehicles and the
registrations of all equipment included in the Assets to Buyer in a fashion
consistent with the provisions of this Agreement;
(e) the Records contemplated by Section 4.3;
(f) a certificate from the Chief Financial Officer of Seller
setting forth in reasonable detail the best good faith estimate of such Chief
Financial Officer of the Closing Date Working Capital;
(g) a certificate dated the Closing Date and signed by the
duly authorized signatories of Seller stating that the transactions contemplated
hereunder have been duly authorized and approved by Seller and certifying the
attached resolutions of Seller's shareholders, if applicable, and Board of
Directors approving said transactions; and
- 12 -
<PAGE>
(h) an affidavit that Seller is not a foreign person.
2.6 Closing Documents of Parent. At the Closing, Parent shall
deliver or cause to be delivered to Buyer the following documents:
(a) copies of the Certificate of Incorporation of Parent as
amended to the Closing Date, certified by its Secretary and the Secretary of
State of the State of Delaware;
(b) copies of the By-laws of Parent as amended to the
Closing Date, certified by its Secretary;
(c) long form corporate good standing certificate with
respect to Parent from the Secretary of State of the State of Delaware, dated no
earlier than five (5) days prior to the Closing Date; and
(d) a certificate dated the Closing Date and signed by the
duly authorized signatories of Parent stating that the transactions contemplated
hereunder have been duly authorized and approved by Parent and certifying the
attached resolutions of Parent's Board of Directors approving said transactions
2.7 Closing Documents of Buyer. At the Closing, Buyer shall
deliver or cause to be delivered to Parent the following documents:
(a) copies of its Certificate of Incorporation as amended to
the Closing Date, certified by its Secretary;
(b) copies of its By-laws, as amended to the Closing Date,
certified by its Secretary;
(c) long form tax and corporate good standing certificate
from the Secretary of State of the State of California, dated no earlier than
five (5) days prior to the Closing Date;
(d) copies of the Certificate of Incorporation of Integrated
Health Services, Inc. ("IHS") as amended to the Closing Date, certified by its
Secretary;
(e) copies of the By-laws of IHS as amended to the Closing
Date, certified by its Secretary;
(f) long form corporate good standing certificate for IHS
from the Secretary of State of the State of Delaware, dated no earlier than five
(5) days prior to the Closing Date;
(g) a certificate dated the Closing Date and signed by the
duly authorized signatories of Buyer stating that the transactions contemplated
hereunder have been
- 13 -
<PAGE>
duly authorized and approved by the Buyer and certifying the attached
resolutions of its Board of Directors, and if applicable, its shareholders,
approves said transactions;
(h) a certificate dated the Closing Date and signed by the
duly authorized signatories of IHS stating that the transactions hereunder have
been duly authorized and approved by IHS including the guarantee by IHS of
Buyer's performance under such transactions and certifying the attached
resolutions of its Board of Directors, and if applicable, its shareholders,
approves said transactions;
(i) a duly executed assumption agreement (the "Assumption
Agreement"), in the form attached hereto as Exhibit 2.7(i), and such other
documents as Seller shall reasonably request to evidence Buyer's assumption of
the Assumed Liabilities; and
(j) stock certificates representing the shares of IHS Stock
issued to Seller in connection with this Agreement.
2.8 Legal Opinions. In addition to the other documents to be
delivered at Closing, (a) Buyer shall have received the favorable opinion, dated
as of the Closing Date, from Dechert Price & Rhoads, counsel for Seller and for
Parent, in the form attached hereto as Exhibit 2.8(a) and (b) Parent and Seller
shall have received the favorable opinion, dated as of the Closing Date, from
Blass & Driggs, Esq., counsel for Buyer, in the form attached hereto as Exhibit
2.8(b).
2.9 IHS Stock.
(a) As set forth in Section 2.1(b) above, a portion of the
Purchase Price shall be payable by means of the delivery to Seller of IHS Stock
valued at $5,200,000 based upon a price per share (the "Initial Market Value Per
Share") of such stock equal to the average closing NYSE price of such stock for
the twenty (20) business day period ending on the date which is four (4)
business days prior to the Closing Date.
(b) Resale Limitations. All sales of IHS Stock issued
pursuant to this Agreement shall be effected solely through Smith Barney, Inc.,
as broker, and sales of such shares shall not at any time, in the aggregate,
exceed one-hundred thousand (100,000) shares during any thirty (30) day period.
The restriction on the number of shares that may be sold in accordance with this
subsection (b) shall lapse at such time as the Seller or the Parent shall have
sold at least 100,000 of such shares in accordance with this subsection (b). If
Smith Barney, Inc. shall be unable to act as the broker for any of such sales,
then IHS shall designate another broker that is reasonably acceptable to Seller
through which such sales shall be made.
(c) Investment Representations. All shares of IHS Stock to
be issued hereunder will be newly issued shares of IHS. Seller represents and
warrants to IHS and Buyer that the IHS Stock being issued hereunder is being
acquired, and will be acquired, by it for investment for its own account or the
account of the Parent, to whom transfer of any of such shares is expressly
permitted in accordance with this Agreement, and not with a view to or for
- 14 -
<PAGE>
sale in connection with any distribution thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") or any applicable
state securities law; Seller acknowledges that the IHS Stock constitutes
restricted securities under Rule 144 promulgated by the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act, may have to be
held indefinitely and may not be sold, transferred, assigned, pledged or
otherwise disposed of except pursuant to an effective registration statement or
an exemption from registration under the Securities Act and the rules and
regulations thereunder. Seller and Parent have the knowledge and experience in
financial and business matters, are capable of evaluating the merits and risks
of the investment, and are able to bear the economic risk of such investment.
Seller and Parent have been provided with such materials as are generally
provided to shareholders of IHS and has had the opportunity to make inquiries of
and obtain from representatives and employees of IHS such other information
about IHS as they deem necessary in connection with such investment.
(d) Legends. It is understood that the certificates
evidencing the IHS Stock shall bear the following (or a similar) legend (in
addition to any legends which may be required in the opinion of IHS's counsel by
the applicable securities laws of any state):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION
OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.
Upon the written request of Seller and Parent, accompanied by a legal
opinion in form and substance and from counsel reasonably acceptable to IHS and
setting forth that the shares evidenced by the stock certificate are freely
transferable without registration under the Securities Act, IHS shall cause a
new certificate, evidencing such shares and that does not bear such legend, to
be issued to Seller or the Parent.
(e) Transfers. Upon prior notice to IHS, Seller shall be
permitted to transfer any of the shares of IHS Stock acquired by it pursuant to
this Agreement and the registration rights related thereto to Parent.
(f) Registration of IHS Stock. (i) IHS will use its best
efforts to cause to be prepared, filed and declared effective by the Commission
within sixty (60) to ninety (90) days following the Closing Date, a registration
statement for the registration under the Securities Act of the IHS Stock issued
to Seller pursuant to this Agreement, and IHS shall maintain the effectiveness
of such registration statement for a period of two (2) years following the date
on which it becomes effective, or for so long as Seller or Parent shall own any
of the IHS Stock issued pursuant to this Agreement, whichever shall occur first,
in each case except to the extent that such shares shall become freely
transferable without registration under the Securities Act. If the number of
shares of IHS Stock included in the Purchase Price shall be increased pursuant
to clause (ii) below, IHS shall, prior to the effective date of such
registration statement estimate the number of additional shares and shall use
its best efforts to include all of the newly issued shares in the registration
statement.
- 15 -
<PAGE>
(ii) (A) As of the date that such registration statement
shall become effective, the number of shares of IHS Stock included in the
Purchase Price shall be adjusted so that the number of shares issued to Seller
pursuant to this Agreement shall have an aggregate fair market value (the
"Adjusted Fair Market Value") equal to $5,200,000 based upon a price per share
of such stock equal to the average closing NYSE price of such stock for the
twenty (20) business day period ending on the date which is two (2) business
days prior to such effective date (the "Adjusted Market Value Per Share").
Within five (5) business days after such effective date IHS shall deliver notice
(the "Adjustment Notice") to Seller of the Adjusted Fair Market Value, the
Adjusted Market Value Per Share and the number of shares to be delivered by
Buyer to Seller (if the Adjusted Market Value Per Share shall be less than the
Initial Market Value Per Share) or by Seller to Buyer (if the Adjusted Market
Value Per Share shall be greater than the Initial Market Value Per Share) so as
to effect the adjustment described in this clause (ii). The number of shares to
be delivered or issued, as the case may be, shall be rounded up or down so that
no fractional shares need be issued. Within five (5) business days the parties
shall make the delivery of the shares of IHS Stock required in the Adjustment
Notice.
(B) In lieu of (and not in addition to) the adjustment
set forth in paragraph (A) above, in addition to any other remedy available at
law, if the registration statement referred to in clause (i) above shall not
have been declared effective on or prior to the second anniversary of the
Closing Date and the Adjusted Market Value Per Share as of such second
anniversary date shall be less than Initial Market Value Per Share, then, the
adjustment set forth in paragraph (A) above shall be made as of such second
anniversary date.
(g) Registration Procedures, etc. In connection with the
registration rights granted to Seller with respect to the IHS Stock as provided
in this Section 2.9, IHS agrees as follows:
(i) IHS will promptly notify Seller at any time when a
prospectus relating to a registration statement covering Seller's shares under
this Section 2.9 is required to be delivered under the Securities Act, of the
happening of any event known to IHS as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing.
(ii) IHS shall furnish Seller with such number of
prospectuses as shall reasonably be requested, and Seller agrees to comply with
the prospectus delivery requirements of the Securities Act in connection with
any sale of IHS Stock by it.
(iii) IHS shall take all necessary action which may be
required in qualifying or registering IHS Stock included in a registration
statement for offering and sale
- 16 -
<PAGE>
under the securities or Blue Sky laws of such states as reasonably are requested
by Seller, provided that IHS shall not be obligated to qualify as a foreign
corporation or dealer to do business under the laws of any such jurisdiction.
(iv) The information included or incorporated by
reference in the registration statement filed pursuant to this Section 2.9 will
not, at the time any such registration statement becomes effective, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein as necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier filing of such registration
statement or any amendments thereto. The registration statement will comply in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder. With respect to sales of IHS Stock sold in
accordance with the provisions of this Section 2.9 pursuant to the registration
statement, IHS shall indemnify Seller and its successors and assigns, and the
Parent, and each person, if any, who controls Seller within the meaning of ss.15
of the Securities Act or ss.20(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or any other statute,
common law or otherwise, based upon any untrue statement or alleged untrue
statement of a material fact contained in such registration statement executed
by IHS or based upon written information furnished by IHS filed in any
jurisdiction in order to qualify IHS Stock under the securities laws thereof or
filed with the Commission, any state securities commission or agency, NYSE,
NASDAQ, or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to IHS by Seller or the Parent for use in such registration statement,
any amendment or supplement thereto or any application, as the case may be. If
any action is brought against Seller or any controlling person of Seller or the
Parent in respect of which indemnity may be sought against IHS pursuant to this
subsection, Seller or the Parent or such controlling person of Seller or the
Parent shall within thirty (30) days after the receipt thereof of a summons or
complaint, notify IHS in writing of the institution of such action and IHS shall
assume the defense of such action, including the employment and payment of
reasonable fees and expenses of counsel. Seller or any such controlling person
or the Parent shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such Seller or such controlling person or such Parent unless (A) the employment
of such counsel shall have been authorized in writing by IHS in connection with
the defense of such action, or (B) IHS shall not have employed counsel to have
charge of the defense of such action, or (C) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it or
them which are different from or additional to those available to IHS (in which
case, IHS shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events the
- 17 -
<PAGE>
fees and expenses of not more than one additional firm of attorneys for Seller,
such controlling person and the Parent shall be borne by IHS and such law firm
shall be reasonably acceptable to IHS. Except as expressly provided in the
previous sentence, in the event that Seller, any such controlling person or any
the Parent assumes control of the defense of any such action or claim, IHS shall
not thereafter be liable to Seller or any such controlling person or the Parent
in investigating, preparing or defending any such action or claim. IHS agrees
promptly to notify Seller of the commencement of any litigation or proceedings
against IHS or any of its officers, directors or controlling persons in
connection with the resale of IHS Stock or in connection with such registration
statement. If the indemnification provided for in this Section 2.9 is held by a
court of competent jurisdiction to be unavailable to Seller or any controlling
person of Seller or any Parent with respect to any loss, liability, claim,
damage or expense referred to herein, then IHS in lieu of indemnifying Seller or
any controlling person of Seller or the Parent hereunder, shall contribute to
the amount paid or payable by Seller or any controlling person of Seller or the
Parent hereunder, as a result of such loss, liability, claim, damage, expense or
liability in such proportion as is appropriate to reflect the relative fault of
IHS on the one hand and of Seller or any controlling person of Seller or the
Parent on the other hand in connection with the statements or omissions which
resulted in such loss, liability, claim, damage, expense, or liability, as well
as any other relevant equitable considerations. The relative fault of IHS and of
Seller or any controlling person of Seller or the Parent shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by IHS or by Seller or any controlling person of Seller or
the Parent and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(v) Seller and Parent and their respective successors
and assigns, shall severally, and not jointly, indemnify IHS and Buyer, their
respective officers, directors and advisers, and each person, if any, who
controls IHS or Buyer within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Exchange Act against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising from information that was furnished by or on behalf of
Seller, or the Parent or its, respective successors or assigns and which was
included in the selling shareholder provisions in such registration statement.
The indemnification rights set forth in this clause (v) shall be subject to the
same procedures as are to be applied to the indemnification rights set forth in
clause (iv) above, although references to Buyer and IHS on the one hand, and
Seller and Parent, on the other hand, shall be reversed.
(h) Registration Expenses. Seller and the Parent shall not be
responsible for, and IHS shall bear, all of the reasonable expenses of IHS
related to such registration including, without limitation, the fees and
expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of IHS Stock and the costs
- 18 -
<PAGE>
and expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of IHS Stock under the Blue Sky laws of
various jurisdictions. IHS, however, shall not be required to pay underwriter's
or brokerage discounts, commissions or expenses, or to pay any costs and
expenses in excess in the aggregate of $20,000 for Blue Sky qualifications of
Seller's (and the Parent's) IHS Stock, or to pay any costs or expenses arising
out of Seller's or the Parent's failure to comply with its obligations under
this Section 2.9.
(i) Notice of Sale. Except for transfers permitted under
Section 2.9(e), above, if the Seller (or the Parent) desires to transfer all or
any portion of its IHS Stock, Seller (or the Parent, as the case may be) will
deliver written notice to IHS, describing in reasonable detail its intention to
effect the transfer and the manner of the proposed transfer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller and Parent.
Seller and Parent hereby, jointly and severally, represent and warrant to Buyer
as follows:
(a) Authority. This Agreement and each of the certificates,
instruments, agreements and documents executed and delivered by Seller or Parent
pursuant to this Agreement (Seller's "Transactions Documents") have been duly
executed and delivered by Seller and Parent and constitute the legal, valid and
binding obligations of Seller and Parent enforceable against each of them, in
accordance with their respective terms. The Seller and Parent have all requisite
corporate power and authority to enter into this Agreement and each Seller's
Transaction Document and to consummate the transactions contemplated hereby and
thereby. All corporate acts and other proceedings required to be taken by the
Seller and Parent to authorize the execution, delivery and performance of this
Agreement and each Seller's Transaction Document and the consummation of the
transactions contemplated hereby and thereby have been duly and properly taken.
The execution and delivery of this Agreement and the Seller's Transaction
Documents do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the terms hereof and thereof will not: result in
any violation of or default, under, or require any consents or approvals under
(i) any material note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment or agreement to which Seller or the Parent is a party or by
which any of their respective properties are bound except as set forth on
Schedule 3.1(a), (ii) any provision of the Certificate of Incorporation or
Bylaws of Seller or Parent and (iii) any judgment, injunction, order or decree,
or material statute, law, ordinance, rule or regulation applicable to Seller or
Parent, or the property or assets of Seller or Parent.
(b) Organization and Standing of Seller and Parent. Seller
and Parent are each a corporation duly organized and validly existing under the
laws of Delaware. Seller
- 19 -
<PAGE>
has full corporate power and authority and possesses all material governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to use its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business in all material respects as presently
conducted. Seller is duly qualified and in good standing to do business in each
jurisdiction set forth on Schedule 3.1(b) and Seller is not doing business and
none of the Assets are located in any other jurisdiction where the failure to be
so qualified and in good standing would have a Material Adverse Effect. Seller
and Parent have delivered to Buyer true and complete copies of the Certificates
of Incorporation, as amended to date, and the Bylaws, as in effect on the date
hereof, of Seller and Parent.
(c) Ownership. Parent owns of record and beneficially all of
the outstanding capital stock of Seller.
(d) Subsidiaries of the Seller. Seller does not, directly or
indirectly, own any stock of, or any other interest in, any other corporation or
business entity (including, without limitation, joint ventures and
partnerships).
(e) Financial Statements. Schedule 3.1(e) sets forth the
unaudited consolidated balance sheets of Seller as of September 30, 1994 (the
"1994 Balance Sheet"), September 30, 1995 (the "1995 Balance Sheet"), July 31,
1996, and August 31, 1996 (the "Balance Sheet"), and the unaudited consolidated
statements of income, shareholders' equity, and cash flows of Seller for the
periods ended September 30, 1994, September 30, 1995, July 31, 1996, and August
31, 1996 (collectively, the "Financial Statements"). The Financial Statements
have been prepared in accordance with the books and records of Seller and
present fairly, in all material respects, the financial position and operations
as of September 30, 1994, September 30, 1995, July 31, 1996, and August 31, 1996
and the results of operations and cash flows of Seller for the periods then
ended in conformity with generally accepted accounting principles, consistently
applied, except for (i) the absence of certain notes which would otherwise be
required by generally accepted accounting principles and (ii) no accrual has
been made in connection with the governmental inquiries described on Schedule
3.1(e). Except as set forth on Schedule 3.1(e), the income statements included
in the Financial Statements do not contain any material items of special or
nonrecurring income or expense or any other income not earned or expense not
incurred in the ordinary course of business except as expressly specified
therein, and, except as so set forth, such financial statements include all
adjustments, which consist only of normal recurring accruals, necessary for such
presentation. Except under general principles of successor liability law
(including, without limitation, such principles arising under applicable
healthcare law), there is no basis for the assertion against Seller of any
material Liability of any nature or in any amount (other than Liabilities
reflected on the Balance Sheet or as have been incurred since the date of the
Balance Sheet in the ordinary course of business consistent with past practice)
for which Buyer may become liable.
- 20 -
<PAGE>
(f) Taxes.
(i) For purposes of this Agreement, (A) "Tax" or "Taxes"
shall mean all Federal, state, local and foreign taxes, charges and assessments,
including all interest, penalties and additions imposed with respect to such
amounts and (B) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(ii) Seller has filed or caused to be filed in a timely
manner (within any applicable extension periods) all Tax returns, reports and
forms required to have been filed by the Code or by applicable state, local or
foreign Tax laws, rules, regulations and orders (collectively, "Returns") other
than those the failure which to file would not have a Material Adverse Effect;
all Taxes shown to be due on such Returns have been timely paid in full; and no
tax Liens have been filed and no material claims are being asserted in writing
with respect to any Taxes, except as set forth on Schedule 3.1(f). True and
complete copies of all Returns with respect to income or sales or use for any
period during the two-year period ending on the date hereof have been delivered
to Buyer, and as of the time of filing, the Returns correctly reflected in all
material respects or will correctly reflect in all material respects the facts
regarding the income, business, assets, operations, activities and status of
Seller and any other information required to be shown therein.
(g) Assets Other than Real Property. Schedule 3.1(g) sets
forth a complete description and list of all of Seller's motor vehicles, all
x-ray, EKG and other equipment, all computers, all office furniture and each
other item of tangible personal property included in the Assets that has a fair
market value of at least $500. Except as disclosed on Schedule 3.1(g) hereto,
Seller has such title to all Assets comprising personal property, tangible or
intangible, reflected on the Balance Sheet or thereafter acquired, except those
since sold or otherwise disposed of in the ordinary course of business,
consistent with past practice, as is necessary to permit the use and enjoyment
of such assets and properties in the same manner as used and enjoyed by Seller
and none of such Assets are subject to any liens, claims, security interests,
mortgages, pledges, charges, easements, rights of setoff, restraints on
transfers, restrictions on use, options, conditional sale agreements, subleases,
sublicenses or encumbrances of any kind or nature whatsoever ("Liens"), other
than Permitted Liens. For the purposes of this Agreement, "Permitted Liens"
means: (i) each lien set forth on Schedule 3.1(g) hereto; (ii) carriers',
warehouseman's, mechanics, materialmen's, repairmen's or other like liens
arising in the ordinary course of business which are not overdue for a period of
more than 30 days; (iii) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of like nature
incurred in the ordinary course of business, provided that each such deposit
shall be included in the Assets and shall not exceed $15,000 in any one case, or
$75,000 in the aggregate; (iv) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation; and
(v) capitalized financing leases to the extent reflected on the Balance Sheet
and copies of which have been delivered to Buyer. No person
- 21 -
<PAGE>
other than Seller has any right to the use or possession of any of such property
(other than in the ordinary course of business in accordance with contractual
rights) and no currently effective financing statement (other than Permitted
Liens) with respect to such personal property has been filed in any
jurisdiction, and (other than Permitted Liens) Seller has not signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement. All of such personal property
owned by Seller and necessary to the operation of the Business, or currently
being used by Seller in the operation of the Business, comprising equipment,
improvements, furniture, vehicles and other tangible personal property, whether
owned or leased, is in good operating condition and repair except for normal
wear and tear in the ordinary course of business. The Assets, other than the
Excluded Assets, represent all of the assets, including without limitation, all
property (real, personal and mixed), licenses, intellectual property, permits
and authorizations, contracts, leases and other agreements that are owned by
Seller, and include all of the Assets owned by Seller, other than any Excluded
Assets, that are necessary or material to the operation of the Business as now
operated (the "Necessary Assets"). The preceding sentence shall not apply to
assets owned by any other person. This paragraph (g) does not relate to real
property or interests in real property, such items being the subject of
paragraph (h) of this Section 3.1.
(h) Title to Real Property. Schedule 3.1(h) sets forth a
complete list of all real property and interests in real property leased by
Seller. Except as disclosed on the appropriate Schedule, Seller has such
leasehold interest in all real property and interests in real property shown on
Schedule 3.1(h) to be leased by it, as is necessary to permit the use and
enjoyment of such real property substantially in the manner such real property
is now utilized by Seller, and there are no Liens (other than capitalized
financing leases) affecting any such leasehold interest except for (A)
easements, covenants, rights-of-way and other encumbrances or restrictions of
record on the date hereof, (B) zoning, building and other statutory or
regulatory restrictions, (C) liens for taxes and assessments not yet due and
payable, (D) easements, covenants, rights-of-way, liens, encumbrances or other
restrictions, none of which have a Material Adverse Effect.
(i) Intellectual Property. Schedule 3.1(i) sets forth a true
and complete list of all material patents, trademarks, trade names, service
marks and copyrights and applications therefor owned by, licensed to, or, to its
Knowledge, used by Seller. Except as set forth in Schedule 3.1(i), Seller has no
notice or Knowledge of any objections or claim being asserted in writing by any
person with respect to the ownership, validity, enforceability or use of any
such patents, trademarks, trade names, copyrights, applications therefor, or
trade secrets or challenging or questioning the validity or effectiveness of any
such license which would (or would reasonably be expected to) have a Material
Adverse Effect (or of the basis for any such claim).
(j) Contracts. Except as described in Schedule 3.1(j) or the
other Schedules hereto, Seller is not as of the date of this Agreement a party
to or bound by any:
- 22 -
<PAGE>
(i) employee collective bargaining agreement or other
contract with any labor union;
(ii) employment or severance agreements or
non-competition or, to the extent included in the Assets, confidentiality
agreements with any current or former director, officer or employee (excluding
any such employment contracts or arrangements for which the total compensation
during each of the last two years was less than $20,000 per person);
(iii) (A) lease or similar agreement under which Seller
is lessee of, or holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by a third party, (B) continuing contract for
the future purchase of materials, supplies or equipment, (C) management,
service, consulting or other similar type of contract, (D) distribution or sales
agency agreement or arrangement, or (E) advertising agreement or arrangement, in
any such case which has an aggregate future liability in excess of $25,000 or
which is not terminable by Seller (x) on not more than 90 days' notice without
penalty or premium or (y) for a cost of less than $25,000;
(iv) agreement or contract under which Seller has
borrowed or loaned any money or issued any note, bond, indenture or other
evidence of indebtedness or guaranteed indebtedness, liabilities or obligations
of others, in each case for an amount in excess of $25,000 in any single case,
or in excess of $100,000 in the aggregate (other than endorsements for the
purpose of collection in the ordinary course of business);
(v) mortgage, pledge, security agreement, deed of trust
or other document, in each case granting a lien (including liens upon properties
acquired under conditional sales, capital leases or other title retention or
security devices) securing obligations in excess of $25,000 in any single case,
or in excess of $100,000 in the aggregate;
(vi) independent contractor agreements with any
radiologist, cardiologist, or company representing a physician or other
physician including annual payments in excess of $25,000 in any single case, or
in excess of $100,000 in the aggregate;
(vii) agreement or arrangement for the sale of any of
its assets, property or rights outside the ordinary course of business or
requiring the consent of any party to the transfer and assignment of any such
assets, property or rights (by sale of assets, sale of stock, merger or
otherwise);
(viii) contract which contains any provisions requiring
Seller or, with respect to the Business, the Parent, to indemnify or act for any
other person or entity or to guaranty or act as surety for any other person or
entity;
- 23 -
<PAGE>
(ix) agreement restricting Seller from conducting
business anywhere in the world for any period of time or restricting its use or
disclosure of any confidential or proprietary information (other than those
agreements not included in the Assets);
(x) partnership, joint venture or management contract or
similar arrangement or agreement which involves a right to share profits or
future payments with respect to the business of Seller or any portion thereof or
the business of any other person or entity;
(xi) agreement granting a leasehold or other interest in
real property;
(xii) contract under which the Seller performs
radiological, EKG, ultrasound or other services for any nursing home or other
facility or institution ("Customer Contracts"); or
(xiii) agreement not made in the ordinary and normal
course of business and consistent with past practice or involving consideration
in excess of $25,000 in any single case or $100,000 in the aggregate or the
omission of which would otherwise cause a Material Adverse Effect.
Each agreement, contract, lease, license, commitment or
instrument of Seller described on Schedule 3.1(j) or the other Schedules hereto
(collectively, the "Contracts") is in full force and effect, except as expressly
disclosed on Schedule 3.1(j)-A or the other Schedules hereto. Seller is not
(with or without the lapse of time or the giving of notice, or both) in breach
or default under any Contract, and to the Knowledge of Seller, no other party to
any of the Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default thereunder, except for such breaches or
defaults as are disclosed on Schedule 3.1(j)-B. Except as set forth on Schedule
3.1(j)-C all amounts payable under each of the Contracts are on a current basis.
Seller has delivered to Buyer true, complete and correct copies of each written
Contract and a written description of the material terms of each oral Contract
except for Customer Contracts. Each Customer Contract is in the form and
substance of Exhibits 3.1(j)-A and 3.1(j)-B hereto, except for deviations that
individually or in the aggregate would not be likely to and shall not have a
Material Adverse Effect. At Closing, possession of each written Customer
Contract shall be delivered to Buyer at the location where such Contract is
presently located. Except as set forth in Schedule 3.1(j)-C, each of the
Contracts is freely and fully assignable to Buyer without the consent of the
remaining parties thereto. Seller has obtained the consent from each party to
each Contract not set forth on Schedule 1.4(a) that is necessary for the
assignment thereof to Buyer other than the consents set forth on Schedule
3.1(j)-D. Seller has not received written notice that any of the Contracts will
be terminated by any party thereto pursuant to any provision thereof permitting
any such party to terminate such Contract with or without cause.
- 24 -
<PAGE>
(k) Litigation; Decrees. Schedule 3.1(k) sets forth a list
as of the date of this Agreement of all lawsuits, claims, proceedings or
investigations pending or, to the Knowledge of Seller, threatened by or against
or affecting Seller or any of its properties, assets, operations or business
which, if determined adversely to Seller, could reasonably be expected to have a
Material Adverse Effect, or which challenge the legality of this Agreement or
any action to be taken in connection herewith. To the Knowledge of Seller,
Seller is not in default under any judgment, order or decree applicable to it or
any of its properties.
(l) Insurance. Seller maintains such policies of fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are set forth in Schedule
3.1(l). True and complete copies of each of such policies have been delivered to
Buyer.
(m) Benefit Plans.
(i) Schedule 3.1(m) sets forth a list of all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), bonus, incentive, deferred
compensation, stock or stock option plans or arrangements, and other material
employee fringe benefit plans or arrangements (all the foregoing being herein
called the "Seller's Benefit Plans") maintained, or contributed to, by Seller or
Parent for the benefit of any employees of Seller. Seller will on request
deliver to Buyer copies of (A) each of Seller's Benefit Plans (or, in the case
of any unwritten Benefit Plans, written descriptions thereof), (B) the most
recent annual report on Form 5500 filed with the Internal Revenue Service with
respect to any of Seller's Benefit Plans (if applicable), and (C) each trust
agreement and group annuity contract relating to any of Seller's Benefit Plans.
(ii) Seller's Benefit Plans are in compliance in all
respects with the applicable provisions of ERISA and the regulations and
published interpretations thereunder, except where noncompliance would not have
a Material Adverse Effect. None of Seller's Benefit Plans are subject to the
provisions of Title IV of ERISA. Seller does not maintain or make contributions
to and has not at any time in the past maintained or made contributions to any
multi-employer plan subject to the terms of the Multi-employer Pension Plan
Amendment Act of 1980.
(n) Absence of Changes or Events. Except as set forth in
Schedule 3.1(n) or expressly in any other Schedule to this Agreement, since the
Balance Sheet Date the business of Seller, has been conducted in the ordinary
course consistent with past practice and Seller has not:
(i) sold, assigned, failed to replace, transferred or
disposed of any of its assets or properties, except in the ordinary course of
business consistent with past practice;
(ii) mortgaged, pledged or subjected to any Lien of any
nature whatsoever any of the Assets, other than Permitted Liens;
- 25 -
<PAGE>
(iii) made or suffered any termination of any Contract,
or made or suffered any amendment of any Contract except for amendments or
terminations of Contracts made in the ordinary course of business consistent
with past practice;
(iv) except in the ordinary course of business,
consistent with past practice, or otherwise to comply with any applicable
minimum wage law, increased the salaries or other compensation of any of its
employees, or made any increase in, or any additions to, other benefits to which
any of such employees may be entitled;
(v) discharged or satisfied any Lien or encumbrance,
other than in the ordinary course of business consistent with past practice, or
failed to pay or discharge when due any Liabilities, the failure to pay or
discharge which has caused a Material Adverse Effect or any actual damage or
risk of loss to Seller or its Business or the Assets;
(vi) changed any of the accounting principles followed
by it or the methods of applying such principles;
(vii) cancelled, modified or waived any debts or claims
held by it, other than in the ordinary course of business consistent with past
practice that would have a Material Adverse Effect, or waived any rights of
substantial value, whether or not in the ordinary course of business;
(viii) declared or paid or set aside or reserved any
amounts for payment of any dividend or other distribution in respect of any
equity or other securities, or redeemed or repurchased or agreed to redeem or
repurchase any capital stock or other securities, or made any material payment
to any Affiliate (as such term is hereinafter defined in Article VII) except for
payments or compensation in the ordinary course of business consistent with past
practice and disclosed to Buyer as such;
(ix) failed to collect, withhold and/or pay to any
proper governmental agency or authority, any federal, state or local income,
franchise, sales, use, withholding or similar tax required by applicable law to
be so collected, withheld and/or paid, except those whose failure to collect or
withhold or pay would not have a Material Adverse Effect;
(x) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental body relating
to it or its property or to its Knowledge received any threat of any such
litigation, action or proceeding;
(xi) entered into any material transaction other than in
the ordinary course of business consistent with past practice; or
(xii) suffered any event, circumstance or occurrence
that would (or would reasonably be likely to) have a Material Adverse Effect on
Seller.
- 26 -
<PAGE>
(o) Compliance with Applicable Laws. Except as set forth in
Schedule 3.1(o), Seller and its operations, properties and assets are in
compliance with all applicable statutes, laws, ordinances, rules and regulations
of any governmental authority or instrumentality, domestic or foreign, except
where noncompliance would not (and would not reasonably be expected to) have a
Material Adverse Effect.
(p) Licenses; Permits. To the Knowledge of Seller, all
material licenses, permits or authorizations of Seller are validly held by
Seller, Seller has complied in all material respects with all requirements in
connection therewith and the same are not subject to suspension, modification or
revocation and will not be so subject, as a result of this Agreement or the
consummation of the transactions contemplated hereby, except as set forth on
Schedule 3.1(p). Seller has all of the licenses, permits or authorizations which
are required to carry on the business of Seller as such business is now
conducted (the "Permits"), except for such licenses, permits or authorizations
the failure to obtain which would not (and would not reasonably be expected to)
have a Material Adverse Effect. True and correct copies of each of such Permits
have been delivered to Buyer. No Affiliate of Seller or of any other person,
firm or corporation other than Seller owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part in any of the Permits.
(q) Environmental Matters. Except as set forth on Schedule
3.1(q) hereto:
(i) Seller has all material permits, licenses, and other
authorizations required for the operations, or conduct of the business of Seller
under applicable Environmental Laws. Seller is in compliance with all terms and
conditions of such authorizations, and with all applicable Environmental Laws,
except for such noncompliance which would not (and would not be reasonably
likely to) have a Material Adverse Effect.
(ii) During the past three (3) years, Seller has
received no written notice of any citation, summons, order, complaint, penalty,
investigation, or review by any governmental or other entity with respect to any
violation by Seller of any Environmental Law.
(iii) Seller has received no written requests for
information, notice of claim, demand, or notification that it is, or may be,
potentially responsible with respect to any investigation or cleanup of any
threatened or actual release of any Hazardous Substance.
(r) Employee and Labor Relations. Except as set forth in
Schedule 3.1(r) hereto:
(i) there is no labor strike, dispute, slowdown or work
stoppage or lockout actually pending or, to the Knowledge of Seller, threatened
against or affecting Seller and during the past year there has not been any such
action;
- 27 -
<PAGE>
(ii) no employees of Seller are represented by any labor
union or similar organization in connection with their employment relationship
with Seller, and to the Knowledge of Seller, no material union organizational
campaign is in progress with respect to any of the employees of Seller and no
question concerning representation exists respecting such employees; and (iii)
there is no unfair labor practice charge or complaint against Seller pending or,
to the Knowledge of Seller, threatened before the National Labor Relations
Board.
(s) Special Fee Arrangements. Schedule 3.1(s) sets forth a
true and complete list of any special fee arrangements in effect between Seller
and any of its customers as of the date hereof that contain terms and conditions
other than the Seller's customary terms and conditions as of the time the
arrangement was entered into.
(t) Patient Volumes. Schedule 3.1(t) sets forth a true and
complete list of Seller's patient volumes for x-rays, EKGs, and other exams from
the commencement of fiscal year 1994 through August 31, 1996.
(u) Employees. Schedule 3.1(u) and Schedule 3.1(m) together
contain a true, complete and correct list of the name, position, current rate of
compensation and any vacation or holiday pay, sick pay, personal leave and any
other material compensation arrangements or fringe benefits, of each current
employee of Seller (together with a description of any specific arrangements or
rights concerning such persons that are not reflected in any agreement or
document referred to in Schedule 3.1(j)). No employee, consultant or commission
agent of Seller has any vested or unvested retirement benefits or other
termination benefits, except as described on Schedule 3.1(m). The Balance Sheet
contains an adequate reserve for vacation and all other vested employee-related
accruals.
(v) Relationships. Except as disclosed on Schedule 3.1(v),
to Seller's knowledge, no Affiliate of Seller or Parent has, and at no time
within the last two (2) years has had, a material ownership interest in any
business, corporate or otherwise, that is a party to, or in any property that is
the subject of, business relationships or arrangements of any kind relating to
the operation of the Business.
(w) Questionable Payments. Except as set forth on Schedule
3.1(w), Seller has not, and to Seller's Knowledge, no Affiliate (a) has used any
corporate funds of Seller or, with respect to the Business, of the Parent, in
any case, to make any payment to any officer or employee of the government, or
to any political party or official thereof, where such payment either (i) was,
at the time, unlawful under laws applicable thereto; or (ii) was, at the time,
unlawful under the Foreign Corrupt Practices Act of 1977, as amended; or (b) has
made or received an illegal payment, bribe, kickback, political contribution or
other similar questionable illegal payment in connection with the operation of
the Business (collectively, "Questionable Payments") or made any illegal
referrals in connection with the operation of the Business.
- 28 -
<PAGE>
(x) Reimbursement Matters. Except as disclosed on Schedule
3.1(x), (a) Seller has not and, to the Seller's Knowledge, no nursing home,
hospital or other facility with respect to which Seller provides services has
received any written notice of denial or recoupment from the Medicare or
Medicaid programs, or any other third party reimbursement source (inclusive of
managed care organizations) with respect to products or services provided by
Seller, (b) to the Seller's Knowledge, there is no basis for the assertion after
the Closing Date of any such denial or recoupment claim, and (c) neither Seller
nor, to the Seller's Knowledge, any nursing home, hospital or other facility
with respect to which Seller provides services has received written notice from
any Medicare or Medicaid program or any other third party reimbursement source
(inclusive of managed care organizations) of any pending or threatened
investigations or surveys specifically with respect to, or arising out of,
products or services provided by Seller, and to the Seller's Knowledge, no such
investigation or survey is pending, threatened or imminent. Seller has fully and
accurately disclosed to the appropriate intermediaries and carriers all material
billing and business practices with respect to Medicare and Medicaid
reimbursement with respect to the Business to the extent necessary for Seller to
comply with applicable law. Seller has complied with all material requirements
imposed by any such intermediary or carrier with respect to such billing. Seller
has billed the applicable intermediaries and/or carriers for the services
rendered by Seller in material compliance with all applicable Medicare and
Medicaid laws, and Seller is not aware of any non-compliance by it with any
state licensing or corporate practice of medicine law that would cause such
billing or business practices to not be in material compliance with any of such
Medicare or Medicaid laws. Seller has not received any notice from any
regulatory authority or intermediary that indicates that Buyer could not
continue to bill intermediaries in substantially the same manner and structure
as Seller is billing on the date hereof.
(y) Medicare/Medicaid Participation. All services provided
by the Seller for which Seller directly or indirectly receives payment under the
Medicare or Medicaid programs are, to the extent required by law, certified for
participation or enrollment in all Medicare and Medicaid programs, have a
current and valid provider contract with the Medicare and Medicaid programs or
other third party reimbursement source (inclusive of managed care
organizations), are in compliance with the conditions of participation of such
programs, and, to the extent required by law, have received all approvals or
qualifications necessary for capital reimbursement, except for such
certifications, contracts, compliances, approvals and qualifications which are
set forth on Schedule 3.1(y) and which, individually or in the aggregate, would
not have a Material Adverse Effect. Seller has delivered to Buyer true and
complete copies of all Medicare and Medicaid compliance reports by the
applicable licensing authority for any period after October 1, 1994 for each
location of Seller for which there is a Medicare or Medicaid provider number.
(z) Customer List. Schedule 4.1(z)-A contains a complete and
accurate list of each of the nursing homes, prisons and other facilities which
is currently serviced by Seller in connection with the Business, and Schedule
4.1(z)-B contains a complete and accurate list of patients serviced by the
facilities during the one year period ending on the date hereof.
- 29 -
<PAGE>
(aa) Financial Statements and SEC Documents. Each of the
balance sheets in or incorporated by reference into any annual reports filed on
Form 10-K and all other reports, registration statements, definitive proxy
statements or information statements filed by Parent after December 31, 1995
with the Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (together with the rules and regulations thereunder, the
"Securities Act"), or under Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act") (collectively, the "Parent SEC
Documents") fairly presents in all material respects the financial position of
Parent as of the date it was filed and each of the statements of income and
changes in shareholders' equity and cash flows or equivalent statements in such
report and documents (including any related notes and schedules thereto) as of
such date fairly presents in all material respects the results of operations,
changes in shareholders' equity and changes in cash flows, as the case may be,
of the Parent for the periods set forth therein, in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except in each case as may be noted therein, subject to normal and
recurring year-end audit adjustments in the case of unaudited statements (and,
where applicable, the absence of footnotes).
3.2 Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller as follows:
(a) Authority. Buyer and IHS have all requisite corporate
power and authority to enter into this Agreement and each of the certificates,
instruments, agreements and documents executed and delivered by Buyer pursuant
to this Agreement (Buyer's "Transaction Documents") and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by Buyer and IHS to authorize the execution,
delivery and performance of this Agreement and each Buyer Transaction Documents,
and the consummation of the transactions contemplated hereby have been duly and
properly taken. This Agreement and each Buyer Transaction Document have been
duly executed and delivered by Buyer and, as applicable, IHS and constitute the
legal, valid and binding obligations of Buyer and, as applicable, IHS,
enforceable against Buyer and IHS in accordance with their respective terms. The
execution and delivery of this Agreement and each Buyer Transaction Document, do
not, and the consummation of the transactions contemplated hereby and thereby
and compliance with the terms hereof will not: result in any violation of or
default, under (i) any provision of the Certificate or Articles of Incorporation
or Bylaws of Buyer or IHS, (ii) any material note, bond, mortgage, indenture,
deed of trust, license, lease, contract, commitment or agreement to which Buyer
or IHS is a party or by which any of their respective properties are bound or
(iii) any judgment, injunction, order or decree, or material statute, law,
ordinance, rule or regulation applicable to Buyer or IHS or to the property or
assets of Buyer or IHS. No Consent is required to be obtained or made by or with
respect to Buyer or IHS in connection with the execution and delivery of this
Agreement or the consummation by Buyer of the transactions contemplated hereby,
other than as set forth on Schedule 3.1(a).
- 30 -
<PAGE>
(b) Sufficient Funds. IHS and Buyer have sufficient funds
available to pay in full the Purchase Price.
(c) Organization and Standing of Buyer. Buyer is a
corporation duly organized and validly existing under the laws of California.
IHS is a corporation duly organized and validly existing under the laws of
Delaware. Buyer and IHS have full corporate power and authority and possess all
material governmental franchises, licenses, permits, authorizations and
approvals necessary to enable them to use their corporate names and to own,
lease or otherwise hold their properties and assets and to carry on their
business in all material respects as presently conducted.
(d) Financial Statements and SEC Documents. Each of the
balance sheets in or incorporated by reference into any annual reports filed on
Form 10-K and all other reports, registration statements, definitive proxy
statements or information statements filed by IHS after December 31, 1995 with
the SEC under the Securities Act or under Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act (collectively, the "IHS SEC Documents") fairly presents in all
material respects the financial position of IHS as of the date it was filed and
each of the statements of income and changes in shareholders' equity and cash
flows or equivalent statements in such report and documents (including any
related notes and schedules thereto) as of such date fairly presents in all
material respects the results of operations, changes in shareholders' equity and
changes in cash flows, as the case may be, of IHS for the periods set forth
therein, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in each case
as may be noted therein, subject to normal and recurring year-end audit
adjustments in the case of unaudited statements (and, where applicable, the
absence of footnotes).
(e) IHS Stock. Upon delivery to Seller in accordance with
the terms of this Agreement, each share of IHS Stock shall be duly authorized,
validly issued, and nonassessable.
ARTICLE IV
COVENANTS
4.1 Covenants of Seller. Seller covenants and agrees as follows:
(a) Insurance. Effective as of the Closing Date and for a
period of three (3) years thereafter, Seller at its own expense shall purchase
and maintain a tail insurance policy with respect to all claims-made insurance
policies of Seller currently in effect, such tail coverage to name Seller as
insured and Buyer as an additional insured.
(b) Employment Agreements. In the event that Buyer terminates
the employment (including upon expiration of the Initial Term (as such term is
defined in the Employment Agreements) if Buyer elects not to extend the Initial
Term pursuant to the applicable Employment Agreement) of any of William Glynn,
Kenneth Levinson, or Stephen
- 31 -
<PAGE>
Manty (the "Subject Employees") at any time after the one year anniversary of
the Closing Date and on or prior to the expiration of the Initial Term (as such
term is defined in such Employment Agreement), Seller will be solely responsible
for the payment of any compensation, severance, benefits, or other amounts
becoming thereafter due to such terminated Subject Employee solely under
Employment Agreements between Seller and the Subject Employees in an amount not
to exceed the aggregate amount that would have been due had such Employment
Agreements not been amended or modified on or after the Closing Date; provided
however, that any liability to any Subject Employee that constitutes a Current
Liability on the Closing Balance Sheet shall be Buyer's responsibility. Any
liabilities or obligations of any nature to the Subject Employees arising out of
any matters occurring after the Closing or arising out of such Employment
Agreements, other than those arising under the preceding sentence (or as
expressly assumed by Seller under the applicable Assignment and Amendment of
Employment Agreement) shall be the sole liability and responsibility of Buyer.
Buyer's liabilities under this Section 4.1(c) shall be Assumed Liabilities. Any
liability to Stephen Manty expressly assumed by Seller under paragraph 3 of his
Assignment and Amendment of Employment Agreement shall be an Excluded Liability.
(c) COBRA. Seller shall give all notices, make all offers, pay
and collect all premiums, obtain all group health plan coverage, and perform all
other actions mandated by Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), which are required to be given, made,
paid, obtained, and performed as a result of the Closing under this Agreement.
This provision shall not be construed, however, to require Seller to maintain
its group health insurance coverage following Closing, except as may be required
by applicable Governmental Requirements or Section 4.2(c).
4.2 Covenants of Buyer. Buyer covenants and agrees as follows:
(a) Financial Information. Buyer will use reasonable
commercial efforts to (i) hold all of the books and records of Seller delivered
to it and existing on the Closing Date and not destroy or dispose of any thereof
for a period of three (3) years from the Closing Date, and thereafter if it
desires to destroy or dispose of such books and records, will offer first in
writing at least 60 days prior to such destruction or disposition to surrender
them to Parent, provided that such books and records must be held as
confidential information by Parent and Parent must state the reason it wants
possession of the books and records, and (ii) promptly provide to Parent upon
request, financial information provided to it by Seller with respect to Seller
for the period of the current fiscal year up to Closing in accordance with past
practice to allow Parent to comply with securities law, financial and tax
reporting and accounting requirements.
(b) Accounts. Buyer shall pay to Parent all amounts owed to
Parent by Seller on the Closing Date to the extent such amounts constitute
Assumed Liabilities when they shall become due in the ordinary course of
business consistent with past practice.
- 32 -
<PAGE>
(c) Employees. Buyer undertakes to offer employment to all
employees of Seller other than two (2) employees to be designated by Buyer (the
"Designated Employees"), on such terms and with such benefits and compensation
as Buyer shall deem advisable in its sole discretion. Buyer agrees, at Seller's
prior written request, to use its reasonable commercial effort to continue
(until no later than March 31, 1997) the employment of Ms. Perez-Lugones after
the date which is thirty (30) days after the date hereof to provide Seller with
such assistance as it shall reasonably request of her (within the scope of her
employment arrangement or agreement with Buyer); provided that Seller shall be
liable for all compensation to, and costs and expenses payable with respect to,
such employee with respect to any period during which said employee is employed
by Buyer at Seller's request, and if Seller requests that Buyer continue such
employment, Buyer shall be entitled to reimbursement for any Employment
Termination Payment due to such employee to the extent provided in Section
1.3(a)(iii) regardless of when she is thereafter terminated.
(d) Insurance. The disability, life, health, dental and vision
insurance plans of Seller described on Schedule 3.1(l) shall constitute
Contracts and shall be assigned to, and assumed by, Buyer as provided in Section
1.4 of this Agreement.
4.3 Mutual Covenants. Each of Seller and Buyer, as applicable,
covenants and agrees as follows:
(a) Records.
(i) On the Closing Date, Seller shall cause to be
delivered to Buyer all Records and, to the extent transferred hereunder, the
items described in Section 1.1(a)(viii), in the possession of Seller relating to
the Business to the extent not then in the possession of Seller, subject to the
following exceptions:
(A) Buyer recognizes that certain Records may
contain incidental confidential information relating to Parent and not relating
to Seller, and that Seller may delete and retain such information from such
Records; and
(B) Seller may retain all bids received from other
parties and analyses relating to Seller.
(ii) Upon reasonable written notice, Buyer and Seller
agree to furnish or cause to be furnished to each other and their
representatives, employees, counsel and accountants access, during normal
business hours, such information (including Records pertinent to Seller) and
assistance relating to Seller as is reasonably necessary for financial reporting
and accounting matters, the preparation and filing of any Returns or the defense
of any Tax claim or assessment or the defense or prosecution of any litigation
matters; provided, however, that such access does not unreasonably disrupt the
normal operations of Buyer, Seller or any of their Affiliates.
- 33 -
<PAGE>
(iii) Buyer agrees that it will use its commercially
reasonable efforts to make available to Seller the services of Stephen Manty (to
the extent he shall continue to be employed by Buyer and within the scope of his
Employment Agreement with Buyer) and/or his designees for the time period
commencing on the date hereof and ending on March 31, 1997 to assist Seller with
the defense of litigation matters and any investigation by the Department of
Labor and oversight of accounting matters; provided that Seller shall pay to
Buyer an amount equal to $4,000 per month in respect thereof and such services
to Seller shall not materially interfere with the performance of his obligations
to Buyer under his Employment Agreement.
(b) Publicity. Seller (and Parent) and Buyer (and IHS) agree
that no public release or announcement concerning the transactions contemplated
hereby shall be issued by either of them without the prior consultation and
written consent (which consent shall not be unreasonably withheld) of the other,
except such release or announcement as may be required by law or the rules or
regulations of any United States or foreign securities exchange, in which case
the party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance.
ARTICLE V
OTHER AGREEMENTS
5.1 Certain Understandings. Buyer acknowledges that neither Parent,
Seller, nor any other person has made any representation or warranty, expressed
or implied, as to the accuracy or completeness of any information regarding
Seller not included in this Agreement or the Schedules hereto or the Seller's
Transaction Documents, and none of Parent, Seller, or any other person will have
or be subject to any liability to Buyer or any other person resulting from the
distribution to Buyer, or Buyer's use of, any such information (including,
without limitation, any offering memorandum, brochure or other publication
provided to Buyer, and any other document or information provided to Buyer in
connection with the transactions contemplated hereby).
5.2 Further Assurances. From time to time, as and when requested by
either party hereto, the other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
5.3 Transfer Taxes. Seller shall be responsible for and shall timely
pay all sales and use taxes and personal property transfer taxes imposed by any
governmental entity in connection with the transfer of the Assets. Buyer shall
be responsible for and shall pay all other
- 34 -
<PAGE>
transfer taxes, documentary stamp taxes, recording charges and other fees and
taxes imposed by any governmental entity in connection with the transfer of the
Assets ("Buyer Taxes").
5.4 Use of Mediq Name. Buyer acknowledges and agrees that the name
and service mark "MEDIQ" and all derivations thereof (the "Name") is owned by
Parent and that by the sale of the Assets, or otherwise, Parent is not
relinquishing any interest in or rights to the Name or any derivation thereof,
nor permitting Buyer (after the Closing Date) to use, license or otherwise have
any rights in or to the Name, except on such terms as are expressly set forth in
this Section. Parent will permit use of the Name by Buyer for transition
purposes during a period not to exceed 365 days subsequent to the Closing Date
(the "Transition Period"), on the following terms and conditions:
(a) By the end of the Transition Period, Buyer shall have
caused the removal in all material respects of the Name from all of Buyer's
assets, motor vehicles, machinery, equipment, stationery, business cards, and
other documents. During the Transition Period, Buyer and Seller shall not affix,
or cause to be affixed, the Name to any of its assets, vehicles, machinery or
equipment.
(b) Within a reasonable period of time after the Closing Date,
Buyer shall cease to use the Name in its dealings with its customers, suppliers
and others with whom it does business.
(c) Buyer may use the Name solely in connection with its
operation of the Business pursuant to this Section 5.4 and shall have no right
to license, assign or otherwise transfer any rights in or to the Name.
5.5 Covenant Not to Compete.
(a) Each of Parent and Seller agrees that for a period of 3
years after the Closing Date neither of them nor any of their respective
Affiliates shall, directly or indirectly, for himself, herself or itself, or on
behalf of any other person, firm, entity or other enterprise, be employed by, be
an officer, director or manager of, act as a consultant for, be a partner in,
have a proprietary interest in, or loan money to any person, enterprise,
partnership, association, corporation, limited liability company, joint venture
or other entity which is directly or indirectly in the business of owning,
operating or managing any mobile radiological, EKG, or any other business
currently conducted by Seller (the "Applicable Businesses"), now or hereafter
competitive with any such Applicable Business of Buyer (including, without
limitation, the Business), IHS or any of their respective Affiliates, located in
any state in which Buyer, IHS or Seller is currently conducting such business;
provided, however, that nothing contained herein shall restrict Seller from
performing its obligations under any Temporary Excluded Contracts as provided in
Section 1.4(c) or restrict Parent or any of its Affiliates from operating or
owning any of their existing businesses or investments or renting or leasing any
equipment, provided that they do not expand into the foregoing prohibited
activities. The restrictions contained in this Section 5.5 (other than the
confidentiality provisions) shall not be binding upon any third party
- 35 -
<PAGE>
purchaser of Parent, or of any assets, stock, division or business unit of
Parent or of any Affiliate of Parent.
(b) Seller and Parent represent and warrant that there are no
employees, consultants or agents of Parent having expertise in the operation of
the Applicable Business or having a relationship with any customers of the
Applicable Business. Notwithstanding anything to the contrary contained in this
Agreement, the foregoing representation and warranty and all indemnification
rights with respect thereto shall not expire until the date that is three (3)
years after the date hereof.
(c) Seller and the Parent hereby agree that, for a period of
three (3) years following the date hereof, without the express written consent
of IHS, none of Seller, the Parent and their respective Affiliates will directly
or indirectly, for themselves or on behalf of any other person, firm, entity or
other enterprise:
(i) solicit any client, facility or patient who, prior to the date
hereof, was a client, facility or patient of Seller with respect to the
Applicable Business; or
(ii) hire, entice away or in any other manner persuade any employee,
consultant, representative or agent who was an employee, consultant,
representative or agent of Seller prior to the date hereof, to alter, modify or
terminate their relationship with Buyer or IHS.
(d) The Parent and Seller each acknowledges that the
restrictions contained in this Section 5.5 are reasonable and necessary to
protect the legitimate business interests of Buyer and IHS and that any
violation thereof by either of them would result in irreparable harm to Buyer
and IHS, and that damages in the event of such a breach will be difficult, if
not impossible, to ascertain. Accordingly, the Parent and Seller each agrees
that upon the violation by it of any of the restrictions contained in this
Section 5.5, Buyer and IHS shall be entitled to obtain from any court of
competent jurisdiction a preliminary and permanent injunction as well as any
other relief provided at law, equity, under this Agreement or otherwise, without
the necessity of posting any bond or other security whatsoever. In the event any
of the foregoing restrictions are adjudged unreasonable in any proceeding, then
the parties agree that the period of time or the scope of such restrictions (or
both) shall be adjusted to such a manner or for such a time (or both) as is
adjudged to be reasonable.
(e) The Parent and Seller each acknowledges that the covenants
contained in this Section 5.5 are independent covenants and that any failure by
the Buyer or IHS to perform its obligations under this Agreement shall not be a
defense to enforcement of the covenants contained in this Agreement, including
but not limited to a temporary or permanent injunction.
- 36 -
<PAGE>
(f) Seller and Parent agree to take any and all actions
necessary, including, without limitation, commencement of legal proceedings, to
enforce each of the non-competition agreements set forth on Schedule 1.4(a)
hereto upon the request of and in accordance with the instructions of Buyer.
Seller and Parent shall not be required to advance or expend any funds in
connection with their respective obligations under this subsection (f). Buyer
shall indemnify and hold harmless Seller and Parent from any loss, liability,
damage, cost and expense, including without limitation, reasonable legal fees
and expenses, arising out of taking any such actions at Buyer's request. Buyer
acknowledges that Seller intends to terminate all Excluded Contracts (not
otherwise terminated); provided that Seller shall not shorten the
non-competition provisions of such agreements in effect immediately prior to
their termination.
5.6 Restrictions.
(a) From and after the Closing Date, neither Seller nor the
Parent shall disclose, directly or indirectly, to any person or entity, or make
use of, without the express authorization of IHS and Buyer, any non-public
pricing strategies or records acquired by Buyer from Seller, any proprietary
data or trade secrets acquired by Buyer from Seller or any financial or other
information acquired by Buyer from Seller; provided that the foregoing
restrictions shall not apply to any information which:
(i) is or becomes publicly known through no wrongful act
on the part of Seller or Parent; or
(ii) is or becomes available to the disclosing party on
a non- confidential basis from a third party without restriction and without
breach of this Agreement; or
(iii) is approved for release by written authorization
signed by Buyer or IHS; or
(iv) is required to be disclosed in accordance with
applicable law; provided, however, prior to making any such disclosure the party
required to make such disclosure shall provide Buyer with prompt notice of such
requirement to enable Buyer to seek an appropriate protective order and such
party will use its best efforts to preserve the confidentiality of such
information and will disclose only that portion of the information as is
required to be disclosed.
(b) Each of Seller and Parent acknowledges that the
restrictions contained in this Section 5.6 are reasonable and necessary to
protect the legitimate business interests of Buyer and IHS, and that any
violation thereof by any of them would result in irreparable harm to Buyer and
IHS. Accordingly, each of Seller and Parent agrees that upon the violation by
any of them of any of the restrictions contained in this Section 5.6, Buyer and
- 37 -
<PAGE>
IHS shall be entitled to obtain from any court of competent jurisdiction a
preliminary and permanent injunction as well as any other relief provided at law
or equity, under this Agreement or otherwise, without the necessity of posting
any bond or security whatsoever.
5.7 Adjustments for Medicare Reimbursement Rate Increases.
(i) If the Medicare carrier for the States of Maine,
Massachusetts, New Hampshire or Vermont (each, an "Applicable State"): increases
the reimbursement rate for the transport component for mobile x-ray or EKG
services performed by Seller prior to the Closing Date, then the difference
between the amount due with respect to the transport component for mobile x-ray
or EKG services performed by Seller in all Applicable States prior to the
Closing Date at the increased rate of reimbursement shall be deemed to be an
Account Receivable, and accordingly, Seller shall be entitled to additional
Purchase Price payments if and to the extent provided in Section 2.3(b)(ii)
above; provided that such increases in Purchase Price by reason of this Section
5.7(a) shall not exceed $800,000 in the aggregate.
(b) Buyer and IHS shall cooperate and use their commercially
reasonable efforts to collect any amounts that shall become due to Seller as
contemplated by subsection (a) above, including, without limitation,
resubmitting billing if necessary, but only to the extent that Seller has
specifically identified and compiled and delivered to Buyer all of the necessary
bills and records.
(c) Seller shall have the right to assume the prosecution of
any action, suit, claim, proceeding or investigation relating to an increase in
the Medicare reimbursement rate for the transport component for mobile x-ray or
EKG services in the Applicable States that could result in an Account Receivable
(as provided in subsection (a) above) (each, an "Action") in a manner consistent
with the prosecution of similar Actions with respect to such reimbursement rates
in the Applicable States by other businesses in the Seller's industry in such
Applicable States, and Buyer and Seller agree to cooperate in good faith with
each other and shall not have the right to compromise or settle an Action
without the other's consent (which shall not be unreasonably withheld or
delayed).
5.8 Audit. Following Closing, Seller and the Parent will cooperate
with and assist Buyer in a review of the financial statements of Seller. Buyer
may, at its own expense, have an audit performed of such financial statements,
and Seller and the Parent will cooperate in the performance of such audit.
5.9 Billing and Collection Agent. (a) Seller hereby appoints Buyer
to act as Seller's exclusive authorized agent to bill and collect all
Non-Assignable Receivables, and Buyer and Seller hereby agree that the proceeds
of such Non-Assignable Receivables shall be distributed in accordance with the
provisions of Section 1.1 and 2.3(b) above.
- 38 -
<PAGE>
(b) Buyer shall not receive a fee or any other compensation
for said billing and collection services.
(c) Seller hereby constitutes and appoints Buyer its true,
lawful, and irrevocable attorney to demand, receive, and enforce the billing and
collection of the NonAssignable Receivables, and to give receipts, releases, and
satisfactions for the same.
5.10 Benefits under Excluded Contracts. If Buyer is provided with
any requested benefit under an Excluded Contract (such as use of space or access
to programs available with respect to leased motor vehicles), Buyer shall
reimburse Seller for its proportionate out-of-pocket cost of providing such
benefit.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller and Parent. (a) Seller and Parent
hereby jointly and severally agree to indemnify Buyer, IHS and their respective
Affiliates and their respective officers, directors, employees and agents
against and hold them harmless from any loss, liability, claim, damage or
expense (including reasonable legal fees and expenses but excluding punitive
damages and unforeseen or other consequential damages other than punitive
damages and unforeseen or other consequential damages which are paid to third
parties) (a "Loss") suffered or incurred by any such indemnified party, as a
direct consequence of (i) any breach of any representation or warranty of Seller
or Parent contained in this Agreement or any Transaction Document, which by the
terms of Section 8.3 survives the Closing, (ii) any breach of any covenant of
Seller contained in this Agreement or any Transaction Document, (iii) all
Reimbursement Liabilities; (iv) any Loss relating to any Excluded Liability
(except as expressly assumed by Buyer under Section 1.4(c)); (v) any Loss
arising out of any bulk transfer act (whether relating to liabilities in general
or taxes or otherwise); (vi) any Loss arising out of the noncompliance of Seller
with COBRA or any like statute; (vii) any Loss that is attributable to the
pre-Closing conduct by Seller and relates to matters presently being
investigated by the U.S. Department of Labor with respect to Seller; and (viii)
any and all actions, suits, proceedings, demands assessments, judgments,
settlements (to the extent approved by Seller, such approval not to be
unreasonably withheld, delayed or conditioned) costs and legal and other
expenses incident to any of the foregoing; provided, however, that Seller shall
not have any liability under clause (i) above until the aggregate of all Losses,
for which Seller would, but for this proviso, be liable exceeds on a cumulative
basis $100,000, upon which Seller shall be liable for such $100,000 amount and
all other amounts under this Section 6.1; provided, further, that the aggregate
liability of Seller hereunder with respect to any and all Losses shall be
limited to the aggregate amount of the final Purchase Price.
(b) Buyer acknowledges and agrees that its sole and exclusive
remedy with respect to any and all claims for monetary damages relating to the
subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Article VI.
- 39 -
<PAGE>
(c) Buyer acknowledges and agrees that Parent and Seller shall
not have any liability under any provision of this Agreement for any Loss to the
extent that such Loss is caused by actions taken by or omitted to be taken by
Buyer after the Closing Date. Buyer shall take and cause its Affiliates to take
all reasonable steps to mitigate any Loss to the extent the same would have been
required by applicable law if Buyer's rights to compensation for damages arose
under law rather than by reason of contractual rights.
(d) Buyer may offset any of its indemnification claims against
payment of the Contingent Payment (as defined in Section 2.2), provided that if
Seller disputes the claim, Buyer shall place the amount of the claim into an
escrow account with a nationally recognized financial institution, until the
dispute is settled under the procedures set forth in this Article VI.
6.2 Indemnification by Buyer. (a) The Buyer hereby agrees to
indemnify Parent, Seller and their Affiliates against and hold them harmless
from any Loss suffered or incurred by any such indemnified party as a direct
consequence of (i) any breach of any representation or warranty of Buyer
contained in this Agreement or any Transaction Document, which by the terms of
Section 8.3 survives the Closing, (ii) any breach of any covenant of Buyer
contained in this Agreement or any Transaction Document, (iii) any guarantee or
obligation to assure performance given or made by Parent or any of its
Affiliates with respect to any obligation or liability of the Business that
constitutes an Assumed Liability, (iv) any Assumed Liability or any liability,
expense or obligation of the Business arising after the Closing Date, (v) any
use of the Name by Buyer or IHS not authorized by this Agreement and (vi) any
and all actions, suits, proceedings, demands assessments, judgments, settlements
(to the extent approved by Buyer, such approval not to be unreasonably withheld,
delayed or conditioned) costs and legal and other expenses incident to any of
the foregoing.
(b) Seller and Parent shall take all reasonable steps to
mitigate any Loss to the extent the same would have been required by applicable
law if the rights of Seller and Parent to compensation for damages arose under
law rather than by reason of contractual rights..
6.3 Losses Net of Insurance, Etc. The amount of any Loss for which
indemnification is provided under this Article VI shall be net of (i) in the
case of Section 6.1, any reserves established on the Closing Balance Sheet of
the Seller, to the extent covering such Loss, (ii) any net insurance proceeds
actually collected by the indemnified party covering such loss and (iii) an
amount equal to the present value of the net Tax benefit, if any, attributable
to such Loss and used by the indemnified party, taking into account the receipt
of such recovery; it being understood that each party will use such Tax benefits
as promptly as reasonably practicable. If the amount to be netted hereunder from
any payment required under Sections 6.1 or 6.2 is determined after payment by
the indemnifying party of any amount otherwise required to be paid to an
indemnified party pursuant to this Article VI, the indemnified party shall repay
to the indemnifying party, promptly after such determination, any amount that
the indemnifying party would not have had to pay pursuant to this Article VI had
such determination been made at the time of such payment.
- 40 -
<PAGE>
6.4 Termination of Indemnification. The obligations to indemnify and
hold harmless a party hereto, (i) pursuant to Sections 6.1(a)(i) and 6.2(a)(i),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 8.3, and (ii) pursuant to the other clauses of Sections 6.1
and 6.2, shall not terminate; provided; however, that as to clauses (i) and (ii)
above such obligations to indemnify and hold harmless shall not terminate with
respect to any item as to which the person to be indemnified (or the related
party thereto) shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice (stating in reasonable detail the
basis of such claim) to the party providing the indemnification.
6.5 Procedures Relating to Indemnification under Sections 6.1 and
6.2. (a) A party seeking indemnification pursuant to Sections 6.1 and 6.2 (an
"Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim or assessment, or the commencement of any action, suit, audit or
proceeding, by a third party in respect of which indemnity may be sought
hereunder (a "Third Party Claim") and will give the Indemnifying Party such
information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder (except to the extent the Indemnifying Party has
suffered actual prejudice thereby). The Indemnifying Party (which, in the case
of Seller or Parent, must include both such parties) shall have the right,
exercisable by written notice (the "Notice") to the Indemnified Party (which
notice shall state that the Indemnifying Party expressly agrees that as between
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall
be solely obligated to satisfy and discharge the Third Party Claim) within
fourteen (14) days of receipt of notice from the Indemnified Party of the
commencement of or assertion of any Third Party Claim, to assume the defense of
such Third Party Claim, using counsel selected by the Indemnifying Party and
reasonably acceptable to the Indemnified Party; provided, that the Indemnifying
Party shall not have the right to assume a Third Party Claim if (i) the named
parties to any such action (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party and (ii) the Indemnified Party
shall have been advised by counsel in writing that under applicable standards of
professional responsibility, a conflict will arise in the event both the
Indemnified Party and the Indemnifying Party are represented by the same counsel
with respect to the Third Party Claim, in which case such Indemnified Party
shall have the right to participate in the defense of such Third Party Claim and
all Losses in connection therewith shall be reimbursed by the Indemnifying
Party. In addition, if the Indemnifying Party fails to give the Indemnified
Party the Notice complying with the provisions stated above within the stated
time period, the Indemnified Party shall have the right to assume control of the
defense of the Third Party Claim and all Losses in connection therewith shall be
reimbursed by the Indemnifying Party upon demand of the Indemnified Party.
(b) If at any time after the Indemnifying Party assumes the defense
of a Third Party Claim, any of the conditions set forth in clauses (i) or (ii)
of subsection (a) above come
- 41 -
<PAGE>
into existence the Indemnified Party shall have the same rights as set forth
above as if the Indemnifying Party never assumed the defense of such claim.
(c) The Indemnifying Party or the Indemnified Party, as the case may
be, shall in any event have the right to participate, at its own expense, in the
defense of any Third Party Claim which the other is defending.
(d) The Indemnifying Party, if it shall have assumed the defense of
any Third Party Claim in accordance with the terms hereof, shall have the right,
upon thirty (30) days prior written notice to the Indemnified Party, to consent
to the entry of judgment with respect to, or otherwise settle such Third Party
Claim unless (i) the Third Party Claim involves equitable or other non-monetary
damages or (ii) in the reasonable judgment of the Indemnified Party such
settlement would have a continuing material adverse effect on the Indemnified
Party's business (including any material impairment of its relationships with
customers and suppliers), in which case such settlement only may be made with
the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Seller shall keep Buyer appraised of any material
negotiations between Seller and the U.S. Department of Labor, or any material
occurrences with respect to the same (to the extent within the knowledge of
Seller or the Parent), and will not enter into a settlement of such matters
without Buyer's consent, such consent not to be unreasonably withheld or
delayed.
(e) Whether or not the Indemnifying Party chooses to defend or
prosecute any claim involving a third party, all the parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested in connection
therewith.
ARTICLE VII
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Accounting Principles" shall have the meaning set forth in Section
2.3(b).
"Accounts Receivable" shall have the meaning set forth in Section
2.3(b).
"Action" shall have the meaning set forth in Section 5.7(d).
"Affiliate" shall have the meaning given to such term in Rule 12b-2
under the Exchange Act, as in effect as of the date of this
Agreement.
- 42 -
<PAGE>
"Applicable Authority" shall have the meaning set forth in Section
2.2(c).
"Applicable State" shall have the meaning set forth in Section
5.7(a).
"Balance Sheet" shall have the meaning set forth in Section 3.1(e).
"Base Rate" shall have the meaning set forth in Section 5.7(a).
"Buyer" shall have the meaning set forth in the first paragraph of
this Agreement.
"Buyer Taxes" shall have the meaning set forth in Section 5.3
"Buyer's Transaction Documents" shall have the meaning set forth in
Section 3.2(a).
"Closing" shall have the meaning set forth in Section 2.4.
"Closing Date" shall have the meaning set forth in Section 2.4.
"Closing Date Working Capital" shall have the meaning set forth in
Section 2.3(a).
"COBRA" shall have the meaning set forth in Section 4.1(e).
"Code" shall have the meaning set forth in Section 3.1(f).
"Collateral Source" shall have the meaning set forth in Section 6.3.
"Confidentiality Agreement" shall have the meaning set forth in
Section 4.1(a).
"Contingent Payment" shall have the meaning set forth in Section
2.2(a).
"Contracts" shall have the meaning set forth in Section 3.1(j).
"Customer Contracts" shall have the meaning set forth in Section
3.1(j)(xii).
"Date of Determination" shall have the meaning set forth in Section
2.2(b).
"Delay Payment Notice" shall have the meaning set forth in Section
2.3(b).
"EKG Transportation Reimbursement Change" shall have the meaning set
forth in Section 2.2(c).
- 43 -
<PAGE>
"Environmental Laws" means federal, state and local laws, rules,
regulations, codes and ordinances, and any orders, decrees,
judgments or injunctions issued, promulgated, approved or entered
thereunder, relating to the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act ("CERCLA"); the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"); the Federal Water
Pollution Control Act, as amended; the Federal Clear Air Act, as
amended; the Toxic Substances Control Act, as amended; the Surface
Mining Control and Reclamation Act of 1977, as amended; the Safe
Drinking Water Act, as amended; the Pollution Control Act of 1990,
as amended; the Federal Insecticide, Fungicide and Rodenticide Act,
as amended; and comparable state and local laws in effect on the
date hereof.
"ERISA" shall have the meaning set forth in Section 3.1(m).
"Excess Amount" shall have the meaning set forth in Section 5.7(a).
"Excess Amount Dispute Notice" shall have the meaning set forth in
Section 5.7(b).
"Excess Amount Schedule" shall have the meaning set forth in Section
5.7(b).
"Exchange Act" shall have the meaning set forth in Section 3.1(aa).
"Excluded Contracts" shall have the meaning set forth in Section
1.4(a).
"Excluded Liabilities" shall have the meaning set forth in Section
1.3(b).
"Final Excess Amount" shall have the meaning set forth in Section
5.7(b).
"Financial Statements" shall have the meaning set forth in Section
3.1(e).
"Hazardous Substances" shall have the meaning set forth in Section
101(14) of CERCLA, 42 U.S.C. Section 9601(14).
"IHS SEC Documents" shall have the meaning set forth in Section
3.2(d).
"Impracticalities" shall have the meaning set forth in Section
1.4(a).
"Indemnified Party" shall have the meaning set forth in Section 6.5.
"Indemnifying Party" shall have the meaning set forth in Section
6.5.
- 44 -
<PAGE>
"Independent Accounting Firm" shall have the meaning set forth in
Section 2.3(b).
"Knowledge" means, with respect to Seller, the actual knowledge of
the officers of Seller.
"Liability" shall have the meaning set forth in Section 1.3(b).
"Liens" shall have the meaning set forth in Section 3.1(g).
"Loss" shall have the meaning set forth in Section 6.1(a).
"Material Adverse Effect" means a material adverse effect on the
value of the Assets, the transactions contemplated by this
Agreement, the financial condition, or results of operations of the
Seller, or the Buyer, as the case may be. Seller or Buyer may,
however, at its option, include in the Schedules of this Agreement
or elsewhere items which would not have a Material Adverse Effect
within the meaning of the previous sentence in order to avoid any
misunderstanding, and such inclusion shall not be deemed to be an
acknowledgment by the Seller or Buyer that such items would have a
Material Adverse Effect or further define the meaning of such term
for the purpose of this Agreement.
"Name" shall have the meaning set forth in Section 5.4.
"Non-competition Agreement" shall have the meaning set forth in
Section 5.5.
"Notice" shall have the meaning set forth in Section 6.5.
"Parent SEC Documents" shall have the meaning set forth in Section
3.1(aa).
"Permitted Liens" shall have the meaning set forth in Section
3.1(g).
"Purchase Price" shall have the meaning set forth in Section 2.1.
"Preliminary Closing Date Balance Sheet" shall have the meaning set
forth in Section 2.3(b).
"Questionable Payments" shall have the meaning set forth in Section
3.1(w).
"Records" shall have the meaning set forth in Section 1.1(a)(vi).
"Required Amount" shall have the meaning set forth in Section
2.3(a).
"Returns" shall have the meaning set forth in Section 3.1(f).
"SEC" shall have the meaning set forth in Section 3.1(aa).
- 45 -
<PAGE>
"Securities Act" shall have the meaning set forth in Section
3.1(aa).
"Seller" shall have the meaning set forth in the first paragraph of
this Agreement.
"Seller's Benefit Plans" shall have the meaning set forth in Section
3.1(m).
"Seller's Transaction Documents" shall have the meaning set forth in
Section 3.1(a).
"Smith Agreement" shall have the meaning set forth in Section
1.4(a).
"Specified Party" shall have the meaning set forth in Section 6.7.
"Subject Employees" shall have the meaning set forth in Section
4.1(c).
"Tax" or "Taxes" shall have the meanings set forth in Section
3.1(f).
"Third Party Claim" shall have the meaning set forth in Section 6.5.
"Transition Period" shall have the meaning set forth in Section 5.4.
"Working Capital Increase" shall have the meaning set forth in
Section 2.3(b).
"Working Capital Review" shall have the meaning set forth in Section
2.3(b).
ARTICLE VIII
MISCELLANEOUS
8.1 Assignment. This Agreement and the rights hereunder shall not be
assignable or transferable by Buyer or Seller (including by sale of stock,
operation of law in connection with a merger, or sale of substantially all the
assets of Buyer) without the prior written consent of the other party hereto;
provided that Buyer may assign this Agreement to any other Affiliate of IHS or
to any person that acquires all or substantially all of the assets of Buyer,
with IHS remaining as guarantor of the assignee's obligations and liabilities
under this Agreement and further provided Buyer remains liable hereunder. This
Agreement shall inure to the benefit of, and be binding upon and enforceable
against, the successors and permitted assigns of the respective parties hereto.
8.2 No Third-Party Beneficiaries. Except as provided in Section 4.2
and Article VI, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns
- 46 -
<PAGE>
and nothing herein expressed or implied shall give or be construed to give to
any person or entity, other than the parties hereto and such assigns, any legal
or equitable rights hereunder.
8.3 Survival of Representations. The representations and warranties
in this Agreement and in any other document delivered in connection herewith
shall survive the Closing solely for purposes of Sections 6.1 and 6.2 of this
Agreement and shall terminate at the close of business twelve months following
the Closing Date, except that such time limitation shall not apply to (i) claims
for misrepresentations or breaches of warranty relating to Section 3.1(f)
(relating to Taxes), Section 3.1(w) (relating to Questionable Payments), Section
3.1(x) (relating to Reimbursement Matters), or Section 3.1(z) (relating to
Medicare/Medicaid Participation) which may be asserted within 60 days after the
expiration of the applicable statute of limitations with respect to the period
to which the particular claims relate, and (ii) claims for any other
misrepresentation or breach of warranty as to which Buyer has described in
reasonable detail pursuant to a written notice given to Seller prior to the
expiration of such 12-month period.
8.4 Expenses. Whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses, except as may otherwise be expressly provided
in this Agreement. None of Seller's cost and expenses arising out of the
transactions contemplated by this Agreement, including without limitation, legal
and accounting fees, shall be included as Current Liabilities.
8.5 Amendments. No amendment to or modification of this Agreement
shall be effective unless it shall be in writing and signed by each of the
parties hereto.
8.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (a) on the date of delivery if delivered
personally; (b) on the date of transmission if sent via facsimile transmission
to the facsimile number given below, and telephonic confirmation of receipt is
obtained promptly after completion of transmission; (c) on the business date
after delivery to a reputable nationally recognized overnight courier service or
(d) three business days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) If to Buyer,
Symphony Diagnostic Services
No. 1, Inc.
8181 West Broward Boulevard, Suite 370
Plantation, FL 33324
Attention: Martin Ardman
Telecopier: (954) 474-3754
- 47 -
<PAGE>
With required copies to:
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Marshall Elkins, Esq.
and
Blass & Driggs, Esqs.
461 Fifth Ave.
19th Floor
New York, NY 10016
Attention: Michael Blass, Esq.
Telecopier: 212-447-5428
(ii) If to Seller, to:
Mediq Mobile X-Ray Services, Inc.
90 Glacier Drive
Westwood, MA 02090
Attention: Stephen Manty
Telecopier: (617) 326-8807
With a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Henry N. Nassau, Esq.
Telecopier: (215) 994-2222
(iii) If to Parent to:
Mediq Incorporated
One Mediq Plaza
Pennsauken, NJ 08110
Attention: Michael F. Sandler
Telecopier: (609) 486-4720
- 48 -
<PAGE>
With a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Henry N. Nassau, Esq.
Telecopier: (215) 994-2222
Such addresses may be changed, from time to time by means of a notice given in
the manner provided in this Section (provided that no such notice shall be
effective until it is received by the other parties hereto).
8.7 Fees. Each party hereto hereby represents and warrants that the
only broker or finder that has acted for such party in connection with this
Agreement or the transactions contemplated hereby or that may be entitled to any
brokerage fee, finder's fee or commission in respect thereof is Robert Reisley
with respect to Seller. Seller will pay all fees or commissions which may be
payable to the firms so named.
8.8 Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
8.9 Interpretation. All references to immediately available funds or
dollar amounts contained in this Agreement shall mean United States dollars. All
references to generally accepted accounting principles contained in this
Agreement shall mean United States generally accepted accounting principles
consistently applied. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The parties acknowledge and agree that (i) each party and its
counsel have reviewed the terms and provisions of this Agreement and have
contributed to its revision, (ii) the normal rule of construction, to the effect
that any ambiguities are resolved against the drafting party, shall not be
employed in the interpretation of it, and (iii) the terms and provisions of this
Agreement shall be constructed fairly as to all parties hereto and not in favor
of or against any party, regardless of which party was generally responsible for
the preparation of this Agreement. All information disclosed by Seller in any
Schedule hereto or any representation or warranty herein shall be deemed to have
been disclosed in any other Schedule hereto or any representation or warranty
herein where such disclosure of such information is required or pertains to a
representation or warranty made by Seller herein; provided that a reasonable
reading of such schedule, representation or warranty would clearly indicate that
information contained therein is required in or pertains to another Schedule,
representation or warranty. Reference in this Agreement to dollar amount
thresholds (including such references in Article VIII of this Agreement) shall
not, for purposes of this Agreement, be deemed to be evidence of materiality or
a Material Adverse Effect.
8.10 Waiver. Waiver of any term or condition of this Agreement by
any party shall be effective if in writing and shall not be construed as a
waiver of any subsequent breach
- 49 -
<PAGE>
or failure of the same term or condition, or a waiver of any other term of this
Agreement. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
8.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
8.12 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto and the other documents delivered pursuant to this Agreement,
contain the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements, negotiations, correspondence, undertakings and understandings, oral
or written, relating to such subject matter. Any Confidentiality Agreements in
effect between the parties hereto prior to the date hereof are hereby
terminated.
8.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania applicable to agreements made and to be performed entirely within
Pennsylvania, without regard to the conflicts of law principles thereof.
8.14 Joint and Several. All obligations, representations,
warranties, covenants and agreements of Seller and Parent under this Agreement
or any of Seller's Transaction Documents shall be joint and several obligations,
representations, warranties, covenants and agreements of Seller and Parent. All
obligations, representations, warranties, covenants and agreements of Buyer and
IHS under this Agreement or any of Buyer's Transaction Documents shall be joint
and several obligations, representations, warranties, covenants and agreements
of Buyer and IHS.
[SIGNATURES ON FOLLOWING PAGE]
- 50 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
MEDIQ INCORPORATED
By: /s/ Michael F. Sandler
---------------------------
Name: Michael F. Sandler
Title: Senior Vice President
MEDIQ MOBILE X-RAY SERVICES, INC.
By: /s/ Michael F. Sandler
---------------------------
Name: Michael F. Sandler
Title: Chief Financial Officer
SYMPHONY DIAGNOSTIC SERVICES
NO.1, INC.
By: /s/ Martin Ardman
---------------------------
Name: Martin Ardman
Title:
GUARANTEE:
The performance of all the covenants, liabilities and obligations of
Symphony Diagnostic Services No. 1, Inc. hereunder are unconditionally and
irrevocably, jointly and severally guaranteed as surety by Integrated Health
Services, Inc., its parent.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ Elizabeth B. Kelly
-------------------------
Senior Vice President,
Corporate Development
EXECUTION COPY
$260,000,000
CREDIT AGREEMENT
Dated as of October 1, 1996
Among
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
as Borrower,
MEDIQ INCORPORATED
and PRN HOLDINGS, INC.,
as Parent Guarantors,
and
THE INITIAL LENDERS NAMED HEREIN,
and
BANQUE NATIONALE DE PARIS,
as Administrative Agent and Initial Issuing Bank,
and
NATIONSBANK, N.A.,
as Documentation Agent
<PAGE>
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms........................................ 2
1.02. Computation of Time Periods.................................. 37
1.03. Accounting Terms............................................. 37
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances................................................. 37
2.02. Making the Advances.......................................... 39
2.03. Issuance of and Drawings and Reimbursement Under Letters of
Credit..................................................... 40
2.04. Repayment of Advances........................................ 42
2.05. Termination or Reduction of the Commitments.................. 46
2.06. Prepayments.................................................. 47
2.07. Interest..................................................... 51
2.08. Fees......................................................... 52
2.09. Conversion of Advances....................................... 53
2.10. Increased Costs, Etc......................................... 54
2.11. Payments and Computations.................................... 55
2.12. Taxes........................................................ 57
2.13. Sharing of Payments, Etc..................................... 59
2.14. Use of Proceeds.............................................. 60
2.15. Defaulting Lenders........................................... 61
2.16. Release of Funds from the Asset Sale Blocked Account......... 63
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit.......... 64
3.02. Conditions Precedent to Each Borrowing and Issuance.......... 70
3.03. Determinations Under Section 3.01............................ 72
<PAGE>
ii
Section Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower............... 72
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants........................................ 79
5.02. Negative Covenants........................................... 83
5.03. Reporting Requirements....................................... 92
5.04. Financial Covenants.......................................... 97
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default............................................ 101
6.02. Actions in Respect of the Letters of Credit upon Default..... 105
ARTICLE VII
PARENT GUARANTIES
7.01. Guaranty..................................................... 105
7.02. Guaranty Absolute............................................ 106
7.03. Waiver....................................................... 107
7.04. Payments Free and Clear of Taxes, Etc........................ 107
7.05. Continuing Guaranty; Assignments............................. 108
7.06. Subrogation.................................................. 108
ARTICLE VIII
THE AGENTS
8.01. Authorization and Action..................................... 109
8.02. Agents' Reliance, Etc........................................ 110
<PAGE>
iii
8.03. BNP, NationsBank and Affiliates.............................. 110
8.04. Lender Party Credit Decision................................. 110
8.05. Indemnification.............................................. 111
8.06. Successor Agents............................................. 112
ARTICLE IX
MISCELLANEOUS
9.01. Amendments, Etc.............................................. 113
9.02. Notices, Etc................................................. 114
9.03. No Waiver; Remedies.......................................... 114
9.04. Costs and Expenses........................................... 115
9.05. Right of Set-off............................................. 116
9.06. Binding Effect............................................... 117
9.07. Assignments and Participations............................... 117
9.08. Execution in Counterparts.................................... 120
9.09. No Liability of the Issuing Bank............................. 120
9.10. Jurisdiction, Etc............................................ 121
9.11. Governing Law................................................ 122
9.12. Waiver of Jury Trial......................................... 122
Schedule I - Commitments and Applicable Lending Offices
Schedule II - EBITDA Schedule
Schedule III - Discontinued Operations, Joint Ventures, Equity Investments
Schedule IV - Discontinued Subsidiaries
Schedule 2.14(a) - Refinancing Debt
Schedule 3.01(e) - Surviving Debt
<PAGE>
iv
Schedule 3.01(g)(iii) - Subsidiary Guarantors
Schedule 3.01(g)(iv) - Good Standing Certificates
Schedule 3.01(g)(vii)(B) - UCC Filing Jurisdictions
Schedule 3.01(g)(xviii) - Landlord Consents
Schedule 3.01(g)(xix)(1) - Termination Letters
Schedule 3.01(g)(xix)(2) - Existing Debt
Schedule 3.01(g)(xxi) - Local Counsel
Schedule 4.01(a) - Parent Guarantors
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and
Filings
Schedule 4.01(k) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(t) - Environmental Investigations
Schedule 4.01(y) - Open Years
Schedule 4.01(aa) - Tax Disputes
Schedule 4.01(ff) - Owned Real Property
Schedule 4.01(gg) - Investments
Schedule 4.01(hh) - Intellectual Property
Schedule 5.02(a)(iii) - Existing Liens
Schedule 5.02(b)(i)(A) - Parent Guarantor Debt-A
Schedule 5.02(b)(i)(B) - Parent Guarantor Debt-B
Schedule 5.02(b)(ii)(F) - Existing Borrower Debt
<PAGE>
v
Schedule 6.01(k) - Investor Group
Exhibit A-1 - Form of Term A Note
Exhibit A-2 - Form of Term B Note
Exhibit A-3 - Form of Working Capital Note
Exhibit A-4 - Form of Acquisition Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Mortgage
Exhibit F - Form of Notice of Drawing
Exhibit G - Form of Subsidiary Guaranty
Exhibit H - Form of Borrowing Base Certificate
Exhibit I - Form of Opinion of Counsel to the Loan Parties
Exhibit J - Form of Solvency Opinion
Exhibit K-1 - Form of Borrower Solvency Certificate
Exhibit K-2 - Form of MEDIQ Solvency Certificate
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of October 1, 1996 among MEDIQ/PRN LIFE
SUPPORT SERVICES, INC., a Delaware corporation (the "Borrower"), MEDIQ
INCORPORATED, a Delaware corporation ("MEDIQ"), PRN Holdings, Inc., a Delaware
corporation ("Holdings", and together with MEDIQ, the "Parent Guarantors"), the
banks, financial institutions and other institutional lenders listed on the
signature pages hereof as the Initial Lenders (the "Initial Lenders"), Banque
Nationale de Paris ("BNP"), as administrative agent (the "Administrative Agent")
for the Lender Parties (as hereinafter defined), BNP as the initial issuing bank
(the "Initial Issuing Bank"), and NationsBank, N.A. ("NationsBank"), as
documentation agent for the Lender Parties (the "Documentation Agent", and
together with the Administrative Agent and any successors appointed pursuant to
Article VIII hereof, the "Agents").
PRELIMINARY STATEMENTS:
(1) The Borrower and MEDIQ/PRN Life Support Services - I, Inc.,
direct, wholly owned Subsidiaries (as hereinafter defined) of Holdings,
Holdings, a direct, wholly owned Subsidiary of MEDIQ, and MEDIQ have incurred
Debt (as hereinafter defined) pursuant to various indentures and other
agreements, and the Borrower and MEDIQ intend to refinance part of such Debt
(the "Refinancing").
(2) The Borrower has requested that the Lender Parties lend to the
Borrower up to $260,000,000 in order to effect the Refinancing, to pay
transaction fees and expenses in connection with the Refinancing and the other
transactions contemplated hereby, to finance certain permitted acquisitions and
to provide working capital for the Borrower and for other general corporate
purposes permitted by this Agreement.
(3) The Lender Parties have indicated their willingness to agree to
lend such amounts on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
<PAGE>
2
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquisition Advance" has the meaning specified in Section 2.01(f).
"Acquisition Borrowing" means a borrowing consisting of simultaneous
Acquisition Advances of the same Type made by the Acquisition Lenders.
"Acquisition Commitment" means, with respect to any Acquisition
Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Acquisition Commitment" or, if such
Lender has entered into one or more Assignments and Acceptances, set forth
for such Lender in the Register maintained by the Administrative Agent
pursuant to Section 9.07(d) as such Lender's "Acquisition Commitment", as
such amount may be reduced at or prior to such time pursuant to Section
2.05.
"Acquisition Facility" means, at any time, the aggregate amount of
the Acquisition Lenders' Acquisition Commitments at such time.
"Acquisition Facility Sublimit" means, at any time, an amount equal
to $100,000,000 minus the sum of (i) the Acquisition Advances outstanding
at such time, (ii) the value of MEDIQ's common stock used in any
Investment pursuant to Section 5.02(f)(i) at the time of such Investment
and (iii) the amount of Subordinated Notes outstanding at such time.
"Acquisition Lender" means any Lender that has an Acquisition
Commitment.
"Acquisition Note" means a promissory note of the Borrower payable
to the order of any Acquisition Lender, in substantially the form of
Exhibit A-4 hereto, evidencing the indebtedness of the Borrower to such
Lender resulting from the Acquisition Advances made by such Lender.
"Acquisition Reduction Amount" has the meaning specified in Section
2.06(b)(viii).
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
<PAGE>
3
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent at the Federal
Reserve Bank of New York, 33 Liberty Street, New York, New York 10048, ABA
No. 026007689, for further credit to Account No. 750420-701-03 or such
other account maintained by the Administrative Agent and designated by the
Administrative Agent in a written notice to the Lender Parties and the
Borrower.
"Advance" means a Term A Advance, a Term B Advance, an Acquisition
Advance, a Working Capital Advance or a Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Agents" has the meaning specified in the recital of the parties to
this Agreement.
"Alternative Lender" means any Lender that elects not to be secured
directly or indirectly by any Margin Stock Collateral by notice to the
Administrative Agent to such effect, but shall be in all other respects
and for all other purposes, except where specifically provided otherwise,
a Lender.
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a Base
Rate Advance and such Lender Party's Eurodollar Lending Office in the case
of a Eurodollar Rate Advance.
"Applicable Margin" means (a) with respect to Advances outstanding
under the Term A Facility, the Acquisition Facility or the Working Capital
Facility, a
<PAGE>
4
percentage per annum determined by reference to the Leverage Ratio as set
forth below:
- -------------------------------------------------------------------------------
Leverage Ratio Base Rate Advances Eurodollar Rate Advances
- -------------------------------------------------------------------------------
Level I
less than or equal to 2.0:1.0 0.25% 1.75%
Level II
greater than 2.0:1.0, but less
than or equal to 2.5:1.0 0.50% 2.00%
Level III
greater than 2.5:1.0, but less
than or equal to 3.0:1.0 0.75% 2.25%
Level IV
greater than 3.0:1.0, but less
than or equal to 3.5:1.0 1.00% 2.50%
Level V
greater than 3.5:1.0 1.25% 2.75%
- -------------------------------------------------------------------------------
<PAGE>
5
and (b) with respect to Advances outstanding under the Term B Facility, a
percentage per annum determined by reference to the Leverage Ratio as set
forth below:
- --------------------------------------------------------------------------------
Leverage Ratio Base Rate Advances Eurodollar Rate Advances
- --------------------------------------------------------------------------------
Level I
less than or equal to 2.5:1.0 1.25% 2.75%
Level II
greater than 2.5:1.0, but less
than or equal to 3.0:1.0 1.50% 3.00%
Level III
greater than 3.0:1.0 1.75% 3.25%
- --------------------------------------------------------------------------------
The Applicable Margin for each Advance shall be determined by reference to
the Leverage Ratio in effect from time to time; provided, however, that
(A) no change in the Applicable Margin shall be effective until three
Business Days after the date on which the Administrative Agent receives
financial statements pursuant to Section 5.03(c) or (d) and a certificate
of the chief financial officer of the Borrower demonstrating such ratio
and (B) if the Borrower has not submitted to the Administrative Agent the
information described in clause (A) of this proviso as and when required
under Section 5.03(c) or (d), as the case may be, the Applicable Margin
shall be at Level V for the Term A Advances, Acquisition Advances and
Working Capital Advances, and at Level III for the Term B Advances, for so
long as such information has not been received by the Administrative
Agent. Until the delivery of financial statements for the year ended
September 30, 1996, the Applicable Margin shall be at Level V for the Term
A Advances, Acquisition Advances and Working Capital Advances, and at
Level III for the Term B Advances. In the event that at least $60,000,000
in aggregate Net Cash Proceeds from Permitted Asset Sales shall not have
been received by the Borrower prior to the Conversion Date, the Applicable
Margin for all Advances shall immediately be increased by 0.50% per annum
until such time as the Borrower receives such amount.
<PAGE>
6
"Appropriate Lender" means, at any time, with respect to (a) any of
the Term A, Term B, Acquisition or Working Capital Facilities, a Lender
that has a Commitment with respect to such Facility at such time and (b)
the Letter of Credit Facility, (i) the Issuing Bank and (ii) if the other
Working Capital Lenders have made Letter of Credit Advances pursuant to
Section 2.03(c) that are outstanding at such time, each such other Working
Capital Lender.
"Asset Sale Blocked Account" shall have the meaning specified in the
Security Agreement.
"Asset Sale Release Amount" means the aggregate amount of the
Working Capital Advances repaid with funds released from the Asset Sale
Blocked Account pursuant to Section 2.16(B) less the aggregate amount of
any proceeds from Working Capital Advances deposited in the Asset Sale
Blocked Account.
"Asset Sale Threshold Date" means the date on which MEDIQ or its
Subsidiaries shall have completed all Permitted Asset Sales (whether or
not the sale of Health Examinetics is completed) such that the Borrower
shall have received an aggregate of at least $60,000,000 of Net Cash
Proceeds from Permitted Asset Sales.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee and accepted by
the Administrative Agent, in accordance with Section 9.07 and in
substantially the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Bank Hedge Agreement" means any interest rate Hedge Agreement
required or permitted under Article V that is entered into by and between
the Borrower and any Lender Party or any Affiliate of any Lender Party.
"Base Rate" means a fluctuating interest rate per annum in effect
from time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest announced publicly by BNP in New
York, New York, from time to time, as its prime rate (and such term
shall not be construed to be its best or most favorable rate); and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
<PAGE>
7
"Base Rate Advance" means an Advance that bears interest as provided
in Section 2.07(a)(i).
"Beneficial Ownership" or "Beneficially Own" have the meanings
specified in the Securities Exchange Act of 1934 and Rules 13d-3 and 13d-5
thereunder.
"BNP" has the meaning specified in the recital of parties to this
Agreement.
"Borrower" has the meaning specified in the recital of parties to
this Agreement.
"Borrower's Account" means the account of the Borrower maintained by
the Borrower with BNP at its office at 499 Park Avenue, New York, New York
10022, Account No. 200877-001-91, or such other account as the Borrower
and the Administrative Agent may from time to time designate as the
"Borrower's Account".
"Borrowing" means a Term A Borrowing, a Term B Borrowing, an
Acquisition Borrowing or a Working Capital Borrowing.
"Borrowing Base Certificate" means a certificate in substantially
the form of Exhibit H hereto, duly certified by the chief financial
officer of the Borrower.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the sum
of, without duplication, (a) all cash expenditures made, directly or
indirectly, by such Person or any of its Subsidiaries during such period
for equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto, that have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on a Consolidated balance sheet of such
Person (other than the use of insurance proceeds for any such expenditure
for the replacement of any item listed in this clause (a)) plus (b) the
aggregate principal amount of all Debt (including Obligations under
Capitalized Leases and Obligations secured by purchase money Liens
permitted under Section 5.02(a)(v)) assumed or incurred in connection with
any such expenditures less (c) the aggregate principal amount of any
Investments permitted under Section 5.02(f)(i) made after the date hereof
that would otherwise qualify as Capital Expenditures.
<PAGE>
8
"Capitalized Leases" means all leases that have been or should be,
in accordance with GAAP, recorded as capitalized leases.
"Cash Equivalents" means any of the following, to the extent owned
by the Borrower, MEDIQ or any of their Subsidiaries free and clear of all
Liens other than Liens created under the Collateral Documents and having a
maturity of not greater than 180 days from the date of acquisition
thereof: (a) readily marketable direct obligations of the Government of
the United States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the Government
of the United States, (b) insured certificates of deposit of or time
deposits with any commercial bank that is a Lender Party or a member of
the Federal Reserve System, issues (or the parent of which issues)
commercial paper rated as described in clause (c), is organized under the
laws of the United States or any State thereof and has combined capital
and surplus of at least $1 billion, (c) commercial paper in an aggregate
amount of no more than $5,000,000 per issuer outstanding at any time,
issued by any corporation organized under the laws of any State of the
United States and rated at least "Prime-1" (or the then equivalent grade)
by Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade)
by Standard & Poor's Ratings Group or (d) money market or mutual funds
that invest only in Cash Equivalents of the types described in clauses
(a), (b) and (c) above.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Citibank Account" means the account in the name of the Borrower
maintained with Citibank, N.A. for purposes of funding certain obligations
under the Borrower's health plan.
"Clean-Down Period" means, commencing June 1, 1997, with respect to
any Fiscal Year of the Borrower, any period of 30 consecutive days
selected by the Borrower commencing on any day during the period from the
first day of June of such Fiscal Year to the first day of September of
such Fiscal Year.
"Collateral" means all "Collateral" and "Intellectual Property
Collateral" referred to in the Collateral Documents and all other property
that is or is intended to be subject to any Lien in favor of the
Administrative Agent for the benefit of the Secured Parties.
<PAGE>
9
"Collateral Documents" means the Security Agreement, the Mortgage,
the landlord consents from the Persons listed on Schedule 3.01(g)(xviii)
and any other document or agreement that creates or purports to create a
Lien in favor of the Administrative Agent for the benefit of the Secured
Parties.
"Commitment" means a Term A Commitment, a Term B Commitment, an
Acquisition Commitment, a Working Capital Commitment or a Letter of Credit
Commitment.
"Confidential Information" means information that the Borrower
furnishes to the Administrative Agent or any Lender Party on a
confidential basis, but does not include any such information that is or
becomes generally available to the public or that is or becomes available
to the Administrative Agent or such Lender Party from a source other than
the Borrower, which source to the knowledge of the Administrative Agent or
such Lender Party is not under a duty of confidentiality.
"Congress Account" means the account in the name of the Borrower
maintained with Congress Financial Corporation, in an amount not to exceed
$100,000, maintained for purposes of collateralizing certain indemnity
obligations of Borrower to Congress Financial Corporation pursuant to the
Congress Agreement.
"Congress Agreement" means collectively the Release Agreements and
Cash Collateral Agreement, each dated as of September 30, 1996, between
Borrower, MEDIQ/PRN Life Support Services-I, Inc. and Congress Financial
Corporation.
"Consolidated" refers, with respect to any Person, to the
consolidation of accounts of such Person and its Subsidiaries in
accordance with GAAP.
"Conversion", "Convert" and "Converted" each refer to a conversion
of Advances of one Type into Advances of the other Type pursuant to
Section 2.09 or 2.10.
"Conversion Date" means the last day of the calendar month in the
month that is 18 months following the date of the Initial Extension of
Credit.
"Current Assets" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets of such
Person.
"Current Liabilities" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one year
after the date of determination other than Funded Debt and (b) all other
items that in accordance with
<PAGE>
10
GAAP would be classified as current liabilities of a company conducting a
business the same as or similar to that of such Person.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of
such Person for the deferred purchase price of property or services (other
than trade payables not overdue by more than 60 days incurred in the
ordinary course of such Person's business), (c) all Obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments,
(d) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations of
such Person as lessee under Capitalized Leases, (f) all Obligations,
contingent or otherwise, of such Person under acceptance, letter of credit
or similar facilities, (g) all Obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any
capital stock of or other ownership or profit interest in such Person or
any other Person or any warrants, rights or options to acquire such
capital stock other than Obligations of such Person in respect of
management profit sharing plans, valued, in the case of Redeemable
Preferred Stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all
Obligations of such Person in respect of Hedge Agreements (other than for
purposes of calculating the financial covenants in Section 5.04), (i) all
Debt of others referred to in clauses (a) through (h) above or clause (j)
below guaranteed directly or indirectly in any manner by such Person, or
in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or supply funds
for the payment or purchase of such Debt, (ii) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to supply funds to or
in any other manner invest in the debtor (including any agreement to pay
for property or services irrespective of whether such property is received
or such services are rendered) or (iv) otherwise to assure a creditor
against loss, and (j) all Debt referred to in clauses (a) through (i)
above of another Person secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) any Lien
on property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
<PAGE>
11
"Defaulted Advance" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party
to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time
which has not been made by such Lender Party or by the Administrative
Agent for the account of such Lender Party pursuant to Section 2.02(d) as
of such time. In the event that a portion of a Defaulted Advance shall be
deemed made pursuant to Section 2.15(a), the remaining portion of such
Defaulted Advance shall be considered a Defaulted Advance originally
required to be made pursuant to Section 2.01 on the same date as the
Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any
time, any amount required to be paid by such Lender Party to the Agents or
any other Lender Party hereunder or under any other Loan Document at or
prior to such time which has not been so paid as of such time, including,
without limitation, any amount required to be paid by such Lender Party to
(a) Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a
Letter of Credit Advance made by the Issuing Bank, (b) the Administrative
Agent pursuant to Section 2.02(d) to reimburse the Administrative Agent
for the amount of any Advance made by the Administrative Agent for the
account of such Lender Party, (c) any other Lender Party pursuant to
Section 2.13 to purchase any participation in Advances owing to such other
Lender Party and (d) the Administrative Agent or the Issuing Bank pursuant
to Section 8.05 to reimburse the Administrative Agent or the Issuing Bank
for such Lender Party's ratable share of any amount required to be paid by
the Lender Parties to the Administrative Agent or the Issuing Bank as
provided therein. In the event that a portion of a Defaulted Amount shall
be deemed paid pursuant to Section 2.15(b), the remaining portion of such
Defaulted Amount shall be considered a Defaulted Amount originally
required to be paid hereunder or under any other Loan Document on the same
date as the Defaulted Amount so deemed paid in part.
"Defaulting Lender" means, at any time, any Lender Party that, at
such time (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall
take any action or be the subject of any action or proceeding of a type
described in Section 6.01(f).
"Discontinued Subsidiary" means any of the Subsidiaries listed on
Schedule IV hereto.
"Documentation Agent" has the meaning specified in the recital of
parties to this Agreement.
"Domestic Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it
<PAGE>
12
became a Lender Party, as the case may be, or such other office of such
Lender Party as such Lender Party may from time to time specify to the
Borrower and the Administrative Agent.
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis, of (a) net income (or net loss) excluding net income
(or net loss) from or arising from any Persons listed on Schedule III, (b)
Interest Expense, (c) income tax expense, (d) depreciation expense, (e)
amortization expense and (f) extraordinary or unusual losses deducted in
calculating net income less extraordinary or unusual gains added in
calculating net income in each case of MEDIQ and its Subsidiaries,
determined in accordance with GAAP for such period; provided, however,
that for MEDIQ and its Subsidiaries, for any Monthly Rolling Period or
Quarterly Rolling Period, as the case may be, ending on or before May 31,
1997, EBITDA, for each month or quarter, as the case may be, ending on or
before June 30, 1996, shall be deemed to be the amount set forth for such
month or quarter on Schedule II.
"Eligible Assignee" means with respect to any Facility: (i) a
Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank organized
under the laws of the United States, or any State thereof, and having a
combined capital and surplus of at least $1,000,000,000; (iv) a savings
and loan association or savings bank organized under the laws of the
United States, or any State thereof, and having a combined capital and
surplus of at least $1,000,000,000; (v) a commercial bank organized under
the laws of any other country that is a member of the OECD or has
concluded special lending arrangements with the International Monetary
Fund associated with its General Arrangements to Borrow or a political
subdivision of any such country, and having a combined capital and surplus
of at least $1,000,000,000, so long as such bank is acting through a
branch or agency located in the United States; (vi) a finance company,
insurance company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged in
making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and having a combined capital and surplus
of at least $500,000,000; and (vii) any other Person approved by the
Administrative Agent and the Borrower, such approval not to be
unreasonably withheld or delayed; provided, however, that neither any Loan
Party nor any Affiliate of a Loan Party shall qualify as an Eligible
Assignee under this definition.
"Eligible Collateral" means, collectively, Eligible Inventory and
Eligible Receivables.
"Eligible Inventory" means any Inventory owned by the Borrower and
its Ongoing Subsidiaries free and clear of all Liens (other than Permitted
Liens and Liens
<PAGE>
13
in favor of the Secured Parties securing the Secured Obligations) other
than the following:
(a) Inventory consisting of "perishable agricultural
commodities" within the meaning of the Perishable Agricultural
Commodities Act of 1930, as amended, and the regulations thereunder,
or on which a Lien has arisen or may arise in favor of agricultural
producers under comparable state or local laws;
(b) Inventory located on leaseholds as to which the lessor has
not entered into a consent and agreement providing the
Administrative Agent with the right to receive notice of default,
the right to repossess such Inventory at any reasonable time
pursuant to such consent and agreement and such other rights as may
be reasonably acceptable to the Administrative Agent;
(c) Inventory that is obsolete, unusable or otherwise
unavailable for sale;
(d) Inventory with respect to which the representations and
warranties set forth in Section 9 of the Security Agreement
applicable to Inventory are not true and correct;
(e) Inventory consisting of promotional, marketing, packaging
or shipping materials and supplies;
(f) Inventory that fails to meet all standards imposed by any
governmental agency, or department or division thereof, having
regulatory authority over such Inventory or its use or sale;
(g) Inventory that is subject to any licensing, patent,
royalty, trademark, trade name or copyright agreement with any third
party from whom the Borrower has received written notice of a
dispute in respect of any such agreement;
(h) Inventory located outside the United States;
(i) Inventory that is not in the possession of or under the
sole control of the Borrower or not in a leased facility in respect
of which the owner has entered into a consent and agreement
providing the Administrative Agent with the right to receive notice
of default, the right to repossess such Inventory at any reasonable
time pursuant to such consent and agreement and such other rights as
may be reasonably acceptable to the Administrative Agent;
<PAGE>
14
(j) Inventory consisting of work in progress;
(k) Inventory in respect of which the Security Agreement,
after giving effect to the related filings of financing statements
that have then been made, if any, does not or has ceased to create a
valid and perfected first priority lien or security interest in
favor of the Secured Parties securing the Secured Obligations and as
to which no other Liens exist, other than Permitted Liens; and
(l) Inventory not recorded under a perpetual inventory system
reasonably acceptable to the Administrative Agent.
The value of such Eligible Inventory shall be its book value
determined in accordance with GAAP on a basis consistent with current
practice of the Borrower or in accordance with the "average cost" method
of accounting in accordance with GAAP unless the Administrative Agent
determines, in its reasonable discretion that such Eligible Inventory
shall be valued at a lower value.
"Eligible Receivables" means any Receivables owned by the Borrower
and its Ongoing Subsidiaries free and clear of all Liens (other than
Permitted Liens and Liens in favor of the Secured Parties securing the
Secured Obligations) other than the following:
(a) Receivables that do not arise out of sales of goods or
rendering of services in the ordinary course of the Borrower's
business;
(b) Receivables on terms other than those normal or customary
in the Borrower's business;
(c) Receivables owing from any Person that is an Affiliate of
the Borrower;
(d) Receivables more than 120 days past original invoice date;
(e) Receivables owing from any Person from which an aggregate
amount of more than 50% of the Receivables owing are more than 120
days past original invoice date;
(f) Receivables owing from any Person that has asserted any
claim, demand or liability, by action, suit, counterclaim or other
judicial or arbitral proceeding;
<PAGE>
15
(g) Receivables owing from any Person that shall take or be
the subject of any action or proceeding of a type described in
Section 6.01(f);
(h) Receivables (i) owing from any Person that is also a
supplier to or creditor of the Borrower (to the extent such Person
has any right of setoff but only to the extent of such setoff)
unless such Person has waived any right of set-off in a manner
acceptable to the Administrative Agent or (ii) representing any
manufacturer's or supplier's credits, discounts, incentive plans or
similar arrangements entitling the Borrower to discounts on future
purchase therefrom;
(i) Receivables arising out of sales to account debtors
outside the United States;
(j) Receivables arising out of sales on a bill-and-hold,
guaranteed sale, sale-or-return, sale on approval or consignment
basis or subject to any right of return, set-off or charge-back;
(k) Receivables owing from an account debtor that is an
agency, department or instrumentality of the United States or any
State thereof; and
(l) Receivables in respect of which the Security Agreement,
after giving effect to the related filings of financing statements
that have then been made, if any, does not or has ceased to create a
valid and perfected first priority lien or security interest in
favor of the Secured Parties securing the Secured Obligations or as
to which any other Lien exists, other than Permitted Liens.
The value of such Eligible Receivables shall be their book value
determined in accordance with GAAP unless the Administrative Agent
determines, in its reasonable discretion, that such Eligible Receivables
shall be valued at a lower value.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of liability
or potential liability, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law, any
Environmental Permit or Hazardous Material or arising from alleged injury
or threat to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or third party
for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
<PAGE>
16
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or
guidance relating to pollution or protection of the environment, health,
safety or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC; or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are
met with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30 days;
(b) the application for a minimum funding waiver with respect to a Plan;
(c) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (d) the cessation of operations at a facility of any
Loan Party or any ERISA Affiliate in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any
ERISA Affiliate from a Multiple Employer Plan during a plan year for which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for imposition of a lien under Section 302(f) of ERISA
shall have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of a
trustee to administer, such Plan.
<PAGE>
17
"Eurocurrency Liabilities" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender Party (or, if no such
office is specified, its Domestic Lending Office), or such other office of
such Lender Party as such Lender Party may from time to time specify to
the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the average of
the respective rates per annum posted by each of the principal London
offices of banks posting rates as displayed on the Telerate screen, page
3750 or such other page as may replace such page on such service for the
purpose of displaying the London interbank offered rate of major banks for
deposits in U.S. dollars at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period for deposits in
amounts and durations comparable to such Borrowing and such Interest
Period (and rounded upward to the next whole multiple of 1/16 of 1%) by
(b) a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances is determined) having a term equal to such
Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any period, the sum of (a)
Consolidated pretax income (or pretax loss) of MEDIQ and its Subsidiaries
for such period less (b) Consolidated income tax expense of MEDIQ and its
Subsidiaries for such period
<PAGE>
18
paid in cash plus (c) an amount equal to the aggregate amount of all
noncash charges deducted in arriving at Consolidated pretax income (or
pretax loss) for each such period plus (d) an amount (whether positive or
negative) equal to the change in Consolidated Current Liabilities (only to
the extent not duplicated herein) of MEDIQ and its Ongoing Subsidiaries
during such period less (e) an amount equal to the aggregate amount of all
noncash credits included in arriving at such Consolidated pretax income
(or pretax loss) less (f) an amount (whether positive or negative) equal
to the change in Consolidated Current Assets (excluding cash and Cash
Equivalents, and to the extent not duplicated herein) of MEDIQ and its
Ongoing Subsidiaries during such period less (g) an amount equal to the
amount of all Capital Expenditures of MEDIQ and its Ongoing Subsidiaries
paid in cash during such period to the extent permitted by this Agreement
less (h) an amount equal to the aggregate amount of all regularly
scheduled principal payments of Funded Debt made during such period,
together with any optional prepayments of Term Advances, and, from and
after the Conversion Date, the Acquisition Advances, made during such
period in accordance with Section 2.06(a) less (i) an amount equal to the
aggregate amount of Consolidated pretax income of MEDIQ and its
Subsidiaries resulting from any transaction (other than asset sales in the
ordinary course of business) creating Net Cash Proceeds or Extraordinary
Receipts for such period to the extent included in pretax income of MEDIQ
and its Subsidiaries for such period plus (j) any cash received in respect
of any Obligations secured by purchase money Liens or Obligations under
Capitalized Leases. Notwithstanding anything to the contrary contained
herein, (i) gains or losses from Permitted Asset Sales and (ii) any items
in respect of Discontinued Subsidiaries otherwise included in any clause
of the foregoing sentence of this definition shall not be included in
"Excess Cash Flow".
"Excess Cash Flow Basket" means, at any time, the aggregate amount
of Excess Cash Flow for each prior Fiscal Year not used to make any
mandatory prepayment pursuant to Section 2.06(b)(i) minus (x) the
aggregate amount of any payment or prepayment made from the Excess Cash
Flow Basket pursuant to Sections 5.02(f), 5.02(g) and 5.02(k), and (y) any
payment for Capital Expenditures made pursuant to the third proviso in
5.04(f).
"Excess Cash from Permitted Asset Sales" means, at any time, an
amount equal to the aggregate amount of Net Cash Proceeds from Permitted
Asset Sales not previously applied to prepay Acquisition Advances or
Working Capital Advances pursuant to Section 2.06 prior to such time.
"Existing Debt" means Debt of the Loan Parties (excluding any
Discontinued Subsidiary) and their respective Subsidiaries outstanding
immediately before this Agreement becomes effective.
<PAGE>
19
"Extraordinary Receipt" means any cash received by or paid to or for
the account of any Person not in the ordinary course of business,
including, without limitation, tax refunds, pension plan reversions,
proceeds of insurance (excluding proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost
earnings), condemnation awards (and payments in lieu thereof) and
indemnity payments less the amount of taxes payable in connection with or
as a result of the receipt of such funds; provided, however, that if the
amount of taxes deducted is greater than the amount actually so paid for
taxes, the amount of such excess shall constitute an Extraordinary
Receipt, provided, further, that an Extraordinary Receipt shall not
include cash receipts received from proceeds of insurance to the extent
that such proceeds in respect of loss or damage to equipment, fixed assets
or real property are applied (or in respect of which expenditures were
previously incurred) to replace or repair the equipment, fixed assets or
real property in respect of which such proceeds were received in
accordance with the terms of the Loan Documents, so long as such
application is made in the ordinary course of business.
"Facility" means the Term A Facility, the Term B Facility, the
Acquisition Facility, the Working Capital Facility or the Letter of Credit
Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period (i) to the rate
published by the Telerate service on page five of its daily report as the
"ASK" rate as of 10:00 A.M. (New York City time) for such day (or, if such
day is not a Business Day, for the immediately preceding Business Day) or
(ii) if the Telerate service shall cease to publish or otherwise shall not
publish such rates for any day that is a Business Day, to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Final Maturity Date" means the earlier of September 30, 2004 and
the date of repayment in full or termination in whole of all of the
Facilities pursuant to Section 2.05 or 6.01.
"Fiscal Year" means a fiscal year of the Borrower and its
Consolidated Subsidiaries ending on September 30 in any calendar year.
<PAGE>
20
"Fixed Charge Coverage Ratio" means, with respect to any Person for
any Rolling Period, the ratio of (a) Consolidated EBITDA for such Person
and its Subsidiaries for such Rolling Period less the sum of (i) Capital
Expenditures (net of sales of rental equipment in the ordinary course of
business) of such Person and its Subsidiaries during such Rolling Period
less any Capital Expenditures made pursuant to the second proviso of
Section 5.04(f) during such Rolling Period and (ii) income taxes of such
Person and its Subsidiaries that have been paid in cash during such
Rolling Period, other than taxes paid with respect to the Permitted Asset
Sales to (b) the sum of (i) Interest Expense of such Person and its
Subsidiaries for such Rolling Period and (ii) regularly scheduled
principal payments of Funded Debt (other than the Subordinated Notes) of
such Person and its Subsidiaries for such Rolling Period; provided,
however, that for any such Rolling Period ending on or before August 31,
1997, the amounts determined in accordance with clauses (b)(i) and (ii) of
this definition included in the calculation of the "Fixed Charge Coverage
Ratio" shall be the actual amounts for the period from and after October
1, 1996 to and including the last date of such Rolling Period which
amounts shall from and after October 1, 1996 each be multiplied by a
fraction (x) the numerator of which is equal to 12 and (y) the denominator
of which is the actual number of calendar months from October 1, 1996 to
and including the last date of such Rolling Period.
"Funded Debt" of any Person means Debt of such Person that by its
terms matures more than one year after the date of creation or matures
within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year after such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
after such date, including, without limitation, all amounts of Funded Debt
of such Person required to be paid or prepaid within one year after the
date of determination; provided, however, that, with respect to the
Borrower, Funded Debt shall not include Debt permitted pursuant to Section
5.02(b)(ii)(G).
"Guaranteed Obligations" has the meaning specified in Section 7.01.
"GAAP" has the meaning specified in Section 1.03.
"Guarantors" means the Parent Guarantors and the Subsidiary
Guarantors.
"Hazardous Materials" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
<PAGE>
21
"Health Examinetics" means Health Examinetics, Inc., a Delaware
corporation, a wholly owned Subsidiary of MEDIQ.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Hedge Bank" means any Lender Party in its capacity as a party to a
Bank Hedge Agreement.
"Holdings Notes" means the promissory notes issued by Holdings to
the order of KCI Therapeutic Services, Inc. dated September 30, 1994.
"Indemnified Party" has the meaning specified in Section 9.04(b).
"Initial Extension of Credit" means the earlier to occur of the
initial Borrowing hereunder and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank" has the meaning specified in the recital of
parties to this Agreement.
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"InnoServ" means InnoServ Technologies, Inc., a California
corporation.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Interest Coverage Ratio" means, with respect to any Person for any
Rolling Period, the ratio of (a) Consolidated EBITDA of such Person and
its Subsidiaries for such Rolling Period to (b) Interest Expense of such
Person and its Subsidiaries for such Rolling Period; provided, however,
that for any such Rolling Period ending on or before August 31, 1997, the
amounts determined in accordance with clause (b) of this definition
included in the calculation of the "Interest Coverage Ratio" shall be the
actual amounts for the period from and after October 1, 1996 to and
including the last date of such Rolling Period which amounts shall from
and after October 1, 1996 each be multiplied by a fraction (x) the
numerator of which is equal to 12 and (y) the denominator of which is the
actual number of calendar months from the October 1, 1996 to and including
the last date of such Rolling Period.
<PAGE>
22
"Interest Expense" means, with respect to any Person for any period,
the amount by which (a) interest expense (including the interest component
on obligations under Capitalized Leases but excluding amortization of
deferred financing fees and expenses to the extent included in interest
expense), whether paid or accrued, on all Debt of such Person and its
Subsidiaries for such period, including, without limitation and without
duplication, (i) interest expense in respect of Debt resulting from
Advances, (ii) interest expense in respect of the Subordinated Notes,
(iii) commissions, discounts and other fees and charges payable in
connection with letters of credit (including, without limitation, any
Letters of Credit) and (iv) any net payment payable in connection with
interest rate Hedge Agreements less any net credits received in connection
with interest rate Hedge Agreements exceeds (b) interest income, whether
paid or accrued, of such Person for such period.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance, and ending on the last day of
the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months, as the Borrower may, upon notice received by the Administrative
Agent not later than 11:00 A.M. (New York City time) on the third Business
Day prior to the first day of such Interest Period, select; provided,
however, that:
(a) the Borrower may not select any Interest Period with
respect to any Eurodollar Rate Advance under a Facility that ends
after any principal repayment installment date for such Facility
unless, after giving effect to such selection, the aggregate
principal amount of Base Rate Advances and of Eurodollar Rate
Advances having Interest Periods that end on or prior to such
principal repayment installment date for such Facility shall be at
least equal to the aggregate principal amount of Advances under such
Facility due and payable on or prior to such date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing shall
be of the same duration;
(c) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such extension
would cause the last day of such Interest
<PAGE>
23
Period to occur in the next following calendar month, the last day
of such Interest Period shall occur on the immediately preceding
Business Day;
(d) whenever the first day of any Interest Period occurs on a
day of a calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and
(e) prior to the end of the first calendar month immediately
following the date of the Initial Extension of Credit, the Borrower
may select an Interest Period equal to the period from such date to
the end of such calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Inventory" means all Inventory referred to in Section 1(d) of the
Security Agreement.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership
or profit interest, warrants, rights, options, obligations, other
securities or the assets comprising a substantial part or all of the
business of such Person or of an operating division of such Person, any
capital contribution to such Person or any other investment in such
Person, including, without limitation, any arrangement pursuant to which
the investor incurs Debt of the types referred to in clause (i) or (j) of
the definition of "Debt" in respect of such Person.
"Investor Group" shall be those Persons listed on Schedule 6.01(k)
hereto.
"Issuing Bank" means the Initial Issuing Bank and each Eligible
Assignee which is either an Agent or any other Lender as may be approved
by the Borrower (such approval not to be unreasonably withheld) to which a
Letter of Credit Commitment hereunder has been assigned pursuant to
Section 9.07.
"L/C Cash Collateral Account" has the meaning specified in the
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(c)(ii)(A).
<PAGE>
24
"Lender Party" means any Lender or the Issuing Bank.
"Lenders" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 9.07.
"Letter of Credit" has the meaning specified in Section 2.01(d).
"Letter of Credit Advance" means an advance made by the Issuing Bank
or any Working Capital Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing
Bank at any time, the amount set forth opposite the Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
the Issuing Bank has entered into an Assignment and Acceptance set forth
for the Issuing Bank in the Register maintained by the Administrative
Agent pursuant to Section 9.07(d) as the Issuing Bank's "Letter of Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal to
the Issuing Bank's Letter of Credit Commitment at such time, as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
"Leverage Ratio" means, with respect to any Person for any Rolling
Period, the ratio of (a) Funded Debt (other than (i) contingent
obligations of the type described in clause (f) or (h) in the definition
of "Debt" and (ii) Debt permitted under Section 5.02(b)(i)(A)) of such
Person and its Subsidiaries as of the last day of such Rolling Period
minus, in each case as of the last day of such Rolling Period, (i) the
principal amount of the NutraMax Note to the extent secured by the
NutraMax Letter of Credit, so long as such NutraMax Letter of Credit is
issued by a financial institution and on terms and conditions acceptable
to the Administrative Agent and (ii) the amount on deposit in the Asset
Sale Blocked Account to (b) Consolidated EBITDA of such Person and its
Subsidiaries for such Rolling Period, provided, that if any Investment
pursuant to Section 5.02(f)(i) or (vi) shall have occurred, such
Consolidated EBITDA shall include the EBITDA of or attributable to such
Investment for (x) with respect to any Monthly Rolling Period, the 12
months ended on the last day of such Monthly Rolling Period and (y) with
respect to any Quarterly Rolling Period, the four fiscal quarters ended on
the last day of such Quarterly Rolling Period.
<PAGE>
25
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Loan Documents" means (a) for purposes of this Agreement and the
Notes and any amendment, supplement or modification hereof or thereof and
for all other purposes other than for purposes of the Collateral
Documents, (i) this Agreement, (ii) the Notes, (iii) the Collateral
Documents, (iv) each Letter of Credit Agreement and (v) the Subsidiary
Guaranty and (b) for purposes of the Collateral Documents, (i) this
Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each
Letter of Credit Agreement, (v) the Subsidiary Guaranty, (vi) each Bank
Hedge Agreement, and (vii) each Blocked Account Letter (as defined in the
Security Agreement) in each case as amended or otherwise modified from
time to time.
"Loan Parties" means the Borrower and the Guarantors.
"Loan Value" means:
(a) with respect to Eligible Inventory up to 50% of the value
of the Eligible Inventory consisting of rental equipment for sale in
the ordinary course of business, disposable medical supplies, and
parts for rental equipment; and
(b) with respect to Eligible Receivables up to 80% of the
value of the Eligible Receivables;
provided, however, that the Administrative Agent may, in its reasonable
discretion based on an analysis of changes in the Borrower's operations or
credit and collection experience arising after the date hereof that may
dilute the value of Eligible Collateral revise from time to time the
percentage of the value of any individual item of Eligible Collateral that
shall be used in determining Loan Value; provided further that any
increase in such percentage shall require the approval of the Required
Lenders.
"Margin Stock" has the meaning specified in Regulation U and/or
Regulation G.
"Margin Stock Collateral" means any Collateral which qualifies as
Margin Stock or proceeds thereof.
<PAGE>
26
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Loan Parties and their
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Loan Parties and their
Subsidiaries taken as a whole, (b) the rights and remedies of the
Administrative Agent or any Lender Party under any Loan Document or
Related Document or (c) the ability of the Borrower or the Loan Parties
and their Subsidiaries taken as a whole to perform their Obligations under
any Loan Document or Related Document to which they are or are to become
parties.
"MEDIQ" has the meaning specified in the recital of parties to this
Agreement.
"MEDIQ Mobile X-Ray" means MEDIQ Mobile X-Ray Services, Inc., a
Delaware corporation, and a wholly owned Subsidiary of MEDIQ.
"Monthly Rolling Period" means with respect to any month the
consecutive 12-month period ending on the last day of such month.
"Mortgage" has the meaning specified in Section 3.01(g)(viii).
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any asset or the sale or issuance of any Debt
(excluding any Debt issued by any Discontinued Subsidiary) or capital
stock or other ownership or profit interest, any securities convertible
into or exchangeable for capital stock or other ownership or profit
interest or any warrants, rights, options or other securities to acquire
capital stock or other ownership or profit interest by any Person, or any
Extraordinary Receipt received by or paid to or for the account of any
Person, which
<PAGE>
27
shall include the receipt of any cash dividend by MEDIQ or any of its
Subsidiaries other than such dividends permitted under Section 5.02(g),
the aggregate amount of cash received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction (excluding, without limitation, any cash received in respect
of any Obligations under Capitalized Leases or any Obligations secured by
purchase money Liens included in clause (j) of the definition of "Excess
Cash Flow"), after deducting therefrom only (without duplication) (a)
reasonable and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions, (b) the amount of taxes payable in connection with or as a
result of such transaction and (c) the amount of any Debt secured by a
Lien on such asset that, by the terms of such transaction, is required to
be repaid upon such disposition, in each case to the extent, but only to
the extent, that the amounts so deducted are properly attributable to such
transaction or to the asset that is the subject thereof and are, in the
case of clauses (a) and (c), at the time of receipt of such cash or when
otherwise required by the terms of the particular arrangement or entered
into in connection therewith, actually paid to a Person that is not an
Affiliate of such Person or any Loan Party or any Affiliate of any Loan
Party and, in the case of clause (b), on the earlier of the dates on which
the tax return covering such taxes is filed or required to be filed,
actually paid to a Person that is not an Affiliate of such Person or any
Loan Party or any Affiliate of any Loan Party, provided that if the amount
deducted pursuant to clause (b) above is greater than the amount actually
so paid for taxes, the amount of such excess shall constitute "Net Cash
Proceeds."
"Note" means a Term A Note, a Term B Note, an Acquisition Note or a
Working Capital Note.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"NPL" means the National Priorities List under CERCLA.
"NutraMax" means NutraMax Products, Inc., a Delaware corporation, in
which a Subsidiary of MEDIQ has an equity investment.
"NutraMax Escrow Agreement" means the Agreement dated as of July 30,
1993 between MEDIQ, MEDIQ Investment Services, Inc., a Delaware
corporation, and First Fidelity Bank, as escrow agent.
"NutraMax Letter of Credit" means the letter of credit to be issued
by a financial institution pursuant to the NutraMax Agreement.
<PAGE>
28
"NutraMax Agreement" means the Stock Purchase Agreement dated as of
September 18, 1996 among MEDIQ, MEDIQ Investment Services, Inc. and
NutraMax.
"NutraMax Note" means the promissory note issued by NutraMax to
MEDIQ and/or MEDIQ Investment Services, Inc. pursuant to the NutraMax
Agreement.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(f). Without limiting the generality
of the foregoing, the Obligations of the Loan Parties under the Loan
Documents include (a) the obligation to pay principal, interest, Letter of
Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by any Loan Party
under any Loan Document, (b) the obligation of any Loan Party to reimburse
any amount in respect of any of the foregoing that any Lender Party, in
its sole discretion, may elect to pay or advance on behalf of such Loan
Party and (c) the obligation to pay the Administrative Agent pursuant to
Section 2.08(c).
"OECD" means the Organization for Economic Cooperation and
Development.
"Ongoing Subsidiary" means any Subsidiary other than a Discontinued
Subsidiary.
"Open Year" has the meaning specified in Section 4.01(y).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Parent Guarantors" has the meaning specified in the recital of
parties to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCI Services" means PCI Services, Inc., in which a Subsidiary of
MEDIQ has an equity investment.
"Permitted Asset Sales" means the sale by MEDIQ or any of its
Subsidiaries of all of its interest in PCI Services, NutraMax, Health
Examinetics and MEDIQ Mobile X-Ray, or the sale of any non-cash proceeds
received therefrom in accordance
<PAGE>
29
with the provisions of Section 5.02(e)(ii), or, in the case of NutraMax,
the sale by MEDIQ or any of its Subsidiaries of all or part of its
interest in NutraMax pursuant to the NutraMax Agreement.
"Permitted Encumbrances" has the meaning specified in the Mortgage.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b) hereof; (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other similar
Liens arising in the ordinary course of business securing obligations that
(i) are not overdue for a period of more than 30 days and (ii) either
individually or when aggregated with all other Permitted Liens outstanding
on any date of determination, do not materially affect the use or value of
the property to which they relate; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to
secure public or statutory obligations; and (d) easements, rights of way
and other encumbrances on title to real property that do not render title
to the property encumbered thereby unmarketable or materially adversely
affect the use of such property for its present purposes.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledged Debt" has the meaning specified in Section 1(a)(ii) of the
Security Agreement.
"Pledged Shares" has the meaning specified in Section 1(a)(i) of the
Security Agreement.
"Preferred Stock" means, with respect to any corporation, capital
stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
"Pro Rata Share" of any amount means, with respect to any Working
Capital Lender at any time, the product of such amount times a fraction
the numerator of
<PAGE>
30
which is the amount of such Lender's Working Capital Commitment at such
time and the denominator of which is the Working Capital Facility at such
time.
"Quarterly Rolling Period" means with respect to any fiscal quarter
the consecutive four fiscal quarters ending on the last day of such
quarter.
"Recapture Percentage" means, for purposes of Sections 2.06(b) and
5.04(f), with respect to any Fiscal Year of the Borrower and its
Subsidiaries, 75% or, if the Leverage Ratio as at September 30 in any such
Fiscal Year is less than 2.50 to 1.0, 50%.
"Receivables" means all Receivables referred to in Section 1(e) of
the Security Agreement.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any such
right or Obligation that (a) the issuer has undertaken to redeem at a
fixed or determinable date or dates, whether by operation of a sinking
fund or otherwise, or upon the occurrence of a condition not solely within
the control of the issuer or (b) is redeemable at the option of the
holder.
"Reduction Amount" has the meaning specified in Section 2.06(b)(vi).
"Refinancing" has the meaning specified in the Preliminary
Statements.
"Refinancing Debt" means the Debt identified as such on Schedule
2.14(a), in an aggregate amount not to exceed the amount of such Debt set
forth thereon.
"Register" has the meaning specified in Section 9.07(d).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Related Documents" means the Subordinated Note Documents, the Tax
Sharing Agreements, the 12.125% Note Indenture and the NutraMax Escrow
Agreement.
"Required Lenders" means at any time Lenders owed or holding at
least 51% of the sum of (a) the aggregate principal amount of the Advances
outstanding at such time, (b) the aggregate Available Amount of all
Letters of Credit outstanding at such time, (c) the aggregate unused
Commitments under the Term A, Term B and Acquisition Facilities at such
time and (d) the aggregate Unused Working Capital
<PAGE>
31
Commitments at such time; provided, however, that if any Lender shall be a
Defaulting Lender at such time, there shall be excluded from the
determination of Required Lenders at such time (A) the aggregate principal
amount of the Advances owing to such Lender (in its capacity as a Lender)
and outstanding at such time, (B) such Lender's Pro Rata Share of the
aggregate Available Amount of all Letters of Credit issued by such Lender
and outstanding at such time, (C) the aggregate unused Acquisition
Commitments of such Lender at such time and (D) the Unused Working Capital
Commitment of such Lender at such time; provided, further, that for
purposes of (i) Section 6.01, solely with respect to any Event of Default
resulting from any Loan Party's failure to comply with Section 5.02(a),
5.02(e) or 5.02(m), insofar as such failure relates to Margin Stock, and
(ii) Section 9.01, solely with respect to any amendment, waiver or consent
to any departure by any Loan Party from the provisions of Section 5.02(a),
5.02(e) or 5.02(m), insofar as such waiver, amendment or consent relates
to Margin Stock, there shall be excluded from the determination of
Required Lenders at such time (A) the aggregate principal amount of the
Advances owing to all Alternative Lenders (in their capacity as Lenders)
and outstanding at such time, (B) such Alternative Lenders' Pro Rata
Shares of the aggregate Available Amount of all Letters of Credit issued
by such Alternative Lenders and outstanding at such time, (C) the
aggregate unused Acquisition Commitments of such Alternative Lenders at
such time and (D) the Unused Working Capital Commitment of such
Alternative Lenders at such time. For purposes of this definition, the
aggregate principal amount of Letter of Credit Advances owing to the
Issuing Bank and the Available Amount of each Letter of Credit shall be
considered to be owed to the Working Capital Lenders ratably in accordance
with their respective Working Capital Commitments.
"Responsible Officer" means the President, Chief Financial Officer,
or any Senior Vice-President of MEDIQ or the Borrower.
"Rolling Period" means a Monthly Rolling Period or a Quarterly
Rolling Period, as the case may be.
"Secured Obligations" has the meaning specified in the Security
Agreement.
"Secured Parties" means the Agents, the Lender Parties (other than,
with respect to Margin Stock Collateral, any Alternative Lender) and the
Hedge Banks.
"Security Agreement" has the meaning specified in Section
3.01(g)(vii).
"Senior Debt" means for any Person all Funded Debt of such Person
and its Subsidiaries other than the Subordinated Notes.
<PAGE>
32
"Senior Leverage Ratio" means, with respect to any Person for any
Rolling Period, the ratio of (a) Senior Debt (other than (i) contingent
obligations of the type described in clause (f) or (h) in the definition
of "Debt" and (ii) Debt permitted under Section 5.02(b)(i)(A)) of such
Person as of the last day of such Rolling Period to (b) Consolidated
EBITDA of such Person and its Subsidiaries for such Rolling Period,
provided, that if any Investment pursuant to Section 5.02(f)(i) or (vi)
shall have occurred, such Consolidated EBITDA shall include the EBITDA of
or attributable to such Investment for (x) with respect to any Monthly
Rolling Period, the 12 months ended on the last day of such Monthly
Rolling Period and (y) with respect to any Quarterly Rolling Period, the
four fiscal quarters ended on the last day of such Quarterly Rolling
Period.
"7.25% Notes" means the 7.25% convertible subordinated debentures
due 2006 issued by MEDIQ in an original aggregate principal amount of
$75,000,000.
"7.50% Notes" means the 7.50% exchangeable subordinated debentures
due 2003 issued by MEDIQ outstanding in the original aggregate principal
amount of $34,500,000.
"7.25% Note Indenture" means the Indenture dated as of June 1, 1986
between MEDIQ and Mellon Bank, N.A.
"7.50% Note Indenture" means the Indenture dated as of July 30, 1993
between MEDIQ and First Fidelity Bank, N.A.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and no Person other than the Loan
Parties and the ERISA Affiliates or (b) was so maintained and in respect
of which any Loan Party or any ERISA Affiliate could have liability under
Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay such debts and liabilities
as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small
capital. The
<PAGE>
33
amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become
an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit issued under
the Letter of Credit Facility, other than a Trade Letter of Credit.
"Subordinated Note Documents" means the 7.25% Note Indenture and the
7.50% Note Indenture, the 7.25% Notes and the 7.50% Notes and all other
agreements, indentures and instruments delivered in connection with the
issuance of such Notes.
"Subordinated Notes" means the 7.25% Notes and the 7.50% Notes.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency), (b) the interest in the
capital or profits of such partnership, joint venture or limited liability
company or (c) the beneficial interest in such trust or estate is at the
time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
"Subsidiary Guarantors" means the Subsidiaries of MEDIQ listed on
Schedule 3.01(g)(iii) hereto and each other Subsidiary of MEDIQ that shall
be required to execute and deliver a guaranty pursuant to Section 5.01(o).
"Subsidiary Guaranty" has the meaning specified in Section
3.01(g)(ix).
"Supplemental Indenture" means the Supplemental Indenture dated as
of the date hereof, between the Borrower and United Jersey Bank.
"Surviving Debt" has the meaning specified in Section 3.01(e).
"Taxes" has the meaning specified in Section 2.12(a).
"Tax Sharing Agreements" means the (i) Consolidated Group Tax
Agreement dated May 28, 1992, as amended, by and between the Borrower and
MEDIQ, (ii) Tax Indemnification Agreement dated August 31, 1993 by and
between Mental Health Management, Inc. and MEDIQ, (iii) Tax
Allocation/Sharing Agreement dated as of
<PAGE>
34
September 20, 1991 by and between PCI Services, Inc. and MEDIQ and (iv)
Consolidated Group Tax Agreement dated September 30, 1994 by and between
Holdings and MEDIQ.
"Term A Advance" has the meaning specified in Section 2.01(a).
"Term A Borrowing" means a borrowing consisting of simultaneous Term
A Advances of the same Type made by the Term A Lenders.
"Term A Commitment" means, with respect to any Term A Lender at any
time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term A Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, the aggregate amount
set forth for Term Lender in the Register maintained by the Administrative
Agent pursuant to Section 9.07(d) as such Lender's "Term A Commitment".
"Term A Facility" means, at any time, the aggregate amount of the
Term A Lenders' Term A Commitments at such time.
"Term A Lender" means any Lender that has a Term A Commitment.
"Term A Note" means a promissory note of the Borrower payable to the
order of any Term A Lender, in substantially the form of Exhibit A-1
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term A Advance made by such Lender.
"Term Advance" means a Term A Advance or a Term B Advance.
"Term B Advance" has the meaning specified in Section 2.01(b).
"Term B Borrowing" means a borrowing consisting of simultaneous Term
B Advances of the same Type made by the Term B Lenders.
"Term B Commitment" means, with respect to any Term B Lender, the
amount set forth opposite such Lender's name on Schedule I hereto under
the caption "Term B Commitment" or, if such Lender has entered into one or
more Assignments or Acceptances, the aggregate amount set forth for such
Lender in the Register maintained by the Administrative Agent pursuant to
Section 9.07(d) as such Lender's "Term B Commitment".
"Term B Facility" means, at any time, the aggregate amount of the
Term B Lenders' Term B Commitments at such time.
<PAGE>
35
"Term B Lender" means any Lender that has a Term B Commitment.
"Term B Note" means a promissory note of the Borrower payable to the
order of any Term B Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term B Advance made by such Lender.
"Term B Opt-Out Lender" has the meaning specified in Section
2.06(c).
"Term Borrowing" means a Term A Borrowing or a Term B Borrowing.
"Term Commitment" means a Term A Commitment or a Term B
Commitment.
"Term Lender" means a Term A Lender or a Term B Lender.
"Termination Date" means the earlier of September 30, 2002 and the
date of termination in whole of the Letter of Credit Commitments and the
Working Capital Commitments pursuant to Section 2.05 or 6.01.
"Trade Letter of Credit" means any Letter of Credit that is issued
under the Letter of Credit Facility for the benefit of a supplier of
Inventory to the Borrower or any of its Subsidiaries to effect payment for
such Inventory.
"12.125% Note Indenture" means the Indenture dated as of July 6,
1992, between the Borrower and United Jersey Bank as amended as of
September 30, 1994 and as of the date hereof.
"12.125% Notes" means the 12.125% Senior Secured Notes due 1999
issued by the Borrower in an aggregate principal amount of $100,000,000.
"Type" refers to the distinction between Advances bearing interest
at the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Acquisition Commitment" means, with respect to any
Acquisition Lender at any time prior to the Conversion Date, such Lender's
Acquisition Commitment at such time minus the aggregate principal amount
of all Acquisition Advances made by such Lender and outstanding at such
time.
"Unused Working Capital Commitment" means, with respect to any
Working Capital Lender at any time, (a) such Lender's Working Capital
Commitment at such time minus (b) the sum of (i) the aggregate principal
amount of all Working Capital
<PAGE>
36
Advances and Letter of Credit Advances made by such Lender (in its
capacity as a Lender) and outstanding at such time, plus (ii) such
Lender's Pro Rata Share of (A) the aggregate Available Amount of all
Letters of Credit outstanding at such time and (B) the aggregate principal
amount of all Letter of Credit Advances made by the Issuing Bank pursuant
to Section 2.03(c) and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening
of such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA, that is maintained for employees of any Loan Party or in respect of
which any Loan Party could have a liability.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
"Working Capital Advance" has the meaning specified in Section
2.01(c).
"Working Capital Borrowing" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the Working
Capital Lenders.
"Working Capital Commitment" means, with respect to any Working
Capital Lender at any time, the amount set forth opposite such Lender's
name on Schedule I hereto under the caption "Working Capital Commitment"
or, if such Lender has entered into one or more Assignments and
Acceptances, set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d) as such Lender's "Working
Capital Commitment", as such amount may be reduced at or prior to such
time pursuant to Section 2.05.
"Working Capital Facility" means, at any time, the aggregate amount
of the Working Capital Lenders' Working Capital Commitments at such time.
"Working Capital Lender" means any Lender that has a Working Capital
Commitment.
"Working Capital Note" means a promissory note of the Borrower
payable to the order of any Working Capital Lender, in substantially the
form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Working Capital Advances made
by such Lender.
<PAGE>
37
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Term A Advances. Each Term A
Lender severally agrees, on the terms and conditions hereinafter set forth, to
make a single advance (a "Term A Advance") to the Borrower on any Business Day
during the period from the date hereof until October 1, 1996 in an amount not to
exceed such Lender's Term A Commitment at such time. The Term A Borrowing shall
consist of Term A Advances made simultaneously by the Term A Lenders ratably
according to their Term A Commitments. Amounts borrowed under this Section
2.01(a) and repaid or prepaid may not be reborrowed.
(b) The Term B Advances. Each Term B Lender severally agrees, on the
terms and conditions hereinafter set forth, to make a single advance (a "Term B
Advance") to the Borrower on any Business Day that the Term A Advances shall be
made in an amount not to exceed such Lender's Term B Commitment at such time.
The Term B Borrowing shall consist of Term B Advances made simultaneously by the
Term B Lenders ratably according to their Term B Commitments. Amounts borrowed
under this Section 2.01(b) and repaid or prepaid may not be reborrowed.
(c) The Working Capital Advances. Each Working Capital Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each, a "Working Capital Advance") to the Borrower from time to time
on any Business Day during the period from the date hereof until the Termination
Date in an amount for each such Advance not to exceed such Lender's Unused
Working Capital Commitment at such time minus an amount equal to such Lender's
Pro Rata Share of the Asset Sale Release Amount. Each Working Capital Borrowing
shall be in an aggregate amount of $1,000,000 or an integral multiple of
$500,000 in excess thereof (other than a Borrowing the proceeds of which shall
be used solely to repay or prepay in full outstanding Letter of Credit Advances
made by the Issuing Bank) and shall consist of Working Capital Advances made
<PAGE>
38
simultaneously by the Working Capital Lenders ratably according to their Working
Capital Commitments. Within the limits of each Working Capital Lender's Unused
Working Capital Commitment in effect from time to time, the Borrower may borrow
under this Section 2.01(c), prepay pursuant to Section 2.06(a) and reborrow
under this Section 2.01(c).
(d) Letters of Credit. The Issuing Bank agrees, on the terms and
conditions hereinafter set forth, to issue letters of credit (the "Letters of
Credit") for the account of the Borrower from time to time on any Business Day
during the period from the date hereof until 60 days before the Termination Date
(i) in an aggregate Available Amount for all Letters of Credit issued by such
Issuing Bank not to exceed at any time the Issuing Bank's Letter of Credit
Commitment at such time and (ii) in an Available Amount for each such Letter of
Credit not to exceed the lesser of (x) the Letter of Credit Facility at such
time and (y) the Unused Working Capital Commitments of the Working Capital
Lenders at such time. No Letter of Credit shall have an expiration date
(including all rights of the Borrower or the beneficiary to require renewal)
later than the earlier of 60 days before the Termination Date and (A) in the
case of a Standby Letter of Credit, one year after the date of issuance thereof
and (B) in the case of a Trade Letter of Credit, 90 days after the date of
issuance thereof. Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, the Borrower may request the issuance
of Letters of Credit under this Section 2.01(d), repay any Letter of Credit
Advances resulting from drawings thereunder pursuant to Section 2.03(c) and
request the issuance of additional Letters of Credit under this Section 2.01(d).
(e) Clean-Down. Notwithstanding the provisions of Sections 2.01(c)
and 2.01(d), no Borrowings may be made under Section 2.01(c), and no Letters of
Credit may be issued under Section 2.01(d), during any Clean-Down Period, unless
the sum of the aggregate principal amount of Working Capital Advances and Letter
of Credit Advances plus the aggregate Available Amount of Letters of Credit
outstanding after giving effect to such Borrowing or the issuance of such Letter
of Credit shall not exceed $10,000,000.
(f) The Acquisition Advances. Subject to Section 2.14(b), each
Acquisition Lender severally agrees, on the terms and conditions hereinafter set
forth, to make advances (each, an "Acquisition Advance") to the Borrower from
time to time on any Business Day during the period from the date hereof until
the Conversion Date in an amount for each such Advance not to exceed such
Lender's Unused Acquisition Commitment at such time. Each Acquisition Borrowing
shall be in an aggregate amount of $1,000,000 or an integral multiple of
$500,000 in excess thereof and shall consist of Acquisition Advances made
simultaneously by the Acquisition Lenders ratably according to their Acquisition
Commitments. Prior to the Conversion Date, within the limits of each Acquisition
Lender's Unused Acquisition Commitment in effect from time to time, the Borrower
may borrow under this Section 2.01(f), prepay pursuant to Section 2.06(b)(vii)
and reborrow under this Section 2.01(f).
<PAGE>
39
SECTION 2.02. Making the Advances. (a) Except as otherwise provided
in Section 2.03, each Borrowing shall be made on notice, given not later than
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate
Advances, or the first Business Day prior to the date of the proposed Borrowing
in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to
the Administrative Agent, which shall give to each Appropriate Lender prompt
notice thereof by telex or telecopier. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be in writing, or telex or telecopier, in
substantially the form of Exhibit B hereto, specifying therein the requested (i)
date of such Borrowing, (ii) Facility under which such Borrowing is to be made,
(iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such
Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each Appropriate Lender
shall, before 11:00 A.M. (New York City time) on the date of such Borrowing,
make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's Account, in same day funds,
such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments under the applicable Facility of such Lender and the
other Appropriate Lenders. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Administrative Agent will make such funds available to the Borrower by
crediting the Borrower's Account; provided, however, that, in the case of any
Working Capital Borrowing, the Administrative Agent shall first make a portion
of such funds equal to the aggregate principal amount of any Letter of Credit
Advances made by the Issuing Bank and by any other Working Capital Lender and
outstanding on the date of such Working Capital Borrowing, plus interest accrued
and unpaid thereon to and as of such date, available to the Issuing Bank and
such other Working Capital Lenders for repayment of such Letter of Credit
Advances.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
the initial Borrowing hereunder and for the period from the date of such initial
Borrowing to the earlier of (x) three months from such date and (y) the
completion of syndication of the Facilities (as shall be specified by the Agents
in a written notice to the Borrower) or for any Borrowing if the aggregate
amount of such Borrowing is less than $5,000,000 or if the obligation of the
Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant to Section 2.09 or Section 2.10 and (ii) with respect to Borrowings
consisting of Eurodollar Rate Advances, the Term A Advances, the Term B Advances
and the Working Capital Advances may not be outstanding as part of more than
eight separate Borrowings in the aggregate.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Appropriate
<PAGE>
40
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Borrowing for such Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from
an Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay or pay to the Administrative Agent
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid or paid to the Administrative Agent, at (i) in the
case of the Borrower, the interest rate applicable at such time under Section
2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such corresponding amount, such amount so paid in respect of principal shall
constitute such Lender's Advance as part of such Borrowing for all purposes.
(e) The failure of any Lender to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to the Issuing Bank, which shall give to the
Administrative Agent prompt notice thereof by telex or telecopier. Each such
notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by
telephone, confirmed immediately in writing, or telex or telecopier, specifying
therein the requested (A) date of such issuance (which shall be a Business Day),
(B) Available Amount of such Letter of Credit, (C) expiration date of such
Letter of Credit, (D) name and address of the beneficiary of such Letter of
Credit and (E) form of such Letter of Credit, and shall
<PAGE>
41
be accompanied by such application and agreement for letter of credit as the
Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "Letter of Credit Agreement"). If (x) the
requested form of such Letter of Credit is acceptable to the Issuing Bank in its
sole discretion and (y) it has not received notice of objection to such issuance
from Lenders holding at least 66-2/3% of the Working Capital Commitments, the
Issuing Bank will, upon fulfillment of the applicable conditions set forth in
Article III, make such Letter of Credit available to the Borrower at its office
referred to in Section 9.02 or as otherwise agreed with the Borrower in
connection with such issuance. In the event and to the extent that the
provisions of any Letter of Credit Agreement shall conflict with this Agreement,
the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to
the Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (B) to
each Working Capital Lender on the first Business Day of each calendar quarter a
written report summarizing issuance and expiration dates of Letters of Credit
issued during the preceding calendar quarter and drawings during such month
under all Letters of Credit and (C) to the Administrative Agent and each Working
Capital Lender on the first Business Day of each calendar quarter a written
report setting forth the average daily aggregate Available Amount during the
preceding calendar quarter of all Letters of Credit.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. In the event of any
drawing under a Letter of Credit, the Issuing Bank shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each
Working Capital Lender and the Borrower and each Working Capital Lender shall
purchase from the Issuing Bank, and the Issuing Bank shall sell and assign to
each such Working Capital Lender, such Lender's Pro Rata Share of such
outstanding Letter of Credit Advance as of the date of such purchase, by making
available for the account of its Applicable Lending Office to the Administrative
Agent for the account of the Issuing Bank, by deposit to the Administrative
Agent's Account, in same day funds, an amount equal to the portion of the
outstanding principal amount of such Letter of Credit Advance to be purchased by
such Lender. Promptly after receipt thereof, the Administrative Agent shall
transfer such funds to the Issuing Bank. The Borrower hereby agrees to each such
sale and assignment. Each Working Capital Lender agrees to purchase its Pro Rata
Share of an outstanding Letter of Credit Advance on (i) the Business Day on
which notice of the drawing under the related Letter of Credit is given by the
Issuing Bank, provided such notice is given not later than 1:00 P.M. (New York
City time) on such Business Day or (ii) the first Business Day next succeeding
such demand if such notice is given after such time. Upon any such assignment by
the Issuing Bank to any other Working Capital Lender
<PAGE>
42
of a portion of a Letter of Credit Advance, the Issuing Bank represents and
warrants to such other Lender that the Issuing Bank is the legal and beneficial
owner of such interest being assigned by it, free and clear of any liens, but
makes no other representation or warranty and assumes no responsibility with
respect to such Letter of Credit Advance, the Loan Documents or any Loan Party.
If and to the extent that any Working Capital Lender shall not have so made the
amount of such Letter of Credit Advance available to the Administrative Agent,
such Working Capital Lender agrees to pay to the Administrative Agent forthwith
on demand such amount together with interest thereon, for each day from the date
of demand by the Issuing Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for its account or the account
of the Issuing Bank, as applicable. If such Lender shall pay to the
Administrative Agent such amount for the account of the Issuing Bank on any
Business Day, such amount so paid in respect of principal shall constitute a
Letter of Credit Advance made by such Lender on such Business Day for purposes
of this Agreement, and the outstanding principal amount of the Letter of Credit
Advance made by the Issuing Bank shall be reduced by such amount on such
Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Term Advances. The Borrower
shall repay to the Administrative Agent for the ratable account of the Term A
Lenders and Term B Lenders the aggregate outstanding principal amount of the
Term A Advances and Term B Advances, respectively, on the following dates in the
amounts indicated (which amounts shall be reduced as a result of the application
of prepayments in accordance with the order of priority set forth in Section
2.06):
<PAGE>
43
Date Amount
---- --------------------------------------
Term A Facility Term B Facility
--------------- ---------------
December 31, 1996 $1,200,000 $250,000
March 31, 1997 $1,200,000 $250,000
June 30, 1997 $1,200,000 $250,000
September 30, 1997 $1,200,000 $250,000
December 31, 1997 $1,200,000 $250,000
March 31, 1998 $1,200,000 $250,000
June 30, 1998 $1,200,000 $250,000
September 30, 1998 $1,200,000 $250,000
December 31, 1998 $1,200,000 $250,000
March 31, 1999 $1,200,000 $250,000
June 30, 1999 $1,200,000 $250,000
September 30, 1999 $1,200,000 $250,000
December 31, 1999 $1,200,000 $250,000
March 31, 2000 $1,200,000 $250,000
June 30, 2000 $1,200,000 $250,000
September 30, 2000 $1,200,000 $250,000
December 31, 2000 $1,200,000 $250,000
March 31, 2001 $1,200,000 $250,000
June 30, 2001 $1,200,000 $250,000
September 30, 2001 $1,200,000 $250,000
December 31, 2001 $2,750,000 $250,000
March 31, 2002 $2,750,000 $250,000
June 30, 2002 $2,750,000 $250,000
September 30, 2002 $2,750,000 $250,000
December 31, 2002 -- $8,500,000
March 31, 2003 -- $8,500,000
June 30, 2003 -- $8,500,000
September 30, 2003 -- $8,500,000
December 31, 2003 -- $15,000,000
March 31, 2004 -- $15,000,000
June 30, 2004 -- $15,000,000
September 30, 2004 -- $15,000,000
provided, however, that the final principal installment of the Term A Facility
and the Term B Facility, respectively, shall in any event and in each case be in
an amount equal to the aggregate principal amount of the Term A Advances and
Term B Advances, respectively then outstanding.
<PAGE>
44
(b) Working Capital Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Working Capital Lenders on
the Termination Date the aggregate outstanding principal amount of the Working
Capital Advances then outstanding.
(c) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of the Issuing Bank and each other Working
Capital Lender that has made a Letter of Credit Advance on the earlier of the
Termination Date and one Business Day after demand the outstanding principal
amount of each Letter of Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances:
(A) any lack of validity or enforceability of any Loan Document, any
Letter of Credit Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (all of the foregoing being, collectively, the
"L/C Related Documents");
(B) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any
consent to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with the transactions contemplated by
the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(E) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit;
<PAGE>
45
(F) any exchange, release or non-perfection of any Collateral or
other collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Obligations of the
Borrower in respect of the L/C Related Documents; or
(G) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor.
(d) Acquisition Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Acquisition Lenders the
aggregate outstanding principal amount of the Acquisition Advances on the
following dates in the amounts indicated, determined as a percentage of the
aggregate amount of Acquisition Advances outstanding on the Conversion Date
(after giving effect to any prepayments required by Section 2.06(b)(ix) and
which amount shall be reduced as a result of the application of further
prepayments in accordance with the order of priority set forth in the applicable
paragraph of Section 2.06):
Date Amount
---- ------
June 30, 1998 5.0%
September 30, 1998 5.0%
December 31, 1998 5.625%
March 31, 1999 5.625%
June 30, 1999 5.625%
September 30, 1999 5.625%
December 31, 1999 5.625%
March 31, 2000 5.625%
June 30, 2000 5.625%
September 30, 2000 5.625%
December 31, 2000 5.625%
March 31, 2001 5.625%
June, 30, 2001 5.625%
September 30, 2001 5.625%
December 31, 2001 5.625%
March 31, 2002 5.625%
June 30, 2002 5.625%
September 30, 2002 5.625%
provided, however, that the final principal installment of the Acquisition
Facility shall in any event be in an amount equal to the aggregate principal
amount of the Acquisition Advances then outstanding.
<PAGE>
46
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part (x) the unused
portions of the Letter of Credit Facility and the Unused Working Capital
Commitments or (y) the Unused Acquisition Commitments; provided, however, that
each partial reduction of a Facility (i) shall be in an aggregate amount of
$1,000,000 or an integral multiple of $500,000 in excess thereof and (ii) shall
be made ratably among the Appropriate Lenders in accordance with their
Commitments with respect to such Facility.
(b) Mandatory. (i) On the date of the Term A Borrowing, after giving
effect to such Term A Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term A Advances, the aggregate Term A Commitments
of the Term A Lenders shall be automatically and permanently reduced, on a pro
rata basis, by an amount equal to the amount by which the aggregate Term A
Commitments immediately prior to such reduction exceed the aggregate unpaid
principal amount of the Term A Advances then outstanding.
(ii) On the date of the Term B Borrowing, after giving effect to
such Term B Borrowing, and from time to time thereafter upon each repayment or
prepayment of the Term B Advances, the aggregate Term B Commitments of the Term
B Lenders shall be automatically and permanently reduced, on a pro rata basis,
by an amount equal to the amount by which the aggregate Term B Commitments
immediately prior to such reduction exceed the aggregate unpaid principal amount
of the Term B Advances then outstanding.
(iii) The Working Capital Facility shall be automatically and
permanently reduced on the date on which any prepayment is required to be made
pursuant to Section 2.06(b)(i), (ii) or (ix) by an amount equal to the
applicable Reduction Amount, provided that each such reduction of the Working
Capital Facility shall be made ratably among the Working Capital Lenders in
accordance with their Working Capital Commitments.
(iv) The Letter of Credit Facility shall be automatically and
permanently reduced from time to time on the date of each reduction in the
Working Capital Facility by the amount, if any, by which the amount of the
Letter of Credit Facility exceeds the Working Capital Facility after giving
effect to such reduction of the Working Capital Facility.
(v) Prior to the Conversion Date, the Acquisition Facility shall be
automatically and permanently reduced on the date on which any prepayment is
required to be made pursuant to Section 2.06(b)(i) or (ii) by an amount equal to
the applicable Acquisition Reduction Amount, provided that each such reduction
of the Acquisition Facility shall be made ratably among the Acquisition Lenders
in accordance with their Acquisition Commitments. From and after the Conversion
Date, the Acquisition Commitments of the Acquisition Lenders shall be
automatically and permanently reduced, on a pro rata basis, by
<PAGE>
47
an amount equal to the amount by which the aggregate Acquisition Facility
Commitments immediately prior to such reduction exceed the aggregate unpaid
principal amount of the Acquisition Advances then outstanding.
SECTION 2.06. Prepayments. (a) Optional. Except on or prior to the
Conversion Date with respect to Acquisition Advances, the Borrower may, upon at
least one Business Day's notice to the Administrative Agent for Base Rate
Advances and three Business Days' notice to the Administrative Agent for
Eurodollar Rate Advances (received not later than 11:00 A.M. (New York City
time)) stating the proposed date and aggregate principal amount of the
prepayment, and if such notice is given the Borrower shall, prepay the
outstanding aggregate principal amount of the Advances comprising part of the
same Borrowing in whole or ratably in part, together with accrued interest to
the date of such prepayment on the aggregate principal amount prepaid unless
such prepayment is with respect to a Working Capital Advance which is a Base
Rate Advance; provided, however, that (x) each partial prepayment shall be in an
aggregate principal amount of $1,000,000 or an integral multiple of $500,000 in
excess thereof and (y) if any prepayment of a Eurodollar Rate Advance shall be
made other than on the last day of an Interest Period therefor, the Borrower
shall also pay any amounts owing pursuant to Section 9.04(c). Each such
prepayment of any Term Advances and, after the Conversion Date, Acquisition
Advances shall be applied ratably to the Term A Facility, the Term B Facility
and, after the Conversion Date, to the Acquisition Facility and, in each case,
ratably to the principal installments thereof.
(b) Mandatory. (i) The Borrower shall, no later than the 30th day
following the date on which it delivers the financial statements referred to in
Section 5.03(d) (but in any event within 120 days after the end of each Fiscal
Year), prepay an aggregate principal amount of the Advances comprising part of
the same Borrowings equal to the Recapture Percentage of the amount of Excess
Cash Flow for such Fiscal Year. Prior to the Conversion Date, each such
prepayment of any Advances shall be applied as follows:
first, ratably to the Term A Facility and the Term B Facility and,
in each case, ratably to the principal installments thereof, and
second, to the extent no Term Advances remain outstanding,
permanently to reduce the Acquisition Facility as set forth in clause
(viii) below, and
third, to the extent no Term Advances remain outstanding and the
Acquisition Facility has been fully repaid and permanently reduced in
full, permanently to reduce the Working Capital Facility as set forth in
clause (vi) below.
From and after the Conversion Date, each such prepayment of any Advances shall
be applied as follows:
<PAGE>
48
first, ratably to the Term A Facility, the Term B Facility and the
Acquisition Facility, in each case ratably to the principal installments
thereof, and
second, to the extent no Term Advances or Acquisition Advances
remain outstanding, permanently to reduce the Working Capital Facility as
set forth in clause (vi) below.
(ii) The Borrower shall, on the date of receipt of the Net Cash
Proceeds by any Loan Party or any of its Subsidiaries from (A) the sale, lease,
transfer or other disposition of any assets of any Loan Party or any of its
Subsidiaries (other than any Permitted Asset Sale on or prior to the Conversion
Date or any sale, lease, transfer or other disposition of assets permitted by
Section 5.02(e)(i)), (B) the incurrence or issuance by any Loan Party or any of
its Subsidiaries of any Debt (other than Debt incurred or issued pursuant to
Section 5.02(b)), (C) the sale or issuance by any Loan Party or any of its
Subsidiaries of any capital stock or other ownership or profit interest (except
(i) common stock issued by MEDIQ (1) pursuant to Section 5.02(f)(i) or (vi) for
purposes of making Investments under such Sections or (2) in respect of the
7.25% Notes in satisfaction of the terms of the 7.25% Note Indenture, or (ii)
any such sale or issuance in connection with the Permitted Asset Sales), any
securities convertible into or exchangeable for capital stock or other ownership
or profit interest or any warrants, rights or options to acquire capital stock
or other ownership or profit interest (except as permitted by Section 5.02(g))
or (D) any Extraordinary Receipt received by or paid to or for the account of
any Loan Party or any of its Subsidiaries and not otherwise included in clause
(A), (B) or (C) above, prepay an aggregate principal amount of the Advances
comprising part of the same Borrowings equal to the amount of such Net Cash
Proceeds; provided, however, that such prepayment shall not be required so long
as the aggregate amount of such Net Cash Proceeds received by any Loan Party or
any of its Subsidiaries in the period immediately following (x) with respect to
the first such prepayment, the Initial Extension of Credit and (y) with respect
to any prepayment after the first such prepayment, the most recent such
prepayment, shall not exceed $250,000. Prior to the Conversion Date, each such
prepayment shall be applied as follows:
first, ratably to the Term A Facility and the Term B Facility and,
in each case, ratably to the principal installments thereof, and
second, to the extent no Term Advances remain outstanding,
permanently to reduce the Acquisition Facility as set forth in clause
(viii) below, and
third, to the extent no Term Advances remain outstanding and the
Acquisition Facility has been fully repaid and permanently reduced in
full, permanently to reduce the Working Capital Facility as set forth in
clause (vi) below.
<PAGE>
49
From and after the Conversion Date, each such prepayment of any Advances shall
be applied as follows:
first, ratably to the Term A Facility, the Term B Facility, and the
Acquisition Facility, in each case ratably to the principal installments
thereof, and
second, to the extent no Term Advances or Acquisition Advances
remain outstanding, permanently to reduce the Working Capital Facility as
set forth in clause (vi) below.
(iii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Working Capital Advances comprising part of the same
Borrowings, and the Letter of Credit Advances equal to the amount by which (A)
the sum of the aggregate principal amount of the Working Capital Advances, the
Letter of Credit Advances then outstanding, the aggregate Available Amount of
all Letters of Credit then outstanding and the Asset Sale Release Amount exceeds
(B) the lesser of the Working Capital Facility and the Loan Value of Eligible
Collateral on such Business Day (as determined based on the most recent
Borrowing Base Certificate delivered to the Lender Parties hereunder).
(iv) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in such Account to equal the
amount by which the aggregate Available Amount of all Letters of Credit then
outstanding exceeds the Letter of Credit Facility on such Business Day.
(v) The Borrower shall pay to the Administrative Agent, on the first
day of each Clean-Down Period, an amount equal to the amount by which the
aggregate principal amount of the Working Capital Advances and the Letter of
Credit Advances plus the aggregate Available Amount of Letters of Credit then
outstanding exceeds $10,000,000, to be applied in the same manner as prepayments
are required to be applied pursuant to Section 2.06(b)(vi).
(vi) Prepayments of the Working Capital Facility shall be first
applied to prepay Letter of Credit Advances then outstanding until such Letter
of Credit Advances are paid in full, second applied to prepay Working Capital
Advances then outstanding comprising part of the same Borrowings until such
Working Capital Advances are paid in full and third deposited in the L/C Cash
Collateral Account to cash collateralize 100% of the Available Amount of the
Letters of Credit then outstanding; and, in the case of prepayments of the
Working Capital Facility required pursuant to clause (i) or (ii) above, the
amount remaining (if any) after the prepayment in full of the Working Capital
Advances then outstanding and the 100% cash collateralization of the aggregate
Available Amount of Letters of Credit then outstanding (the sum of such
prepayment amounts, cash collateralization amounts and
<PAGE>
50
remaining amount being referred to herein as the "Reduction Amount") may be
retained by the Borrower and the Working Capital Facility shall be permanently
reduced as set forth in Section 2.05(b)(iii). Upon the drawing of any Letter of
Credit for which funds are on deposit in the L/C Cash Collateral Account, such
funds shall be applied to reimburse the Issuing Bank or Working Capital Lenders,
as applicable.
(vii) Prior to the Conversion Date, the Borrower shall, on the date
of receipt of the Net Cash Proceeds by any Loan Party or any of its Subsidiaries
from any Permitted Asset Sale, prepay an aggregate principal amount of the
Acquisition Advances comprising part of the same Acquisition Borrowings equal to
the amount of such Net Cash Proceeds. Each such prepayment shall be applied in
accordance with Section 2.06(b)(viii), but amounts so prepaid may be reborrowed
prior to the Conversion Date in accordance with Section 2.01(f).
(viii) Prior to the Conversion Date, prepayments of the Acquisition
Facility pursuant to Section 2.06(b)(i), (ii) or (vii) shall be applied to
prepay Acquisition Advances then outstanding comprising part of the same
Borrowings until such Acquisition Advances are paid in full and the amount
remaining (if any) after the prepayment in full of the Acquisition Advances then
outstanding (such prepayment amounts (except for any amounts prepaid with Net
Cash Proceeds from Permitted Asset Sales in accordance with Section
2.06(b)(vii)) and the remaining amount being referred to herein as the
"Acquisition Reduction Amount") may be retained by the Borrower and, except for
prepayments required by Section 2.06(b)(vii), the Acquisition Facility shall be
permanently reduced as set forth in Section 2.05(b)(v).
(ix) On the Conversion Date, the Borrower shall prepay an aggregate
principal amount of the Advances comprising part of the same Borrowings equal to
the amount on deposit in the Asset Sale Blocked Account plus the Asset Sale
Release Amount. Each such prepayment shall be applied as follows:
first, to the Acquisition Facility,
second, to the extent no Acquisition Advances remain outstanding,
ratably to the Term A Facility and the Term B Facility, in each case
ratably to the principal installments thereof, and
third, to the extent no Term Advances or Acquisition Advances remain
outstanding, permanently to reduce the Working Capital Facility as set
forth in clause (vi) above.
(x) All prepayments under this subsection (b) shall be made together
with accrued interest to the date of such prepayment on the principal amount
prepaid, together with any amounts owing pursuant to Section 9.04(c).
<PAGE>
51
(xi) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Advances comprising part of the same Borrowings equal to
the amount by which the amount on deposit in the Asset Sale Blocked Account
exceeds the aggregate amount of Subordinated Notes outstanding. Each such
prepayment shall be applied as follows:
first, to the Acquisition Facility,
second, to the extent no Acquisition Advances remain outstanding,
ratably to the Term A Facility and the Term B Facility, in each case
ratably to the principal installments thereof, and
third, to the extent no Term Advances or Acquisition Advances remain
outstanding, permanently to reduce the Working Capital Facility as set
forth in clause (vi) above.
(c) Term B Opt-Out. With respect to any prepayment of the Term B
Advances, the Administrative Agent shall ratably pay the Term B Lenders as
required under Section 2.06(a) or (b), unless, with respect to any prepayment
from time to time of the Term B Advances, the Administrative Agent shall have
received written notice from any Term B Lender not later than three Business
Days prior to such prepayment, that such Term B Lender elects not to receive any
prepayments under this Section 2.06 (a "Term B Opt-Out Lender"), which election
shall remain in effect with respect to any subsequent prepayment until the
Administrative Agent shall receive a subsequent written notice from such Term B
Opt-Out Lender cancelling such earlier notice. Any such prepayments which would
have been remitted to a Term B Opt-Out Lender but for its election to not
receive such prepayments, shall be paid ratably to the remaining Lenders as
provided in Sections 2.06(a) and (b); provided, however, that Term B Lenders, on
any date on which the Term A Facility is repaid in full and no Acquisition
Advances are outstanding, shall not be entitled to elect not to receive any
further prepayments.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall
pay interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
Base Rate Advance, a rate per annum equal at all times to the sum of (A)
the Base Rate in effect from time to time plus (B) the Applicable Margin
in effect from time to time, payable in arrears quarterly on the last
Business Day of each March, June, September and December during such
periods, on the date of any prepayment thereof to the
<PAGE>
52
extent required under Section 2.06(b) and on the Final Maturity Date,
commencing December 31, 1996.
(ii) Eurodollar Rate Advances. During such periods as such Advance
is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (A) the Eurodollar
Rate for such Interest Period for such Advance plus (B) the Applicable
Margin in effect on the first day of such Interest Period, payable in
arrears on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each day that occurs
during such Interest Period every three months from the first day of such
Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
of any Event of Default, the Administrative Agent may, and upon the request of
the Required Lenders shall, require that the Borrower pay interest on (i) the
unpaid principal amount of each Advance owing to each Lender, payable in arrears
on the dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a
rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above
and (ii) to the fullest extent permitted by law, the amount of any interest, fee
or other amount payable hereunder that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid,
in the case of interest, on the Type of Advance on which such interest has
accrued pursuant to clause (a)(i) or (a)(ii) above, and, in all other cases, on
Base Rate Advances pursuant to clause (a)(i) above.
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to
the Administrative Agent for the account of the Lenders a commitment fee on the
average daily portion of each Appropriate Lender's Unused Acquisition Commitment
(prior to the Conversion Date) and on the average daily Unused Working Capital
Commitment of each Appropriate Lender, from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other Lender
until the Termination Date, payable in arrears quarterly on the last Business
Day of each March, June, September and December, commencing December 31, 1996,
and, with respect to Unused Acquisition Commitments, on the Conversion Date or,
with respect to Unused Working Capital Commitments, on the Termination Date, at
the rate of half of 1% per annum on the average daily portion of each
Appropriate Lender's Unused Acquisition Commitment and on the average daily
Unused Working Capital Commitment of each Appropriate Lender; provided, however,
that any commitment fee accrued with respect to any of the Commitments of a
Defaulting Lender during the period prior to the time such Lender became a
Defaulting Lender and unpaid at
<PAGE>
53
such time shall not be payable by the Borrower so long as such Lender shall be a
Defaulting Lender except to the extent that such commitment fee shall otherwise
have been due and payable by the Borrower prior to such time; and provided
further that no commitment fee shall accrue on any of the Commitments of a
Defaulting Lender so long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the
Administrative Agent for the account of each Working Capital Lender a
commission, payable in arrears quarterly on the last Business Day of each March,
June, September and December, commencing December 31, 1996, and on the
Termination Date, on such Lender's Pro Rata Share of the average daily aggregate
Available Amount during such quarter of (A) all Standby Letters of Credit
outstanding from time to time and (B) all Trade Letters of Credit then
outstanding, in each case at the rate per annum equal to the Applicable Margin
for Working Capital Advances which are Eurodollar Rate Advances in effect from
time to time.
(ii) The Borrower shall pay to the Issuing Bank, for its own
account, such commissions, issuance fees, fronting fees, transfer fees and other
fees and charges in connection with the issuance or administration of each
Letter of Credit as the Borrower and the Issuing Bank shall agree.
(c) Agents' Fees. The Borrower shall pay to each of the Agents for
its own account such fees as may from time to time be agreed between the
Borrower and such Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Sections 2.07 and
2.10, Convert all or any portion of the Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that (w) if any
Conversion of Eurodollar Rate Advances into Base Rate Advances is made other
than on the last day of an Interest Period for such Eurodollar Rate Advances,
the Borrower shall also pay any amounts owing pursuant to Section 9.04(c), (x)
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b), (y) no
Conversion of any Advances shall result in more separate Borrowings than
permitted under Section 2.02(b), and (z) each Conversion of Advances comprising
part of the same Borrowing under any Facility shall be made ratably among the
Appropriate Lenders in accordance with their Commitments under such Facility.
Each such notice of Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
<PAGE>
54
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $1,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance.
(iii) Upon the occurrence and during the continuance of any Event of
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining Letters of Credit or of agreeing to make or
of making or maintaining Letter of Credit Advances, then the Borrower shall from
time to time, upon demand by such Lender Party (with a copy of such demand to
the Administrative Agent), pay to the Administrative Agent for the account of
such Lender Party additional amounts sufficient to compensate such Lender Party
for such increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by such Lender Party, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder and
other commitments of such type or the issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender Party, from
time to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party in the light of such
<PAGE>
55
circumstances, to the extent that such Lender Party reasonably determines such
increase in capital to be allocable to the existence of such Lender Party's
commitment to lend or to issue Letters of Credit hereunder or to the issuance or
maintenance of any Letters of Credit. A certificate as to such amounts submitted
to the Borrower by such Lender Party shall be conclusive and binding for all
purposes, absent manifest error. Each Lender will determine the amount of any
additional compensation requested under this Section 2.10(b) on a basis
consistent with that on which it requests additional compensation from other
similar borrowers with whom it has an agreement similar to the agreement
contained in this Section 2.10(b).
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed more than 50% of the then aggregate unpaid principal
amount thereof notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate
Advance under any Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Appropriate Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Administrative Agent shall
notify the Borrower that such Lenders have determined that the circumstances
causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, irrespective of any right of
counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds. The Administrative Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by the Borrower is in respect of principal,
interest, commitment fees or any other Obligation then payable hereunder and
<PAGE>
56
under the Notes to more than one Lender Party, to such Lender Parties for the
account of their respective Applicable Lending Offices ratably in accordance
with the amounts of such respective Obligations then payable to such Lender
Parties and (ii) if such payment by the Borrower is in respect of any Obligation
then payable hereunder to one Lender Party, to such Lender Party for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 9.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender Party
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) If the Administrative Agent receives funds for application to
the Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent shall elect to
distribute such funds to each Lender Party ratably in accordance with such
Lender Party's proportionate share of the principal amount of all outstanding
Advances and the Available Amount of all Letters of Credit then outstanding, in
repayment or prepayment of such of the outstanding Advances or other Obligations
owed to such Lender Party, and for application to such principal installments,
as the Administrative Agent shall direct.
(c) After an Event of Default, the Borrower hereby authorizes each
Lender Party, if and to the extent payment owed to such Lender Party is not made
when due hereunder or, in the case of a Lender, under the Note held by such
Lender, to charge from time to time against any or all of the Borrower's
accounts with such Lender Party any amount so due.
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest,
fees or commissions are payable. Each determination by the Administrative Agent
of an interest rate, fee or commission hereunder shall be conclusive and binding
for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause such
payment to be made in the next following calendar month, such payment shall be
made on the next preceding Business Day.
<PAGE>
57
(f) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and each Agent,
taxes imposed on its overall net income by the United States and franchise taxes
and net income taxes that are imposed on such Lender Party or such Agent in lieu
of net income taxes by the state or foreign jurisdiction under the laws of which
such Lender Party or such Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender Party, taxes
imposed on its overall net income and franchise taxes imposed on such Lender
Party in lieu of net income taxes by the state or foreign jurisdiction of such
Lender Party's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender Party or any Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Lender Party or such Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
Notes (hereinafter referred to as "Other Taxes").
<PAGE>
58
(c) The Borrower shall indemnify each Lender Party and each Agent
for and hold it harmless against the full amount of Taxes and Other Taxes, and
for the full amount of taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.12, paid by such Lender Party or such Agent (as the
case may be) and any liability (including penalties, additions to tax, interest
and expenses) arising therefrom or with respect thereto. This indemnification
shall be made within 30 days from the date such Lender Party or such Agent (as
the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 9.02, the original or a certified copy of a receipt evidencing such
payment. In the case of any payment hereunder or under the Notes by or on behalf
of the Borrower through an account or branch outside the United States or on
behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender or Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender Party in the case of each other Lender
Party, and from time to time thereafter if requested in writing by the Borrower
or the Administrative Agent (but only so long thereafter as such Lender Party
remains lawfully able to do so), provide the Administrative Agent and the
Borrower with Internal Revenue Service form 1001 or 4224, or in the case of a
Lender Party that is claiming exemption from United States withholding tax under
Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments
of "portfolio interest" two accurate and complete signed original Forms W-8 and,
if such Lender Party delivers forms W-8, two signed certificates certifying that
such Lender Party is not (i) a "bank" for purposes of Section 881(c) of the
Internal Revenue Code, (ii) is not a 10% shareholder (within the meaning of
Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and (iii) is
not a controlled foreign corporation related to the Borrower (within the meaning
of Section 864(d)(4) of the Internal Revenue Code), as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Lender Party is exempt from or is entitled to a reduced rate of United States
withholding tax on payments under this Agreement or the Notes. If the form
provided by a Lender Party at the time such Lender Party first becomes a party
to this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes unless and until such Lender Party provides the appropriate form
certifying that a lesser rate applies,
<PAGE>
59
whereupon withholding tax at such lesser rate only shall be considered excluded
from Taxes for periods governed by such form; provided, however, that, if at the
date of the Assignment and Acceptance pursuant to which a Lender Party becomes a
party to this Agreement, the Lender Party assignor was entitled to payments
under subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. If any form
or document referred to above in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender Party reasonably considers to be confidential, the Lender
Party shall give notice thereof to the Borrower and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed
to provide the Borrower with the appropriate form described in subsection (e)
above (other than if such failure is due to a change in law occurring after the
date on which a form originally was required to be provided or if such form
otherwise is not required under subsection (e) above), such Lender Party shall
not be entitled to indemnification under subsection (a) or (c) with respect to
Taxes imposed by the United States; provided, however, that should a Lender
Party become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Lender Party shall
reasonably request to assist such Lender Party to recover such Taxes.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) (a) on account of Obligations
due and payable to such Lender Party hereunder and under the Notes at such time
in excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such participations in the Obligations due and payable or
owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender Party to share the excess
<PAGE>
60
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender
Party, such purchase from each other Lender Party shall be rescinded and such
other Lender Party shall repay to the purchasing Lender Party the purchase price
to the extent of such Lender Party's ratable share (according to the proportion
of (i) the purchase price paid to such Lender Party to (ii) the aggregate
purchase price paid to all Lender Parties) of such recovery together with an
amount equal to such Lender Party's ratable share (according to the proportion
of (i) the amount of such other Lender Party's required repayment to (ii) the
total amount so recovered from the purchasing Lender Party) of any interest or
other amount paid or payable by the purchasing Lender Party in respect of the
total amount so recovered. The Borrower agrees that any Lender Party so
purchasing a participation from another Lender Party pursuant to this Section
2.13 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender Party were the direct creditor of the Borrower in the
amount of such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and
issuances of Letters of Credit shall be available (and the Borrower agrees that
it shall use such proceeds and Letters of Credit) solely as follows:
(a) from Term Advances, to refinance, in part, the Refinancing Debt
and to pay transaction fees and expenses in connection therewith and with
the financing contemplated by the Loan Documents;
(b) from Acquisition Advances:
(i) to refinance, in part, the Refinancing Debt, and to pay
transaction fees and expenses in connection therewith;
(ii) on terms permitted by Section 5.02(k)(i)(y)(B); and
(iii) from and after the Asset Sale Threshold Date and subject
to the Acquisition Facility Sublimit (x) to pay dividends and
repurchase shares of the common stock of MEDIQ to the extent
permitted by Section 5.02(g)(i) and (y), if no repurchase of shares
pursuant to Section 5.02(g)(i) has occurred, to make Investments
permitted by Section 5.02(f)(i); and
(c) from Working Capital Advances, to finance working capital
requirements of the Borrower, to be deposited in the Asset Sale Blocked
Account, to make payments required under Section 5.01(p) and for other
general corporate purposes permitted by this Agreement; provided, however,
that Working Capital Advances may not be used for the purposes for which
Acquisition Advances may be
<PAGE>
61
used in accordance with Section 2.14(b) except, if any Investment pursuant
to Section 5.02(f)(vi)(x) shall have been made, to the extent of the
amount of such Investment.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its obligation to make any such payment against the obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date under the Facility pursuant
to which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01. Such Advance shall be a Base Rate Advance and shall be
considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (A)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (B) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall
be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount
to the Administrative Agent or any of the other Lender Parties and (iii) the
Borrower shall make any payment hereunder or under any other Loan Document to
the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so
<PAGE>
62
applied by the Administrative Agent shall constitute for all purposes of this
Agreement and the other Loan Documents payment, to such extent, of such
Defaulted Amount on such date. Any such amount so applied by the Administrative
Agent shall be retained by the Administrative Agent or distributed by the
Administrative Agent to such other Lender Parties, ratably in accordance with
the respective portions of such Defaulted Amounts payable at such time to the
Administrative Agent and such other Lender Parties and, if the amount of such
payment made by the Borrower shall at such time be insufficient to pay all
Defaulted Amounts owing at such time to the Administrative Agent and the other
Lender Parties, in the following order of priority:
(i) first, to the Administrative Agent for any Defaulted Amount then
owing to the Administrative Agent; and
(ii) second, to any other Lender Parties for any Defaulted Amounts
then owing to such other Lender Parties, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall
be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) the Borrower, the Administrative Agent
or any other Lender Party shall be required to pay or distribute any amount
hereunder or under any other Loan Document to or for the account of such
Defaulting Lender, then the Borrower or such other Lender Party shall pay such
amount to the Administrative Agent to be held by the Administrative Agent, to
the fullest extent permitted by applicable law, in escrow or the Administrative
Agent shall, to the fullest extent permitted by applicable law, hold in escrow
such amount otherwise held by it. Any funds held by the Administrative Agent in
escrow under this subsection (c) shall be deposited by the Administrative Agent
in an account with BNP, in the name and under the control of the Administrative
Agent, but subject to the provisions of this subsection (c). The terms
applicable to such account, including the rate of interest payable with respect
to the credit balance of such account from time to time, shall be BNP's standard
terms applicable to escrow accounts maintained with it. Any interest credited to
such account from time to time shall be held by the Administrative Agent in
escrow under, and applied by the Administrative Agent from time to time in
accordance with the provisions of, this subsection (c). The Administrative Agent
shall, to the fullest extent permitted by applicable law, apply all funds so
held in escrow from time to time to the extent necessary to make any Advances
required to be made by such Defaulting Lender and to pay any amount payable by
such Defaulting Lender hereunder and under the other Loan
<PAGE>
63
Documents to the Administrative Agent or any other Lender Party, as and when
such Advances or amounts are required to be made or paid and, if the amount so
held in escrow shall at any time be insufficient to make and pay all such
Advances and amounts required to be made or paid at such time, in the following
order of priority:
(i) first, to the Administrative Agent for any amount then due and
payable by such Defaulting Lender to the Administrative Agent hereunder;
(ii) second, to any other Lender Parties for any amount then due and
payable by such Defaulting Lender to such other Lender Parties hereunder,
ratably in accordance with such respective amounts then due and payable to
such other Lender Parties; and
(iii) third, to the Borrower for any Advance then required to be
made by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that the Administrative Agent or any Lender Party may have against such
Defaulting Lender with respect to any Defaulted Amount.
SECTION 2.16. Release of Funds from the Asset Sale Blocked Account.
So long as no Default shall have occurred and be continuing, the Administrative
Agent will, upon presentation of a Notice of Drawing by the Borrower to the
Administrative Agent substantially in the form of Exhibit F hereto, pay and
release to the Borrower or at its order and at the request of the Borrower, the
amount, if any, or any portion thereof, on deposit in the Asset Sale Blocked
Account, so long as the Borrower applies such amount (A) in the same manner and
on the same basis as is permitted for Acquisition Advances pursuant to Section
2.14(b), (B) to prepay the Working Capital Facility pursuant to Section 2.06(a)
or (C) or as required pursuant to Section 2.06(b)(ix).
<PAGE>
64
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of Credit.
The obligation of each Lender to make an Advance on the occasion of the Initial
Extension of Credit hereunder is subject to the satisfaction of the following
conditions precedent before or concurrently with the Initial Extension of
Credit:
(a) The Lender Parties shall be satisfied with the corporate and
legal structure and capitalization of the Loan Parties, including the
terms and conditions of the charter, bylaws and each class of capital
stock of the Loan Parties and of each agreement or instrument relating to
such structure or capitalization.
(b) Before giving effect to the transactions contemplated by this
Agreement, there shall have occurred no Material Adverse Change since
September 30, 1995.
(c) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of their Subsidiaries pending
or threatened before any court, governmental agency or arbitrator that (i)
could have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Agreement, any Note, any
other Loan Document, any Related Document or the consummation of the
transactions contemplated hereby.
(d) The Lender Parties shall have completed a due diligence
investigation of the Loan Parties (including, without limitation, a field
examination of the quality of the Borrower's current assets and of the
Borrower's management information systems, a fair market value appraisal
of the Borrower's rental equipment from Murray, Devine & Co., a review of
the projected tax assumptions of MEDIQ and its Subsidiaries on a
Consolidated basis from Deloitte & Touche LLP and a due diligence report
on customers prepared by Marketing Corporation of America), each in scope,
and with results, satisfactory to the Lender Parties, and nothing shall
have come to the attention of the Lender Parties during the course of such
due diligence investigation to lead them to believe (i) that any written
information, exhibit or report (including, without limitation, any
financial information) furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender Party was or has become misleading,
incorrect or incomplete in any material respect, (ii) that the Loan
Parties would not have good and marketable title to all of their material
assets and (iii) that the transactions contemplated hereby have or will
have a Material Adverse Effect; without limiting the generality of the
foregoing, the Lender Parties shall have been
<PAGE>
65
given such access to the management, records, books of account, contracts
and properties of each Loan Party and its Subsidiaries as they shall have
requested.
(e) The Existing Debt, other than the Debt identified on Schedule
3.01(e) (the "Surviving Debt"), shall have been prepaid, redeemed or
defeased in full or otherwise satisfied and extinguished and all such
Surviving Debt shall be on terms and conditions satisfactory to the Lender
Parties.
(f) All accrued fees and expenses of the Agents and the Lender
Parties (including the accrued fees and expenses of counsel to the Agents
and of Saiber, Schlesinger, Satz & Goldstein, local counsel to the Lender
Parties) shall have been paid.
(g) The Administrative Agent shall have received on or before the
day of the Initial Extension of Credit the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the
Administrative Agent (unless otherwise specified) and (except for the
Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the Lenders.
(ii) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving this Agreement, the Notes,
each other Loan Document and each Related Document to which it is or
is to be a party and of the transactions contemplated hereby, and of
all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement, the
Notes, each other Loan Document and each Related Document and of the
transactions contemplated hereby.
(iii) A copy of a certificate of the Secretary of State of the
jurisdiction of its incorporation, dated reasonably near the date of
the Initial Extension of Credit, in each case listing the charter of
the Borrower, each Parent Guarantor and each Subsidiary Guarantor
and each amendment thereto on file in his office and certifying that
(A) such charter is a true and correct copy thereof, (B) such
amendments are the only amendments to such charter on file in his
office, (C) such Person has paid all franchise taxes to the date of
such certificate and (D) such Person is duly incorporated and in
good standing under the laws of the State of the jurisdiction of its
incorporation.
(iv) A copy of a certificate of the Secretary of State of the
States listed on Schedule 3.01(g)(iv), dated reasonably near the
date of the Initial Extension of Credit, stating that the Borrower
and each Parent Guarantor is
<PAGE>
66
duly qualified and in good standing as a foreign corporation in such
States and has filed all annual reports required to be filed to the
date of such certificate.
(v) A certificate of each of the Borrower, the Guarantors and
each other Loan Party, signed on behalf of such Person by its
President or Senior Vice-President, Finance, and its Secretary or
Assistant Secretary, dated the date of the Initial Extension of
Credit (the statements made in which certificate shall be true on
and as of the date of the Initial Extension of Credit), certifying
as to (A) the absence of any amendments to the charter of such
Person since the date of the Secretary of State's certificate
referred to in Section 3.01(g)(iii), (B) a true and correct copy of
the bylaws of such Person as in effect on the date of the Initial
Extension of Credit, (C) the due incorporation and good standing of
such Person as a corporation organized under the laws of the
jurisdiction of its incorporation and the absence of any proceeding
for the dissolution or liquidation of such Person, (D) the
completeness and accuracy of the representations and warranties
contained in the Loan Documents as though made on and as of the date
of the Initial Extension of Credit and (E) the absence of any event
occurring and continuing, or resulting from the Initial Extension of
Credit, that constitutes a Default.
(vi) A certificate of the Secretary or Assistant Secretary of
each of the Borrower, the Guarantors and each other Loan Party
certifying the names and true signatures of the officers of such
Persons authorized to sign this Agreement, the Notes, each other
Loan Document and each Related Document to which they are or are to
be parties and the other documents to be delivered hereunder and
thereunder.
(vii) A security agreement in substantially the form of
Exhibit D (together with each other security agreement delivered
pursuant to Section 5.01(m), or 5.01(o), in each case as amended,
supplemented or otherwise modified from time to time in accordance
with its terms, the "Security Agreement"), duly executed by the
Borrower, each Parent Guarantor and each Ongoing Subsidiary,
together with:
(A) certificates representing the Pledged Shares
referred to therein accompanied by undated stock powers
executed in blank and instruments evidencing the Pledged Debt
referred to therein endorsed in blank,
(B) executed copies of proper financing statements, to
be duly filed on or before the day of the Initial Extension of
Credit under
<PAGE>
67
the Uniform Commercial Code of the States listed on Schedule
3.01(g)(vii)(B) and all other jurisdictions that the
Administrative Agent may reasonably deem necessary or
desirable in order to perfect and protect the Liens created
under the Collateral Documents, covering the Collateral
described in the Security Agreement,
(C) completed requests for information, dated on or
before the date of the Initial Extension of Credit, listing
the financing statements referred to in clause (B) above and
all other effective financing statements filed in the
jurisdictions referred to in clause (B) above that name the
Borrower as debtor, together with copies of such other
financing statements,
(D) evidence of the completion of all other recordings
and filings of or with respect to the Security Agreement that
the Administrative Agent may deem necessary or desirable in
order to perfect and protect the Liens created thereby,
(E) evidence of the insurance required by the terms of
the Security Agreement,
(F) executed termination statements (Form UCC-3 or a
comparable form), in proper form to be duly filed on the date
of the Initial Extension of Credit under the Uniform
Commercial Code of all jurisdictions that the Administrative
Agent may deem desirable in order to terminate or amend
existing Liens on the Collateral described in the Security
Agreement, except as contemplated under the Security
Agreement,
(G) the Blocked Account Letters referred to in the
Security Agreement, duly executed by each Blocked Account Bank
referred to in the Security Agreement, and
(H) evidence that all other action that the
Administrative Agent may deem necessary or desirable in order
to perfect and protect the liens and security interests
created under the Security Agreement has been taken, including
delivery of Blocked Account Letters in form and substance
satisfactory to the Administrative Agent.
(viii) A mortgage in substantially the form of Exhibit E and
covering the property listed on Schedule 4.01(ff) (together with
each other mortgage delivered pursuant to Section 5.01(m), in each
case as amended, supplemented
<PAGE>
68
or otherwise modified from time to time in accordance with their
terms, the "Mortgage"), duly executed by the Borrower or MEDIQ,
together with evidence that the Mortgage has been duly recorded in
all filing or recording offices that the Administrative Agent may
deem desirable and all other action that the Administrative Agent
may deem necessary or desirable including a title search in order to
create valid first and subsisting Liens on the property described in
the Mortgages in favor of the Secured Parties and that all filing
and recording expenses and fees have been paid.
(ix) A guaranty in substantially the form of Exhibit G
(together with each other guaranty delivered pursuant to Section
5.01(o), in each case as amended, supplemented or otherwise modified
from time to time in accordance with its terms, the "Subsidiary
Guaranty"), duly executed by each Subsidiary Guarantor.
(x) Certified copies of each of the Related Documents, duly
executed by the parties thereto and in form and substance
satisfactory to the Lender Parties, together with all agreements,
instruments and other documents delivered in connection therewith.
(xi) Such financial, business and other information regarding
each Loan Party and its Subsidiaries as the Lender Parties shall
have requested, including, without limitation, information as to
possible contingent liabilities, tax matters, environmental matters,
obligations under Plans, Multiemployer Plans and Welfare Plans,
collective bargaining agreements and other arrangements with
employees, audited Consolidated and unaudited consolidating annual
financial statements (such unaudited consolidating financial
statements certified by the chief financial officer of MEDIQ) of
MEDIQ and its Subsidiaries dated September 30, 1993, September 30,
1994 and September 30, 1995, interim Consolidated and consolidating
financial statements dated June 30, 1996 (such financial statements
certified by the chief financial officer of MEDIQ), and forecasts
prepared by management, in form and substance satisfactory to the
Lender Parties, of balance sheets, income statements and cash flow
statements on a monthly basis for the first two years following the
day of the Initial Extension of Credit and on an annual basis for
each year thereafter until the Final Maturity Date.
(xii) An opinion, in substantially the form of Exhibit J,
attesting to the Solvency of the Borrower and MEDIQ after giving
effect to the Refinancing and the other transactions contemplated
hereby, from Murray, Devine & Co.
<PAGE>
69
(xiii) Certificates, in substantially the form of Exhibits K-1
and K-2, attesting to the Solvency of the Borrower on a Consolidated
basis and MEDIQ on a Consolidated basis both before and after giving
effect to the Refinancing and the other transactions contemplated
hereby, signed on behalf of each of the Borrower and MEDIQ by their
respective chief financial officer, attesting to the solvency of the
Borrower on a Consolidated basis and MEDIQ on a Consolidated basis,
respectively.
(xiv) Environmental assessment reports, in form and substance
satisfactory to the Lender Parties, from Sadat Associates, Inc. as
to any hazards, costs or liabilities under Environmental Laws to
which any Loan Party or any of its Subsidiaries may be subject
solely with respect to the real estate located at One MEDIQ Plaza,
Pennsauken, New Jersey, the amount and nature of which and the
Borrower's plans with respect to which shall be acceptable to the
Lender Parties. To the extent either the report or any other
information that may become available to the Lender Parties shall
disclose any hazards, costs or liabilities under Environmental Laws
or otherwise that the Lender Parties deem material, the Lender
Parties shall be satisfied that such hazards, costs or liabilities
were adequately reflected in MEDIQ's financial reserves shown on the
financial statements delivered pursuant to Section 3.01(g)(xi) or
that, to the extent not so reflected, the Borrower has made adequate
provision for such hazards, costs or liabilities.
(xv) A letter, in form and substance satisfactory to the
Administrative Agent, from the Borrower to Deloitte & Touche LLP,
its independent certified public accountants, advising such
accountants that the Administrative Agent and the Lender Parties
have been authorized to exercise all rights of the Borrower to
require such accountants to disclose any and all financial
statements and any other information of any kind that they may have
with respect to the Borrower and its Subsidiaries and directing such
accountants to comply with any reasonable request of the
Administrative Agent or any Lender Party through the Administrative
Agent for such information.
(xvi) Evidence of insurance naming the Administrative Agent as
additional insured and loss payee with such responsible and
reputable insurance companies or associations, and in such amounts
and covering such risks, as is satisfactory to the Lender Parties,
including, without limitation, business interruption insurance,
product liability insurance, and directors and officers insurance.
(xvii) A Borrowing Base Certificate dated as of August 31,
1996.
<PAGE>
70
(xviii) Landlord consents from the Persons listed in Schedule
3.01(g)(xviii) in form and substance satisfactory to the
Administrative Agent.
(xix) A termination letter from each of the Persons listed on
Schedule 3.01(g)(xix)(1) to the Administrative Agent relating to the
satisfaction and termination of the Existing Debt listed on Schedule
3.01(g)(xix)(2) and the release of all collateral and security
interests relating thereto.
(xx) A favorable opinion of Drinker, Biddle & Reath, counsel
to the Loan Parties, in substantially the form of Exhibit I hereto.
(xxi) A favorable opinion from each of the counsel to the Loan
Parties listed on Schedule 3.01(g)(xxi).
(xxii) A favorable opinion of Shearman & Sterling, counsel for
the Agents, in form and substance satisfactory to the Administrative
Agent.
(xxiii) A favorable opinion of Saiber, Schlesinger, Satz &
Goldstein, New Jersey counsel to the Lender Parties.
(xxiv) Federal Reserve Forms U-1 provided for in Regulation U,
as applicable, the statements made in which shall be such as to
permit the transactions contemplated hereby in accordance with
Regulation U; and Federal Reserve Forms G-3 provided for in
Regulation G, as applicable, the statements made in which shall be
such as to permit the transactions contemplated hereby in accordance
with Regulation G.
(h) The Supplemental Indenture shall have become effective.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance.
The obligation of each Appropriate Lender to make an Advance (other than a
Letter of Credit Advance made by an Issuing Bank or a Working Capital Lender
pursuant to Section 2.03(c)) on the occasion of each Borrowing (including the
Initial Extension of Credit), and the obligation of each Issuing Bank to issue a
Letter of Credit (including the initial issuance), shall be subject to the
further conditions precedent that on the date of such Borrowing or issuance (a)
the following statements shall be true (and each of the giving of the applicable
Notice of Borrowing, Notice of Issuance and the acceptance by the Borrower of
the proceeds of such Borrowing or of such Letter of Credit shall constitute a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such Borrowing or issuance such statements are true):
<PAGE>
71
(i) the representations and warranties contained in each Loan
Document are correct on and as of such date, before and after giving
effect to such Borrowing or issuance and to the application of the
proceeds therefrom, as though made on and as of such date other than any
such representations or warranties that, by their terms, refer to a
specific date other than the date of such Borrowing or issuance, in which
case as of such specific date;
(ii) no event has occurred and is continuing, or would result from
such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default;
(iii) for each Acquisition Advance: (i) at the time of making such
Acquisition Advance the amount on deposit in the Asset Sale Blocked
Account is zero or all amounts on deposit therein are being applied
simultaneously with such Acquisition Advance, (ii) immediately prior to
such Acquisition Advance, the Asset Sale Release Amount is equal to zero
and (iii) if such Acquisition Advance is used for the purposes set forth
in:
(a) Section 2.14(b)(ii), such Advance shall be under the terms
set forth in Section 5.02(k)(i)(y)(B);
(b) Section 2.14(b)(iii)(x), such Advance shall be under the
terms set forth in Section 5.02(g)(i); and
(c) Section 2.14(b)(iii)(y), such Advance shall be under the
terms set forth in Section 5.02(f)(i); and
(iv) for each Working Capital Advance or issuance of any Letter of
Credit, the lesser of the Working Capital Facility or the sum of the Loan
Values of the Eligible Collateral (as determined based on the most recent
Borrowing Base Certificate delivered to the Lender Parties hereunder)
exceeds the aggregate principal amount of the Working Capital Advances
plus Letter of Credit Advances to be outstanding plus the aggregate
Available Amount of all Letters of Credit plus the Asset Sale Release
Amount net of the amount of such Working Capital Advance to be deposited
in the Asset Sale Blocked Account then outstanding after giving effect to
such Advance or issuance, respectively;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as the Administrative Agent or the Required Lenders
through the Administrative Agent may reasonably request.
<PAGE>
72
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. Each
Loan Party represents and warrants as follows:
(a) Each Loan Party (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed is not
reasonably likely to have a Material Adverse Effect and (iii) has all
requisite corporate power and authority (including, without limitation,
all governmental licenses, permits and other approvals) to own or lease
and operate its properties and to carry on its business as now conducted
and as proposed to be conducted except where the failure to have such
corporate power and authority is not reasonably likely to have a Material
Adverse Effect. All of the outstanding capital stock of the Borrower has
been validly issued, is fully paid and non-assessable and Holdings is
owned by MEDIQ in the amount specified in Schedule 4.01(a) free and clear
of all Liens, except those created under the Loan Documents.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of each Loan Party as of the date hereof (other
than Subsidiaries listed on Schedule IV), showing as of the date hereof
(as to each such Subsidiary) the jurisdiction of its incorporation, the
number of shares of each class of capital stock authorized, and the number
outstanding, on the date hereof and the percentage of the outstanding
shares of each such class owned (directly or indirectly) by such Loan
Party and the number of shares covered by all outstanding options,
warrants, rights of conversion or purchase and similar rights at the date
hereof. All of the outstanding
<PAGE>
73
capital stock of all of such Subsidiaries, has been validly issued, is
fully paid and non-assessable and is owned by such Loan Party or one or
more of its Subsidiaries free and clear of all Liens, except those created
under the Loan Documents. Each such Subsidiary (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires
it to so qualify or be licensed except where the failure to so qualify or
be licensed is not reasonably likely to have a Material Adverse Effect and
(iii) has all requisite corporate power and authority (including, without
limitation, all governmental licenses, permits and other approvals) to own
or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted, except where the failure to
have such corporate power and authority is not reasonably likely to have a
Material Adverse Effect.
(c) The execution, delivery and performance by each Loan Party of
this Agreement, the Notes, each other Loan Document and each Related
Document to which it is or is to be a party, and the consummation of the
Refinancing and the other transactions contemplated hereby and thereby,
are within such Loan Party's corporate powers, have been duly authorized
by all necessary corporate action, and do not (i) contravene such Loan
Party's charter or bylaws, (ii) violate any law (including, without
limitation, the Securities Exchange Act of 1934 and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970), rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination or award, (iii)
conflict with or result in the breach of, or constitute a default under,
any contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument binding on or affecting any Loan Party, any of its
Subsidiaries or any of their properties or (iv) except for the Liens
created under the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of
any Loan Party or any of its Subsidiaries. No Loan Party or any of its
Subsidiaries is in violation of any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or in breach of
any such contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument, the violation or breach of which is reasonably
likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery,
recordation, filing or performance by any Loan Party of this Agreement,
the Notes, any other Loan Document or any Related Document to which it is
or is to be a party, or for the consummation of the
<PAGE>
74
Refinancing or the other transactions contemplated hereby or thereby, (ii)
the grant by any Loan Party of the Liens granted by it pursuant to the
Collateral Documents, (iii) the perfection or maintenance of the Liens
created by the Collateral Documents (including the priority thereof) or
(iv) the exercise by the Administrative Agent or any Lender Party of its
rights under the Loan Documents or the remedies in respect of the
Collateral pursuant to the Collateral Documents, except for the
authorizations, approvals, actions, notices and filings listed on Schedule
4.01(d), all of which have been duly obtained, taken, given or made and
are in full force and effect.
(e) This Agreement has been, and each of the Notes, each other Loan
Document and each Related Document when delivered hereunder will have
been, duly executed and delivered by each Loan Party thereto. This
Agreement is, and each of the Notes, each other Loan Document and each
Related Document when delivered hereunder will be, the legal, valid and
binding obligation of each Loan Party thereto, enforceable against such
Loan Party in accordance with its terms.
(f) The Consolidated and consolidating balance sheets of MEDIQ and
its Subsidiaries as at September 30, 1993, September 30, 1994 and
September 30, 1995, and the related Consolidated and consolidating
statements of income and Consolidated statements of cash flows of each of
MEDIQ and its Subsidiaries and Holdings and its Subsidiaries for the
fiscal years then ended, accompanied by an opinion of Deloitte & Touche
LLP, independent public accountants, or, as to the consolidating
statements, duly certified by the chief financial officer of MEDIQ, and
the Consolidated and consolidating balance sheets of MEDIQ and its
Subsidiaries as at June 30, 1996, and the related Consolidated and
consolidating statements of income and Consolidated statements of cash
flows of each of MEDIQ and its Subsidiaries and Holdings and its
Subsidiaries for the nine months then ended, duly certified by the chief
financial officers of MEDIQ and Holdings, respectively, in each case
copies of which have been furnished to each Lender Party, fairly present,
subject, in the case of said Consolidated and consolidating balance sheets
as at June 30, 1996, and said Consolidated and consolidating statements of
income and Consolidated statements of cash flows of each of MEDIQ and its
Subsidiaries and Holdings and its Subsidiaries for the nine months then
ended, to year-end audit adjustments, the Consolidated and consolidating
financial condition of MEDIQ and its Subsidiaries as at such dates and the
Consolidated and consolidating results of the operations of MEDIQ and its
Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles applied on a consistent basis,
and since September 30, 1995 there has been no Material Adverse Change.
(g) The Consolidated forecasted balance sheets, income statements
and cash flows statements of MEDIQ and its Subsidiaries delivered to the
Administrative Agent pursuant to Section 3.01(g)(xi) or 5.03 were prepared
in good faith on the basis of the
<PAGE>
75
assumptions stated therein, which assumptions were fair in the light of
conditions existing at the time of delivery of such forecasts and at the
time of the Initial Extension of Credit, and represented, at both such
times of delivery, MEDIQ's and the Borrower's best estimate of their
future financial performance.
(h) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries, including
any Environmental Action, pending or threatened before any court,
governmental agency or arbitrator that (i) is reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the legality, validity
or enforceability of the Refinancing, this Agreement, any Note, any other
Loan Document or any Related Document or the consummation of the
transactions contemplated hereby.
(i) No proceeds of any Advance or drawings under any Letter of
Credit will be used to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of 1934,
except in connection with an Investment permitted by Section 5.02(f)(i)
provided that after giving effect to such Investment the Borrower directly
acquires all of the shares of such class of equity security.
(j) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of
any Advance (other than Acquisition Advances) or drawings under any Letter
of Credit will be used to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin
Stock.
(k) Set forth on Schedule 4.01(k) hereto is a complete and accurate
list of all Plans, Multiemployer Plans and Welfare Plans in effect as of
the date of this Agreement.
(l) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.
(m) As of the last annual actuarial valuation date, the Loan Parties
and the ERISA Affiliates are in compliance with the funding requirements
of the Internal Revenue Code and ERISA with respect to each Plan.
(n) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) for each Plan, copies of which have been filed
with the Internal Revenue Service and furnished to the Administrative
Agent, is complete and accurate and fairly presents the funding status of
such Plan, and since the date of such Schedule B there has been no
material adverse change in such funding status.
<PAGE>
76
(o) Neither any Loan Party nor any ERISA Affiliate has incurred or
is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(p) Neither any Loan Party nor any ERISA Affiliate has been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and no such Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(q) Except as set forth in the financial statements referred to in
this Section 4.01 and in Section 5.03, the Loan Parties and their
respective Subsidiaries have no material liability with respect to
"expected post retirement benefit obligations" within the meaning of
Statement of Financial Accounting Standards No. 106.
(r) Neither the business nor the properties of any Loan Party or any
of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not
covered by insurance) that is reasonably likely to have a Material Adverse
Effect.
(s) The operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past claims of
non-compliance with such Environmental Laws and Environmental Permits have
been resolved without ongoing obligations or costs, and no circumstances
exist that could (i) form the basis of an Environmental Action against any
Loan Party or any of its Subsidiaries or any of its properties is
reasonably likely to have a Material Adverse Effect or (ii) cause any such
property to be subject to any material restrictions on ownership,
occupancy, use or transferability under any Environmental Law that is
reasonably likely to have a Material Adverse Effect.
(t) Except as is disclosed on Schedule 4.01(t), and with respect to
properties not owned by any Loan Party to the extent of the actual
knowledge of any Responsible Officer: none of the properties currently or
formerly owned or operated by any Loan Party or any of its Subsidiaries is
listed or proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list or is adjacent to any such
property; there are no and never have been any underground or aboveground
storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated,
stored or disposed on any property currently owned or operated by any Loan
Party or any of its Subsidiaries or, to the best of its knowledge, on any
property formerly owned or operated by any
<PAGE>
77
Loan Party or any of its Subsidiaries; there is no asbestos or
asbestos-containing material on any property currently owned or operated
by any Loan Party or any of its Subsidiaries; and Hazardous Materials have
not been released, discharged or disposed of on any property currently or
formerly owned or operated by any Loan Party or any of its Subsidiaries;
except, in each case, where the non-compliance with the foregoing is not
reasonably likely to have a Material Adverse Effect.
(u) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together with
other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental
or regulatory authority or the requirements of any Environmental Law; and
all Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries have been disposed
of in a manner not reasonably expected to result in material liability to
any Loan Party or any of its Subsidiaries.
(v) As of the date hereof, Schedule IV is a true and correct list of
all Discontinued Subsidiaries.
(w) Except as permitted by Section 5.02(a)(iii),(iv),(v) and (vii),
the Collateral Documents create a valid and perfected first priority
security interest in the Collateral securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken. The Loan
Parties are the legal and beneficial owners of the Collateral free and
clear of any Lien, except for the liens and security interests created or
permitted under the Loan Documents.
(x) Each Loan Party and each of its Subsidiaries has filed, has
caused to be filed or has been included in all tax returns (Federal,
state, local and foreign) required to be filed and has paid all taxes
shown thereon to be due, together with applicable interest and penalties.
(y) Set forth on Schedule 4.01(y) hereto is a complete and accurate
list, as of the date hereof, of each taxable year of each Loan Party and
each of its Subsidiaries for which Federal income tax returns have been
filed and for which the expiration of the applicable statute of
limitations for assessment or collection has not occurred by reason of
extension or otherwise (an "Open Year").
(z) There is no unpaid amount, as of the date hereof, of adjustments
to the Federal income tax liability of each Loan Party and each of its
Subsidiaries proposed
<PAGE>
78
by the Internal Revenue Service with respect to Open Years. No issues have
been raised by the Internal Revenue Service in respect of Open Years that,
in the aggregate, are reasonably likely to have a Material Adverse Effect.
(aa) There is no unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of each Loan
Party and its Subsidiaries proposed by all state, local and foreign taxing
authorities (other than amounts arising from adjustments to Federal income
tax returns, if any) other than those being contested in good faith and
listed on Schedule 4.01(aa). No issues have been raised by such taxing
authorities that, in the aggregate, are reasonably likely to have a
Material Adverse Effect.
(bb) MEDIQ and its Subsidiaries had, as of September 30, 1995 net
operating loss carryforwards for U.S. Federal income tax purposes in the
amount of $47,972,700 and capital loss carryforwards for U.S. Federal
income tax purposes in the amount of $22,062,300.
(cc) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated hereby, will violate
any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(dd) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ee) All Existing Debt is listed on Schedule 2.14(a) and Schedule
3.01(e), and set forth on each such Schedule, as of the date hereof, is
the principal amount outstanding thereunder, the maturity date thereof and
the amortization schedule therefor.
(ff) Set forth on Schedule 4.01(ff) hereto is a complete and
accurate list of all real property owned by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the street address, county or
other relevant jurisdiction, state and record owner. Each Loan Party or
such Subsidiary has good, marketable and insurable fee simple title to
such real property, free and clear of all Liens, other than Liens created
or permitted by the Loan Documents.
<PAGE>
79
(gg) Set forth on Schedule 4.01(gg) hereto is a complete and
accurate list of all Investments held by any Loan Party as of the date
hereof (other than Discontinued Subsidiaries), showing as of the date
hereof the amount, obligor or issuer and maturity, if any, thereof.
(hh) Set forth on Schedule 4.01(hh) hereto is a complete and
accurate list of all patents, trademarks, trade names, service marks and
copyrights, and all applications therefor and licenses thereof, of each
Loan Party as of the date hereof (other than Discontinued Subsidiaries),
showing as of the date hereof the jurisdiction in which registered, the
registration number, the date of registration and the expiration date.
(ii) The merger of the Borrower and MEDIQ/PRN Life Support
Services-I, Inc. has taken place, and the Borrower is the surviving
corporation.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, each Loan Party will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if
unpaid, might by law become a Lien upon its property; provided, however,
that no Loan Party or any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim (x) that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, or (y) in respect of which the
Lien resulting therefrom, if any, attaches to its property and becomes
enforceable against its other creditors, to the extent that the aggregate
amount of all such taxes, assessments, charges or claims does not exceed
$250,000.
<PAGE>
80
(c) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and all lessees and other Persons operating or occupying
its properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause
each of its Subsidiaries to obtain and renew all Environmental Permits
necessary for its operations and properties, except if the failure to
obtain or renew such Environmental Permit is not reasonably likely to have
a Material Adverse Effect; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing, and undertake
any cleanup, removal, remedial or other action necessary to remove and
clean up all Hazardous Materials from any of its properties, in accordance
with the requirements of all Environmental Laws, except if the failure to
remove or clean up such Hazardous Materials is not reasonably likely to
have a Material Adverse Effect; provided, however, that no Loan Party or
any of its Subsidiaries shall be required to undertake any such cleanup,
removal, remedial or other action to the extent that its obligation to do
so is being contested in good faith and by proper proceedings and
appropriate reserves are being maintained with respect to such
circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which such Loan
Party or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries (excluding any Discontinued Subsidiary
in respect of which the failure to comply with this Section 5.01(e) is not
reasonably likely to have a Material Adverse Effect) to preserve and
maintain, its corporate existence, rights (charter and statutory),
permits, licenses, approvals, privileges and franchises, except if the
failure to preserve and maintain such permits, approvals or licenses is
not reasonably likely to have a Material Adverse Effect; provided,
however, that such Loan Party may consummate any merger or consolidation
permitted under Section 5.02(d).
(f) Visitation Rights. At any reasonable time and from time to time,
upon reasonable prior notice, permit the Administrative Agent or any of
the Lender Parties or any agents or representatives thereof, to examine
and make copies of and abstracts from the records and books of account of,
and visit the properties of, such Loan Party and any of its Subsidiaries,
and to discuss the affairs, finances and accounts of such Loan Party and
any of its Subsidiaries with any of their officers or directors and with
their independent certified public accountants.
<PAGE>
81
(g) Preparation of Environmental Reports. At the request of the
Administrative Agent at the following times: (i) upon the occurrence and
continuance of an Event of Default, (ii) upon the acquisition of real
property by any Loan Party or any of its Subsidiaries and (iii) and no
more than two other times (determined in the discretion of the Required
Lenders) during the term of this Agreement, provide to the Lender Parties
within 90 days after such request, at the expense of the Borrower, a Phase
I environmental site assessment report for any of its or its Subsidiaries'
owned properties described in such request, prepared by an environmental
consulting firm acceptable to the Administrative Agent (and, if based upon
the recommendation of such environmental consulting firm, a Phase II
environmental site assessment report) indicating the presence or absence
of Hazardous Materials and the estimated cost of any compliance, removal
or remedial action in connection with any Hazardous Materials on such
properties; without limiting the generality of the foregoing, if the
Administrative Agent determines at any time that a material risk exists
that any such report will not be provided within the time referred to
above, the Administrative Agent may retain an environmental consulting
firm to prepare such report at the expense of the Borrower, and such Loan
Party hereby grants and agrees to cause any Subsidiary that owns any
property described in such request to grant at the time of such request,
to the Administrative Agent or to any Lender Party who makes such request
through the Administrative Agent, such firm and any agents or
representatives thereof an irrevocable non-exclusive license, subject to
the rights of tenants, to enter onto their respective properties to
undertake such an assessment.
(h) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of such Loan Party and each such Subsidiary in accordance with
generally accepted accounting principles.
(i) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are reasonably required in the conduct of its business in good
working order and condition, ordinary wear and tear excepted, and except
for properties that have become obsolete or no longer fit for their
intended purposes.
(j) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which such Loan Party or any of its Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be forfeited
or cancelled, except if the failure to make such payment, perform such
obligations or keep such leases in full force and effect is not reasonably
likely to have a Material Adverse Effect.
<PAGE>
82
(k) Performance of Related Documents. Perform and observe all of the
terms and provisions of each Related Document to be performed or observed
by it, maintain each such Related Document in full force and effect,
enforce such Related Document in accordance with its terms, take all such
action to such end as may be from time to time requested by the
Administrative Agent and, upon request of the Administrative Agent, make
to each other party to each such Related Document such demands and
requests for information and reports or for action as such Loan Party is
entitled to make under such Related Document.
(l) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to such Loan Party or such Subsidiary
than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
(m) Covenant to Give Security. In addition to the requirements of
Section 5.01(o), upon the request of the Administrative Agent and at the
expense of the Borrower, (i) within 10 days after such request, furnish to
the Administrative Agent a description of the real and personal properties
of such Loan Party and its Subsidiaries in detail satisfactory to the
Administrative Agent, (ii) within 15 days after such request, duly execute
and deliver to the Administrative Agent mortgages, pledges, assignments
and other security agreements, as specified by and in form and substance
satisfactory to the Administrative Agent, securing payment of all the
Obligations of such Loan Party under the Loan Documents and constituting
Liens on all such properties, (iii) within 30 days after such request,
take whatever action (including, without limitation, the recording of
mortgages, the filing of Uniform Commercial Code financing statements, the
giving of notices and the endorsement of notices on title documents) may
be necessary or advisable in the opinion of the Administrative Agent to
vest in the Administrative Agent (or in any representative of the
Administrative Agent designated by it) valid and subsisting Liens on the
properties purported to be subject to the security agreements delivered
pursuant to this Section 5.01(m), enforceable against all third parties in
accordance with their terms, (iv) within 60 days after such request,
deliver to the Administrative Agent a signed copy of a favorable opinion,
addressed to the Administrative Agent, of counsel for such Loan Party
acceptable to the Administrative Agent as to the matters contained in
clauses (i), (ii) and (iii) above, as to such security agreements being
legal, valid and binding obligations of such Loan Party and its
Subsidiaries enforceable in accordance with their terms and as to such
other matters as the Administrative Agent may reasonably request, (v) at
any time and from time to time promptly execute and deliver any and all
further instruments and documents and take all such other action as the
Administrative Agent may deem desirable in obtaining the full benefits of,
or in preserving the Liens of, such security agreements.
<PAGE>
83
(n) Interest Rate Hedging. Enter into prior to November 15, 1996,
and maintain at all times thereafter, interest rate Hedge Agreements with
Persons acceptable to the Administrative Agent, covering a notional amount
of not less than 75% of the Term A and Term B Facilities and providing for
such Persons to make payments thereunder for an initial period of no less
than three years to the extent of increases in interest rates greater than
2.0% above the Eurodollar Rate in effect on the date hereof for an
Interest Period of three months.
(o) Additional Loan Parties. Cause any newly organized or acquired
Subsidiary of the Borrower, any Parent Guarantor, or any of their Ongoing
Subsidiaries (other than any Subsidiary organized or located outside of
the United States) to execute and deliver to the Administrative Agent as
promptly as practicable and in any event within 30 days after the
organization or acquisition of such Subsidiary (i) a security agreement
supplement in the form of Exhibit A to the Security Agreement, (ii) a
guaranty in form and substance satisfactory to the Administrative Agent
and the Lender Parties and (iii) such other documents, agreements,
certificates or instruments as the Administrative Agent may reasonably
request, in each case in form and substance reasonably satisfactory to the
Administrative Agent, and to take all such other actions that may be
necessary or that the Administrative Agent may deem reasonably desirable
in order to perfect and protect any pledge, assignment or security
interest granted by such security agreement (granting a security interest
in the receivables, inventory, deposit accounts, equipment, intellectual
property and other assets of such Subsidiary) of such Subsidiary to the
Administrative Agent for the benefit of the Lender Parties or to enable
the Administrative Agent to exercise and enforce its rights and remedies
thereunder.
(p) Working Capital Advances. If, on the Conversion Date, the amount
on deposit in the Asset Sale Blocked Account is less than the amount
required to be prepaid pursuant to 2.06(b)(ix), the Borrower will either
(i) make a Working Capital Borrowing or (ii) authorize the Administrative
Agent on behalf of the Borrower to obtain a Working Capital Borrowing, in
an amount sufficient to make payment of the amount required to be prepaid
pursuant to Section 2.06(b)(ix), and make such prepayment unless funds are
otherwise available to the Borrower to make such prepayment, and such
prepayment is made with such funds.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, no Loan Party will (provided, however, that
for purposes of this Section 5.02, Loan Party shall not include any Discontinued
Subsidiary, except with respect to Sections 5.02(e), (f) and (j)), at any time:
<PAGE>
84
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Ongoing Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned or
hereafter acquired, or sign or file or suffer to exist, or permit any of
its Ongoing Subsidiaries to sign or file or suffer to exist, under the
Uniform Commercial Code of any jurisdiction, a financing statement that
names such Loan Party or any of its Ongoing Subsidiaries as debtor, or
sign or suffer to exist, or permit any of its Ongoing Subsidiaries to sign
or suffer to exist, any security agreement authorizing any secured party
thereunder to file such financing statement, or assign, or permit any of
its Ongoing Subsidiaries to assign, any accounts or other right to receive
income, excluding, however, from the operation of the foregoing
restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 5.02(a)(iii) hereto, each in an amount and for a duration
not to exceed the amount and duration of such Lien listed on such
Schedule.
(iv) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(ii)(C), provided that no such Lien
shall extend to or cover any Collateral or assets other than the
assets subject to such Capitalized Leases;
(v) purchase money Liens upon or in real property or equipment
acquired or any other property the purchase of which constitutes a
Capital Expenditure or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of financing the acquisition of any
such property or equipment to be subject to such Liens, or Liens
existing on any such property or equipment at the time of
acquisition (other than any such Liens created in contemplation of
such acquisition that do not secure the purchase price), or such
Liens placed on such property or equipment within six months of the
time of such acquisition (so long as such transactions are
consistent with past business practices), or extensions, renewals or
replacements of any of the foregoing for the same or a lesser
amount; provided, however, that no such Lien shall extend to or
cover any property other than the property or equipment being
acquired, and no such extension, renewal or replacement shall extend
to or cover any property not theretofore subject to the Lien being
extended, renewed or replaced; so long as
<PAGE>
85
the aggregate principal amount of such Liens outstanding at any time
plus the aggregate principal amount of Capitalized Leases permitted
pursuant to Section 5.02(b)(ii)(C) outstanding at any time shall not
exceed $20,000,000;
(vi) the filing of financing statements solely as a
precautionary measure in connection with operating leases permitted
under Section 5.02(c);
(vii) the replacement, extension or renewal of any Lien
permitted by clause (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby;
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Ongoing Subsidiaries to create, incur, assume or suffer to exist, any
Debt other than:
(i) in the case of the Parent Guarantors, (A) Debt listed on
Schedule 5.02(b)(i)(A) in an amount for each item of Debt on such
Schedule not to exceed the amount listed for such Debt on such
Schedule and (B) Debt listed on Schedule 5.02(b)(i)(B) in an amount
for each item of Debt on such Schedule not to exceed the amount
listed for such debt on such Schedule, and
(ii) in the case of the Borrower and any of its Ongoing
Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt in respect of Hedge Agreements designed to
hedge against fluctuations in interest rates or foreign
exchange rates incurred in the ordinary course of business and
consistent with prudent business practice in an aggregate
notional amount not to exceed $100,000,000 for interest rate
Hedge Agreements at any time outstanding,
(C) Capitalized Leases, so long as the aggregate
principal amount of such Capitalized Leases outstanding at any
time plus the aggregate principal amount of Liens permitted
pursuant to Section 5.02(a)(v) outstanding at any time shall
not exceed $20,000,000,
(D) Debt assumed or incurred in connection with Capital
Expenditures secured by Liens permitted by Section 5.02(a)(v),
(E) Unsecured Debt in an aggregate amount not to exceed
$3,000,000,
<PAGE>
86
(F) Debt set forth on Schedule 5.02 (b)(ii)(F),
(G) The 12.125% Notes, until such time as such 12.125%
Notes shall be fully redeemed or repurchased pursuant to the
12.125% Note Indenture, so long as such 12.125% Notes remain
defeased pursuant to such Indenture, and
(iii) in the case of MEDIQ and any of its Ongoing
Subsidiaries,
(A) indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business,
(B) any Guaranty of Obligations under the Loan
Documents,
(C) unsecured Debt (other than for the Borrower and its
Ongoing Subsidiaries) in an aggregate amount not to exceed
$250,000, and
(D) any indemnities (other than given by the Borrower
and its Ongoing Subsidiaries) in connection with Permitted
Asset Sales so long as such indemnities are generally
customary for such transactions, and
(E) any indemnities in connection with amounts owed by
Borrower to Congress Financial Corporation pursuant to the
Congress Agreement;
(iv) in the case of Holdings, any indemnities in connection
with amounts owed by Borrower to Congress Financial Corporation
pursuant to the Congress Agreement.
(c) Lease Obligations. Create, incur, assume or suffer to exist, or
permit any of its Ongoing Subsidiaries to create, incur, assume or suffer
to exist, any obligations as lessee (i) for the rental of medical
equipment of any kind in connection with any sale and leaseback
transaction, or (ii) for the rental of other medical equipment of any kind
under leases or agreements to lease, excluding Capitalized Leases, that
would cause such rental expense of MEDIQ and its Subsidiaries, on a
Consolidated basis, to exceed $2,250,000 of expense for any Fiscal Year
plus an amount equal to (1) the rental expense per Fiscal Year of any
Person acquired pursuant to an Investment permitted by Section 5.02(f)(i)
or (vi) at the time of such Investment less (2) the rental expense per
Fiscal Year of such Person in respect of such rentals existing at the time
of such Investment but ceasing to exist thereafter.
<PAGE>
87
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Ongoing
Subsidiaries to do so, except that any wholly owned Subsidiary of MEDIQ or
Holdings other than the Borrower may merge into or consolidate with MEDIQ
or any other such Subsidiary other than the Borrower, so long as the
surviving Person is an Ongoing Subsidiary or MEDIQ; provided, however,
that, (A) the Borrower may merge into Holdings, so long as (i) the
Holdings Notes shall no longer be outstanding, and (ii) in the case of any
such merger or consolidation, the Person surviving such merger or
consolidation shall be the Borrower, (B) any wholly-owned Subsidiary of
the Borrower may merge or consolidate with any Person to effect the
acquisition of such Person or its property in a transaction permitted
under Section 5.02(f)(i) or (vi), so long as the Person surviving such
merger or formed by such consolidation is or becomes a wholly-owned
Subsidiary of the Borrower and complies with Section 5.01(o), and (C) the
Borrower may merge into (1) any wholly owned Subsidiary of the Borrower
acquired pursuant to Section 5.02(f)(i) or (vi), or (2) any wholly owned
Subsidiary previously merged or consolidated with any other wholly owned
Subsidiary acquired pursuant to Section 5.02(f)(i) or (vi), so long as the
Person surviving such merger is the Borrower.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets other than in the ordinary course of
business, or grant any option or other right to purchase, lease or
otherwise acquire any assets other than Inventory or rental equipment to
be sold or leased in the ordinary course of its business, except:
(i) in a transaction authorized by subsection (d) of this
Section,
(ii) Permitted Asset Sales; provided that any Net Cash
Proceeds of such Permitted Asset Sales not used to prepay
Acquisition Advances or Working Capital Advances in accordance with
Section 2.06 shall be deposited in the Asset Sale Blocked Account,
and
(iii) sales of all or any part of Discontinued Subsidiaries,
provided, however, that any Permitted Asset Sales shall in any event
be made in accordance with the terms of Section 5.02(e)(ii).
(f) Investments in Other Persons. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person, except, so
long as no Default shall have occurred and be continuing at the time of
any action described below or would result therefrom:
(i) On or prior to the Conversion Date, using proceeds from
Acquisition Advances and/or from the Asset Sale Blocked Account,
<PAGE>
88
Investments by the Borrower in its wholly owned Ongoing Subsidiaries
organized under the laws of the United States or in the assets
comprising a substantial part or all of the business of any Person
or of an operating division of such Person, provided that:
(1) such Investments shall be in the same lines of business in
which the Borrower is involved on the date hereof,
(2) for the Rolling Period ended as at the end of the most
recent period for which financial statements were required to be
furnished to the Administrative Agent pursuant to Sections 5.03(b),
(c) or (d) and calculated immediately before and after giving effect
to such Investment, the Leverage Ratio shall be not more than 3.50
to 1.0,
(3) the amount of the Acquisition Advances plus the amount of
cash from the Asset Sale Blocked Account used for such an Investment
shall not exceed an amount equal to 5.5 multiplied by the 12 month
trailing EBITDA of such Person,
(4) the aggregate amount of the Acquisition Advances plus the
aggregate amount of cash from the Asset Sale Blocked Account used
for all such Investments plus an amount equal to the aggregate value
of the common stock of MEDIQ used for all such Investments shall not
exceed $100,000,000.
(ii) Investments by MEDIQ, the Borrower and each of their
Ongoing Subsidiaries existing on the date hereof and described on
Schedule 4.01(gg) hereto;
(iii) loans and advances by MEDIQ, the Borrower and each of
their Ongoing Subsidiaries to employees in the ordinary course of
the business of the Borrower as presently conducted in an aggregate
principal amount not to exceed $500,000 at any time outstanding;
(iv) Investments by MEDIQ, the Borrower or their Subsidiaries
in (A) demand deposit accounts maintained in the ordinary course of
business with any Person of the type referred to in clause (i),
(ii), (iii), (iv) or (v) of the definition of "Eligible Assignee",
(B) Cash Equivalents, (C) the Asset Sale Blocked Account and other
accounts maintained pursuant to the Security Agreement and (D) the
Citibank Account;
(v) Investments by the Borrower in Hedge Agreements permitted
under Section 5.02(b)(ii)(B);
<PAGE>
89
(vi) Investments by the Borrower in its wholly owned Ongoing
Subsidiaries, or in the assets comprising a substantial part or all
of the business of any Person or of an operating division of such
Person, such Subsidiaries or Person organized under the laws of the
United States from and after the Conversion Date, (x) from the
amount of the Excess Cash Flow Basket and (y) in addition, from
MEDIQ common stock, in an aggregate amount not to exceed
$10,000,000;
(vii) Investments by Discontinued Subsidiaries in an aggregate
amount not to exceed $1,000,000;
(viii) Investments by MEDIQ Management Services, Inc. in an
aggregate amount not to exceed $1,000,000; and
(ix) Investments evidenced by promissory notes issued to the
Borrower, in the ordinary course of business, with respect to
amounts due to the Borrower.
(g) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or
any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders as such,
make any distribution of assets, capital stock, warrants, rights, options,
obligations or securities to its stockholders as such or issue or sell any
capital stock or any warrants, rights or options to acquire such capital
stock, or, in the case of MEDIQ or Holdings, permit the Borrower to do any
of the foregoing or permit any of its Subsidiaries to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such
Loan Party or any warrants, rights or options to acquire such capital
stock or to issue or sell any capital stock or any warrants, rights or
options to acquire such capital stock, except that so long as no Default
shall have occurred and be continuing at the time of any action described
below or would result therefrom, any Subsidiary of the Borrower may
declare and pay cash dividends to the Borrower, except:
(i) After the period ending on the date twelve months after
the date of the Initial Extension of Credit, the Borrower may pay
cash dividends or advance funds directly or indirectly to MEDIQ to
permit MEDIQ to repurchase the common stock of MEDIQ and to pay cash
dividends, following the Asset Sale Threshold Date, in an aggregate
amount not to exceed $20,000,000 so long as the Leverage Ratio for
the Rolling Period ended as at the end of the most recent period for
which financial statements were required to be furnished to the
Administrative Agent pursuant to Sections 5.03(b), (c) or (d) on a
pro forma basis, giving effect to such repurchase, shall be no
<PAGE>
90
greater than 3.0 to 1.0, provided that no Investments permitted
under Section 5.02(f)(i) have occurred;
(ii) the Borrower may pay cash dividends or advance funds
directly or indirectly to MEDIQ to permit MEDIQ to repurchase the
common stock of MEDIQ and to pay cash dividends with respect to any
Fiscal Year equal to the lesser of (x) 50% of cumulative net income
for each Fiscal Year in the period beginning October 1, 1996 less an
amount equal to the aggregate amount of cash dividends previously
paid pursuant to this clause (x) during such period or (y) the
amount of the Excess Cash Flow Basket;
(iii) the Borrower may pay or advance up to $1,500,000 in the
aggregate per annum to the Parent Guarantors for operating expenses
in the ordinary course of business;
(iv) any Loan Party may make payments under the Tax Sharing
Agreement;
(v) the Borrower may pay cash dividends or advance funds
directly or indirectly to MEDIQ to permit MEDIQ to prepay its
Subordinated Notes, so long as such prepayment is permitted under
Sections 5.02(k)(i)(y)(B);
(vi) MEDIQ may issue common stock; and
(vii) the Borrower may pay or advance funds directly or
indirectly to MEDIQ to permit MEDIQ to make interest payments on the
Subordinated Notes.
(h) Change in Nature of Business. Make, or permit any of its Ongoing
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(i) Charter Amendments. Amend, or permit any of its Ongoing
Subsidiaries to amend, its certificate of incorporation or bylaws, unless
such change would not have a Material Adverse Effect or does not adversely
affect the rights and remedies of the Administrative Agent or any Lender
Party under any Loan Document or any Related Document.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as required by generally accepted accounting
principles or (ii) Fiscal Year.
<PAGE>
91
(k) Prepayments, Etc. of Debt. (i) Prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of,
any Debt, other than:
(x) the prepayment of the Advances in accordance with the
terms of this Agreement, and
(y) if before and after giving effect to any such redemption,
purchase, defeasance or other satisfaction no Default has occurred
or would result therefrom,
(A) regularly scheduled or required repayments or
redemptions of Surviving Debt, other than the Subordinated
Notes, and
(B) prior to the Conversion Date, with Acquisition
Advances used in accordance with Section 2.14(b) or amounts on
deposit in the Asset Sale Blocked Account, regularly scheduled
or required prepayments or redemptions, or the redemption,
repurchase, defeasance or other satisfaction of the
Subordinated Notes so long as the Senior Leverage Ratio for
the Rolling Period ended as at the end of the most recent
period for which financial statements were required to be
furnished to the Administrative Agent pursuant to Sections
5.03(b), (c) or (d), on a pro forma basis after giving effect
to such Advance, shall be no greater than 3.75 to 1.0, or
(C) from and after the Conversion Date, the redemption,
repurchase, defeasance or other satisfaction of the
Subordinated Notes with the amount of the Excess Cash Flow
Basket or
(ii) amend, modify or change in any manner any term or condition of
the Subordinated Notes, or permit any of its Subsidiaries to do any of the
foregoing other than to prepay any Debt payable to the Borrower.
(l) Amendment, Etc. of Related Documents. Cancel or terminate any
Related Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of
any Related Document or give any consent, waiver or approval thereunder,
waive any default under or any breach of any term or condition of any
Related Document, agree in any manner to any other amendment, modification
or change of any term or condition of any Related Document or take any
other action in connection with any Related Document that would impair the
value of the interest or rights of the Borrower
<PAGE>
92
thereunder or that would impair the rights or interests of the
Administrative Agent or any Lender Party, or permit any of its
Subsidiaries to do any of the foregoing.
(m) Negative Pledge. Enter into or suffer to exist, or permit any of
its Ongoing Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties or (ii) in connection with (A) any Surviving Debt, (B) any Debt
secured by purchase money Liens and Capitalized Leases, in each case, to
the extent permitted under Sections 5.02(a)(v) and 5.02(b)(ii)(C),
respectively or (C) Liens on the common stock of InnoServ, Inc. under the
Agreement of Merger and Plan of Reorganization dated as of May 18, 1994,
as amended through the date hereof, among MMI Medical, Inc., MMI
Acquisition Subsidiary, Inc., MEDIQ and MEDIQ Equipment and Maintenance
Services, Inc. or (D) the negative pledge in favor of Summit Bank in
respect of the Borrower's membership interest in MEDIQ PRN/HNE, L.L.C.
(n) Partnerships. Become a general partner in any general or limited
partnership or joint venture, or permit any of its Subsidiaries to do so
other than as permitted by Section 5.02(f)(ii).
(o) Other Transactions. Engage, or permit any of its Subsidiaries to
engage, in any transaction involving commodity options or futures
contracts or any similar speculative transactions (including, without
limitation, take-or-pay contracts) except for Hedge Agreements permitted
under Section 5.02(b)(ii)(B).
SECTION 5.03. Reporting Requirements. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, MEDIQ or the Borrower will furnish to the
Lender Parties (except for the notice required under Section 5.03(a), which
shall be given to the Administrative Agent):
(a) Default Notice. As soon as possible and in any event within two
Business Days after the occurrence of each Default or any event,
development or occurrence reasonably likely to have a Material Adverse
Effect continuing on the date of such statement, a statement of a
Responsible Officer setting forth details of such Default and the action
that the Borrower has taken and proposes to take with respect thereto.
(b) Monthly Financials. As soon as available and in any event within
30 days after the end of each month (other than for each month on which a
fiscal quarter is also ending, in which event such financials shall be
delivered within 45 days), commencing September 30, 1996, Consolidated and
consolidating balance
<PAGE>
93
sheets of MEDIQ and its Subsidiaries as of the end of such month and
Consolidated and consolidating statements of income of MEDIQ and its
Subsidiaries and Consolidated statements of cash flow of each of MEDIQ and
its Subsidiaries and Holdings and its Subsidiaries for the period
commencing at the end of the previous month and ending with the end of
such month and Consolidated and consolidating statements of income of
MEDIQ and its Subsidiaries and Consolidated statements of cash flow of
each of MEDIQ and its Subsidiaries and Holdings and its Subsidiaries for
the period commencing at the end of the previous Fiscal Year and ending
with the end of such month, setting forth in each case in comparative form
the corresponding figures for the corresponding month of the preceding
Fiscal Year and the corresponding figures for the corresponding month of
the current annual forecast, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officers of
MEDIQ and Holdings, respectively, together with (i) a certificate of the
chief financial officer of MEDIQ stating that no Default has occurred and
is continuing or, if a Default has occurred and is continuing, a statement
as to the nature thereof and the action that MEDIQ has taken and proposes
to take with respect thereto, and (ii) in the event of any change from
GAAP in the generally accepted accounting principles used in the
preparation of such financial statements, a statement of reconciliation
conforming such financial statements to GAAP.
(c) Quarterly Financials. As soon as available and in any event
within 45 days after the end of each of the quarters of each Fiscal Year,
Consolidated and consolidating balance sheets of MEDIQ and its
Subsidiaries as of the end of such quarter and Consolidated and
consolidating statements of income of MEDIQ and its Subsidiaries and a
Consolidated statement of cash flow of each of MEDIQ and its Subsidiaries
and Holdings and its Subsidiaries for the period commencing at the end of
the previous fiscal quarter and ending with the end of such fiscal quarter
and Consolidated and consolidating statements of income of MEDIQ and its
Subsidiaries and Consolidated statements of cash flow of each of MEDIQ and
its Subsidiaries and Holdings and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the end
of 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 and duly certified (subject to year-end
audit adjustments) by the chief financial officers of MEDIQ and Holdings,
respectively, as having been prepared in accordance with generally
accepted accounting principles consistent with those applied in the most
recent annual audit, together with (i) a certificate of the chief
financial officer of MEDIQ stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as
to the nature thereof and the action that MEDIQ has taken and proposes to
take with respect thereto, (ii) a schedule in form satisfactory to the
Administrative Agent of the computations used by MEDIQ in determining
compliance with the covenants contained in Sections 5.04(a) through (e)
and (iii) in the event of
<PAGE>
94
any change from GAAP in the generally accepted accounting principles used
in the preparation of such financial statements, a statement of
reconciliation conforming such financial statements to GAAP.
(d) Annual Financials. As soon as available and in any event within
90 days after the end of each Fiscal Year, a copy of the annual audit
report for such year for MEDIQ and its Subsidiaries, including therein a
Consolidated balance sheet of MEDIQ and its Subsidiaries as of the end of
such Fiscal Year and Consolidated statements of income and cash flow of
MEDIQ and its Subsidiaries for such Fiscal Year, all Consolidated balance
sheets and statements of income and cash flow accompanied by an opinion
reasonably acceptable to the Required Lenders of Deloitte & Touche LLP or
other independent public accountants of recognized standing reasonably
acceptable to the Required Lenders and a consolidating balance sheet of
MEDIQ and its Subsidiaries as of the end of such Fiscal Year and a
consolidating statement of income of MEDIQ and its Subsidiaries and a
Consolidated statement of cash flow of Holdings and its Subsidiaries for
such Fiscal Year certified by the chief financial officers of MEDIQ and
Holdings, respectively, together with (i) a schedule prepared by such
officer in form satisfactory to the Administrative Agent of the
computations used by MEDIQ and its Ongoing Subsidiaries in determining, as
of the end of such Fiscal Year, compliance with the covenants contained in
Sections 5.04(a) through (f), (ii) a certificate of the chief financial
officer of MEDIQ stating that no Default has occurred and is continuing
or, if a default has occurred and is continuing, a statement as to the
nature thereof and the action that MEDIQ has taken and proposes to take
with respect thereto and (iii) in the event of any change from GAAP in the
generally accepted accounting principles used in the preparation of such
financial statements, a statement of reconciliation conforming such
financial statements to GAAP.
(e) Annual Forecasts. As soon as available and in any event no later
than the end of each Fiscal Year, forecasts prepared by management of
MEDIQ, in form satisfactory to the Administrative Agent, of Consolidated
and consolidating balance sheets and income statements and a Consolidated
cash flow statement on a monthly basis for the Fiscal Year following such
Fiscal Year then ended and on an annual basis for each Fiscal Year
thereafter until the Final Maturity Date.
(f) ERISA Events and ERISA Reports. (i) Promptly and in any event
within 10 days after any Loan Party or any ERISA Affiliate knows or has
reason to know that any ERISA Event has occurred, a statement of the chief
financial officer of the Borrower describing such ERISA Event and the
action, if any, that such Loan Party or such ERISA Affiliate has taken and
proposes to take with respect thereto and (ii) on the date any records,
documents or other information must be furnished to the
<PAGE>
95
PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of
such records, documents and information.
(g) Plan Terminations. Promptly and in any event within two Business
Days after receipt thereof by any Loan Party or any ERISA Affiliate,
copies of each notice from the PBGC stating its intention to terminate any
Plan or to have a trustee appointed to administer any Plan.
(h) Actuarial Reports. Promptly upon receipt thereof by any Loan
Party or any ERISA Affiliate, a copy of the annual actuarial valuation
report of each Plan.
(i) Plan Annual Reports. Promptly and in any event within 30 days
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan.
(j) Multiemployer Plan Notices. Promptly and in any event within
five Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (i) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (ii) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the
amount of liability incurred, or that may be incurred, by such Loan Party
or any ERISA Affiliate in connection with any event described in clause
(i) or (ii).
(k) Litigation. Promptly after the commencement thereof, notice of
all actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of
its Subsidiaries of the type described in Section 4.01(h) or such action,
suit, investigation, litigation or proceeding alleges monetary damages in
excess of $1,000,000.
(l) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports
that any Loan Party or any of its Subsidiaries sends to its stockholders,
and copies of all regular, periodic and special reports, and all
registration statements, that any Loan Party or any of its Subsidiaries
files with the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or with any national
securities exchange.
(m) Creditor Reports. Promptly after the furnishing thereof, copies
of any statement or report furnished to any other holder of the securities
of any Loan Party or of any of its Subsidiaries (including, without
limitation, the holders of the
<PAGE>
96
Subordinated Notes) pursuant to the terms of the 7.25% Note Indenture, the
7.50% Note Indenture, the 12.125% Note Indenture or the NutraMax Escrow
Agreement, loan or credit or similar agreement and not otherwise required
to be furnished to the Lender Parties pursuant to any other clause of this
Section 5.03.
(n) Agreement Notices. Promptly upon receipt thereof, copies of all
notices, requests and other documents received by any Loan Party or any of
its Subsidiaries under or pursuant to any Related Document or indenture,
loan or credit or similar agreement regarding or related to any breach or
default by any party thereto or any other event that could materially
impair the value of the interests or the rights of any Loan Party or any
of its Subsidiaries or otherwise have a Material Adverse Effect and copies
of any amendment, modification or waiver of any provision of the NutraMax
Note, the NutraMax Letter of Credit, any Related Agreement or indenture,
loan or credit or similar agreement and, from time to time upon request by
the Administrative Agent, such information and reports regarding the
Related Documents as the Administrative Agent may reasonably request.
(o) Revenue Agent Reports. Within 10 days after receipt, copies of
all Revenue Agent Reports (Internal Revenue Service Form 886), or other
written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth positive adjustments to the Federal income tax
liability of the affiliated group (within the meaning of Section
1504(a)(1) of the Internal Revenue Code) of which the
Borrower is a member aggregating $250,000 or more.
(p) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
condition or occurrence on any property of any Loan Party or any of its
Subsidiaries that results in a material noncompliance by any Loan Party or
any of its Subsidiaries with any Environmental Law or Environmental Permit
that (i) could be reasonably expected to have a Material Adverse Effect or
(ii) cause any property described in the Mortgage to be subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law.
(q) Real Property. As soon as available and in any event within 30
days after the end of each Fiscal Year, a report supplementing Schedule
4.01(ff) hereto, including an identification of all owned real property
disposed of by the Loan Parties or any of its Subsidiaries during such
Fiscal Year, a list and description (including the street address, county
or other relevant jurisdiction, state, record owner, book value thereof)
of all real property acquired during such Fiscal Year and a description of
such other changes in the information included in such Schedule as may be
necessary for such Schedule to be accurate and complete.
<PAGE>
97
(r) Insurance. As soon as available and in any event within 30 days
after the end of each Fiscal Year, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for the Loan
Parties (excluding any Discontinued Subsidiary) and their Ongoing
Subsidiaries and containing such additional information as any Lender
Party (through the Administrative Agent) may reasonably specify.
(s) Borrowing Base Certificate. As soon as available and in any
event within 20 days after the end of each month, a Borrowing Base
Certificate, as at the end of such month, certified by the chief financial
officer of the Borrower.
(t) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
the Administrative Agent or any Lender Party (through the Administrative
Agent) may from time to time reasonably request.
(u) Clean-Down Notice. Within 5 Business Days prior to the
commencement of a Clean-Down Period of the Borrower, a notice from the
chief financial officer of the Borrower setting forth the precise day on
which the Clean-Down Period will begin.
SECTION 5.04. Financial Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, MEDIQ and its Ongoing Subsidiaries will:
(a) Net Worth. Maintain at all times an excess of Consolidated total
assets over Consolidated total liabilities, in each case, of MEDIQ and its
Ongoing Subsidiaries of not less than the amount set forth below for the
period set forth below:
Quarter Ending Amount
-------------- ------
December 31, 1996 $ 6,000,000
March 31, 1997 $ 7,500,000
June 30, 1997 $ 8,500,000
September 30, 1997 $ 9,500,000
December 31, 1997 $10,500,000
March 31, 1998 $13,000,000
June 30, 1998 $15,000,000
September 30, 1998 $16,500,000
December 31, 1998 $18,500,000
March 31, 1999 $22,500,000
June 30, 1999 $25,500,000
September 30, 1999 $27,500,000
<PAGE>
98
December 31, 1999 $ 31,500,000
March 31, 2000 $ 36,500,000
June 30, 2000 $ 40,500,000
September 30, 2000 $ 44,500,000
December 31, 2000 $ 49,500,000
March 31, 2001 $ 55,500,000
June 30, 2001 $ 58,500,000
September 30, 2001 $ 64,500,000
December 31, 2001 $ 69,500,000
March 31, 2002 $ 76,500,000
June 30, 2002 $ 81,500,000
September 30, 2002 $ 87,500,000
December 31, 2002 $ 91,500,000
March 31, 2003 $ 96,500,000
June 30, 2003 and thereafter $100,000,000
provided that each amount set forth above, and each amount thereafter,
shall be (x) increased by an amount equal to the income from any Permitted
Asset Sale or (y) decreased by the sum of (i) any loss resulting from any
Permitted Asset Sale, net of any tax or other expense on such sale and
(ii) any dividends or stock repurchases otherwise permitted under this
Agreement, commencing on the date immediately following the date of such
sale or such dividend or stock repurchase.
(b) Leverage Ratio. Maintain on a Consolidated basis for itself and
its Ongoing Subsidiaries a Leverage Ratio for each Quarterly Rolling
Period ended as at the end of the quarter (of the Fiscal Year) ending on
the date set forth below of not more than the amount set forth below for
such Quarterly Rolling Period:
Quarterly Rolling Period Ending On Ratio
---------------------------------- -----
December 31, 1996 4.75
March 31, 1997 4.75
June 30, 1997 4.50
September 30, 1997 4.50
December 31, 1997 4.50
March 31, 1998 4.50
June 30, 1998 4.00
September 30, 1998 4.00
December 31, 1998 3.75
<PAGE>
99
March 31, 1999 3.50
June 30, 1999 3.50
September 30, 1999 3.25
December 31, 1999 3.25
March 31, 2000 3.00
June 30, 2000 3.00
September 30, 2000 2.75
December 31, 2000 2.75
March 31, 2001 2.50
June 30, 2001 2.50
September 30, 2001 2.25
December 31, 2001 2.25
March 31, 2002 2.25
June 30, 2002, and thereafter 2.00
(c) Senior Leverage Ratio. Maintain on a Consolidated basis for
itself and its Ongoing Subsidiaries a Senior Leverage Ratio for each
Quarterly Rolling Period ended as at the end of the quarter (of the Fiscal
Year) ending on the date set forth below of not more than the amount set
forth below for such Quarterly Rolling Period:
Quarterly Rolling Period Ending On Ratio
---------------------------------- -----
December 31, 1996 4.25
March 31, 1997 4.25
June 30, 1997 4.00
September 30, 1997 4.00
December 31, 1997 4.00
March 31, 1998 4.00
June 30, 1998 3.50
September 30, 1998 3.50
December 31, 1998 3.25
March 31, 1999 3.00
June 30, 1999 3.00
September 30, 1999 2.75
December 31, 1999 2.75
<PAGE>
100
March 31, 2000 2.50
June 30, 2000 2.50
September 30, 2000 2.25
December 31, 2000 2.25
March 31, 2001 2.00
June 30, 2001 2.00
September 30, 2001 1.75
December 31, 2001 1.75
March 31, 2002 1.75
June 30, 2002, and thereafter 1.50
(d) Fixed Charge Coverage Ratio. Maintain on a Consolidated basis
for itself and its Ongoing Subsidiaries a Fixed Charge Coverage Ratio for
each Quarterly Rolling Period ended as at the end of each quarter of each
Fiscal Year (i) ending on or prior to September 30, 2000 of not less than
1.05 or (ii) ending at any time thereafter of not less than 1.10.
(e) Interest Coverage Ratio. Maintain on a Consolidated basis for
itself and its Ongoing Subsidiaries an Interest Coverage Ratio for each
Quarterly Rolling Period ended as at the end of the quarter (of the Fiscal
Year) ending on the date set forth below of not less than the amount set
forth below for such Quarterly Rolling Period:
Quarterly Rolling Period Ending On Ratio
---------------------------------- -----
December 31, 1996 2.00
March 31, 1997 2.25
June 30, 1997 2.25
September 30, 1997 2.25
December 31, 1997 2.25
March 31, 1998 2.50
June 30, 1998 2.50
September 30, 1998 2.50
December 31, 1998 2.75
March 31, 1999 2.75
June 30, 1999 2.75
September 30, 1999 3.00
December 31, 1999 3.00
<PAGE>
101
March 31, 2000 3.25
June 30, 2000 3.25
September 30, 2000 3.50
December 31, 2000 3.75
March 31, 2001 3.75
June 30, 2001 and thereafter 4.00
(f) Capital Expenditures. Not make, or permit any of its Ongoing
Subsidiaries to make, any Capital Expenditures that would cause the
aggregate of all such Capital Expenditures made by MEDIQ and its Ongoing
Subsidiaries in any Fiscal Year to exceed $14,000,000; provided, however,
that if any Investment pursuant to Section 5.02(f)(i) or (vi) shall have
occurred, for each increment of $3,000,000 of EBITDA, as determined at any
time during such Fiscal Year on a historical basis for the twelve month
period ending on the date of such determination, attributable to all such
Investments, the amount specified above shall be increased by an increment
of $1,000,000, so long as such total amount shall not exceed $20,000,000;
provided, further, that if, at the end of any Fiscal Year (the "Prior
Fiscal Year"), the amount specified above for such Fiscal Year exceeds the
amount of Capital Expenditures made by the Borrower during such Fiscal
Year (the amount of such excess being the "Excess Amount"), MEDIQ and its
Ongoing Subsidiaries shall be entitled to make additional Capital
Expenditures in the succeeding Fiscal Year in an amount (such amount being
referred to herein as the "Carryover Amount") equal to the lesser of (i)
the Excess Amount and (ii) 1/3 of the amount specified above for the Prior
Fiscal Year and, provided still further that the amount of Capital
Expenditures during any Fiscal Year may be increased by an amount equal to
100% minus the applicable Recapture Percentage multiplied by the amount of
Excess Cash Flow for the prior Fiscal Year ratably reduced by the sum of
(A) the amount of any payment of dividends pursuant to Section
5.02(g)(ii), (B) the amount of any repurchase of stock pursuant to Section
5.02(g)(ii), (C) the amount of any Investments made pursuant to Section
5.02(f)(vi) and (D) the amount of any refinancing of Subordinated Notes
pursuant to 5.02(k)(i)(y)(B).
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
<PAGE>
102
(a) the Borrower shall fail to pay any principal of any Advance as
the same becomes due and payable, or the Borrower or any other Loan Party
shall fail to pay any interest on any Advance or make any other payment
under any Loan Document within two Business Days after the same becomes
due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Sections 2.14, 2.16, 5.01(e), (f), (g), (l), (m)
or (n), 5.02, 5.03 or 5.04; or
(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 15 days after the
earlier of the date on which (A) a Responsible Officer of the Borrower
becomes aware of such failure or (B) written notice thereof shall have
been given to the Borrower by the Administrative Agent or any Lender
Party; or
(e) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in
respect of any Debt that is outstanding in a principal or notional amount
of at least $1,000,000 either individually or in the aggregate (but
excluding Debt outstanding hereunder) of such Loan Party or such
Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt or otherwise to
cause, or to permit the holder thereof to cause, such Debt to mature; or
any such Debt shall be declared to be due and payable or required to be
prepaid or redeemed (other than by a regularly scheduled or required
prepayment or redemption), purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Debt shall be required to be made, in
each case prior to the stated maturity thereof; or
(f) any Loan Party or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against any Loan Party or any of its Subsidiaries
<PAGE>
103
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief,
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
in the case of any such proceeding instituted against it (but not
instituted by it) that is being diligently contested by it in good faith,
either such proceeding shall remain undismissed or unstayed for a period
of 45 days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or any substantial part of its property) shall occur; or any Loan
Party or any of its Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$1,000,000 (to the extent not fully paid or discharged) shall be rendered
against any Loan Party or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party or any of its Subsidiaries that could have a Material Adverse
Effect, and there shall be any period of 10 consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 or 5.01(m) shall for any reason cease to be valid
and binding on or enforceable against any Loan Party to it, or any such
Loan Party shall so state in writing; or
(j) any Collateral Document after delivery thereof pursuant to
Section 3.01 or 5.01(m) shall for any reason (other than pursuant to the
terms thereof) cease to create a valid and perfected first priority lien
on and security interest in the Collateral purported to be covered thereby
except as permitted hereunder; or
(k) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of MEDIQ
(together with any new directors whose election to such Board or whose
nomination for election by the shareholders of MEDIQ was approved by a
vote of at least 66-2/3% of the
<PAGE>
104
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of such Board
of Directors then in office; or if at any time any Person or two or more
Persons acting in concert shall acquire Beneficial Ownership of Voting
Stock of MEDIQ representing a percentage of the combined voting power of
all Voting Stock of MEDIQ that exceeds (i) the percentage of the combined
voting power of all Voting Stock of MEDIQ Beneficially Owned by the
Investor Group or any one or more of the members thereof or (ii) 30% of
the outstanding Voting Stock of the Borrower; or
(l) any ERISA Event shall have occurred with respect to a Plan and
the sum (determined as of the date of occurrence of such ERISA Event) of
the Insufficiency of such Plan and the Insufficiency of any and all other
Plans with respect to which an ERISA Event shall have occurred and then
exist (or the liability of the Loan Parties and the ERISA Affiliates
related to such ERISA Event) exceeds $1,000,000; or
(m) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
as of the date of such notification), exceeds $250,000 or requires
payments exceeding $50,000 per annum; or
(n) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $50,000; or
(o) there shall occur any Material Adverse Change;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by the Issuing Bank or a Working Capital Lender
pursuant to Section 2.03(c)) and of the Issuing Bank to issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the request, or may with the consent, of the Required Lenders, by
<PAGE>
105
notice to the Borrower, declare the Notes, all interest thereon and all other
amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to any Loan Party or any of its
Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of each
Lender to make Advances (other than Letter of Credit Advances by the Issuing
Bank or a Working Capital Lender pursuant to Section 2.03(c)) and of the Issuing
Bank to issue Letters of Credit shall automatically be terminated and (y) the
Notes, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
Default. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, irrespective of whether it is taking any of the
actions described in Section 6.01 or otherwise, make demand upon the Borrower
to, and forthwith upon such demand the Borrower will, pay to the Administrative
Agent on behalf of the Lender Parties in same day funds at the Administrative
Agent's office designated in such demand, for deposit in the L/C Cash Collateral
Account, an amount equal to the aggregate Available Amount of all Letters of
Credit then outstanding. If at any time the Administrative Agent determines that
any funds held in the L/C Cash Collateral Account are subject to any right or
claim of any Person other than the Administrative Agent and the Lender Parties
or that the total amount of such funds is less than the aggregate Available
Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the
Administrative Agent, pay to the Administrative Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right and
claim.
ARTICLE VII
PARENT GUARANTIES
SECTION 7.01. Guaranty. Each Parent Guarantor hereby unconditionally
and irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of each Loan Party
now or hereafter existing under the Loan Documents, whether for principal,
interest, fees, expenses or otherwise (such Obligations being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) incurred by the Agents or the Lender Parties in
enforcing any rights under this Guaranty. Without limiting the generality of the
<PAGE>
106
foregoing, each Parent Guarantor's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by any Loan
Party to the Administrative Agent, the Agents or any Lender Party under the Loan
Documents but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Borrower.
SECTION 7.02. Guaranty Absolute. Each Parent Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in accordance with the
terms of the Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Administrative Agent or any other Secured Party with respect
thereto. The Obligations of each Parent Guarantor under this Guaranty are
independent of the Guaranteed Obligations or any other Obligations of any Loan
Party under the Loan Documents, and a separate action or actions may be brought
and prosecuted against any Parent Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against any Loan Party or whether
any Loan Party is joined in any such action or actions. The liability of each
Parent Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and each Parent Guarantor hereby irrevocably
waives any defenses it may now or hereinafter have in any way relating to, any
or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Loan Party under the Loan Documents
or any other assets of any Loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of its Subsidiaries; or
<PAGE>
107
(f) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Administrative Agent or any other Secured Party that
might otherwise constitute a defense available to, or a discharge of, any
Loan Party, any Parent Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Administrative Agent or any other Secured
Party upon the insolvency, bankruptcy or reorganization of any Loan Party or
otherwise, all as though such payment had not been made.
SECTION 7.03. Waiver. Each Parent Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that the
Administrative Agent or any other Secured Party protect, secure, perfect or
insure any Lien or any property subject thereto or exhaust any right or take any
action against any Loan Party or any other Person or any collateral. Each Parent
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Loan Documents and that the
waiver set forth in this Section 7.03 is knowingly made in contemplation of such
benefits.
SECTION 7.04. Payments Free and Clear of Taxes, Etc. (a) Any and all
payments made by each Parent Guarantor hereunder or under the Notes shall be
made, in accordance with Section 2.11, free and clear of and without deduction
for any and all present or future Taxes. If any Parent Guarantor shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Administrative Agent or any other Secured Party, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent or such other Secured Party (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Parent Guarantor shall make such deductions and
(iii) such Parent Guarantor shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, each Parent Guarantor agrees to pay any present or
future Other Taxes.
(c) Each Parent Guarantor will indemnify the Administrative Agent
and each other Secured Party for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Administrative
Agent or such other Secured Party (as the case may be) and any liability
(including penalties, additions to tax, interest and expenses) arising
<PAGE>
108
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date the Administrative Agent or such other Secured Party (as the
case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Parent Guarantor will furnish to the Administrative Agent, at its address
referred to in Section 9.02, appropriate evidence of payment thereof. If no
Taxes are payable in respect of any payment hereunder by any Parent Guarantor
through an account or branch outside the United States or on behalf of such
Parent Guarantor by a payor that is not a United States person, such Parent
Guarantor will furnish, or will cause such payor to furnish, to the
Administrative Agent a certificate from each appropriate taxing authority or
authorities, or an opinion of counsel acceptable to the Administrative Agent, in
either case stating that such payment is exempt from or not subject to Taxes.
For purposes of this subsection (d), the terms "United States" and "United
States person" shall have the meaning specified in Section 7701 of the Internal
Revenue Code.
(e) Without prejudice to the survival of any other agreement of any
Parent Guarantor hereunder, the agreements and obligations of such Parent
Guarantor contained in this Section 7.04 shall survive the payment in full of
the Guaranteed Obligations and all other amounts payable under this Guaranty.
SECTION 7.05. Continuing Guaranty; Assignments. This Guaranty is a
continuing guaranty and shall (a) remain in full force and effect until the
later of the cash payment in full of the Guaranteed Obligations and all other
amounts payable under this Guaranty and the Termination Date, (b) be binding
upon each Parent Guarantor, its successors and assigns and (c) inure to the
benefit of and be enforceable by the Administrative Agent and the other Secured
Parties and their successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Lender Party may assign or otherwise
transfer all or any portion of its rights and obligations hereunder (including,
without limitation, all or any portion of its Commitment, the Advances owing to
it and the Note or Notes held by it) to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Lender herein or otherwise, in each case as provided in Section 9.07.
SECTION 7.06. Subrogation. The Parent Guarantors will not exercise
any rights that it may now or hereafter acquire against the Borrower or any
other insider guarantor that arise from the existence, payment, performance or
enforcement of the Parent Guarantor's Obligations under this Agreement or any
other Loan Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Administrative Agent or any other
Secured Party against the Borrower or any other insider guarantor or any
collateral, whether or not such claim, remedy or right arises in equity or under
contract,
<PAGE>
109
statute or common law, including, without limitation, the right to take or
receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Obligations and all other amounts payable under this Guaranty shall
have been paid in full in cash and the Commitments shall have expired or
terminated. If any amount shall be paid to the Parent Guarantor in violation of
the preceding sentence at any time prior to the later of the payment in full in
cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty and the Termination Date, such amount shall be held in trust for the
benefit of the Administrative Agent and the Secured Parties and shall forthwith
be paid to the Administrative Agent to be credited and applied to the Guaranteed
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, in accordance with the terms of the Loan Documents, or to be held
as collateral for any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. If (i) the Parent Guarantor shall make payment to
the Administrative Agent or any other Secured Party of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall be paid in full in cash and (iii) the
Termination Date shall have occurred, the Administrative Agent, and the other
Secured Parties will, at the Parent Guarantor's request and expense, execute and
deliver to the Parent Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to the Parent Guarantor of an interest in the Guaranteed Obligations
resulting from such payment by the Parent Guarantor.
ARTICLE VIII
THE AGENTS
SECTION 8.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender, the Issuing Bank (if applicable) and a potential Hedge
Bank) hereby appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to such Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by the Loan Documents
(including, without limitation, enforcement or collection of the Notes), each
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders (or all the Lenders to the extent required by 9.01) and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that no Agent shall be required to take any action that
exposes such Agent to personal liability or that is contrary to this Agreement
or
<PAGE>
110
applicable law. Each Agent agrees to give to each Lender Party prompt notice of
each notice given to it by the Borrower pursuant to the terms of this Agreement.
SECTION 8.02. Agents' Reliance, Etc. None of the Agents nor any of
their directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, each Agent: (a) may treat
the payee of any Note as the holder thereof until the Administrative Agent
receives and accepts an Assignment and Acceptance entered into by the Lender
that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 9.07; (b) may consult with legal counsel
(including counsel for any Loan Party), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
Party and shall not be responsible to any Lender Party for any statements,
warranties or representations (whether written or oral) made in or in connection
with the Loan Documents; (d) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of any Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. BNP, NationsBank and Affiliates. With respect to its
Commitments, the Advances made by it and the Notes issued to it, each of BNP and
NationsBank shall have the same rights and powers under the Loan Documents as
any other Lender Party and may exercise the same as though they were not Agents;
and the term "Lender Party" or "Lenders Parties" shall, unless otherwise
expressly indicated, include BNP in its individual capacity. Each of BNP and
NationsBank and their affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if BNP and NationsBank were not Agents
and without any duty to account therefor to the Lender Parties.
SECTION 8.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon any Agent or
any other
<PAGE>
111
Lender Party and based on the financial statements referred to in Section 4.01
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender Party
also acknowledges that it will, independently and without reliance upon any
Agent or any other Lender Party and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 8.05. Indemnification. (a) Each Lender Party severally
agrees to indemnify each Agent (to the extent not promptly reimbursed by the
Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against such Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by such Agent under the Loan Documents; provided,
however, that no Lender Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from any Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender Party
agrees to reimburse each Agent promptly upon demand for its ratable share of any
costs and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 9.04, to the extent that such Agent is not
promptly reimbursed for such costs and expenses by the Borrower. For purposes of
this Section 8.05, the Lender Parties' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (a) the aggregate
principal amount of the Advances outstanding at such time and owing to the
respective Lender Parties, (b) their respective Pro Rata Shares of the aggregate
Available Amount of all Letters of Credit outstanding at such time, (c) the
aggregate unused portions of their respective Term Commitments at such time and
(d) their respective Unused Working Capital Commitments and Unused Acquisition
Commitments at such time. In the event that any Defaulted Advance shall be owing
by any Defaulting Lender at any time, such Lender Party's Commitment with
respect to the Facility under which such Defaulted Advance was required to have
been made shall be considered to be unused for purposes of this Section 8.05(a)
to the extent of the amount of such Defaulted Advance. The failure of any Lender
Party to reimburse any Agent promptly upon demand for its ratable share of any
amount required to be paid by the Lender Party to such Agent as provided herein
shall not relieve any other Lender Party of its obligation hereunder to
reimburse each Agent for its ratable share of such amount, but no Lender Party
shall be responsible for the failure of any other Lender Party to reimburse any
Agent for such other Lender Party's ratable share of such amount. Without
prejudice to the survival of any other agreement of any Lender Party hereunder,
the agreement and obligations of each Lender Party contained in this Section
8.05(a) shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the other Loan Documents.
<PAGE>
112
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Issuing Bank under the Loan Documents; provided, however, that no Lender
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Issuing Bank's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender Party agrees to reimburse the
Issuing Bank promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by the Borrower under Section 9.04, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower. For purposes of
this Section 8.05(b), the Lender Parties' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time,
(c) the aggregate unused portions of their respective Term Commitments at such
time plus (d) their respective Unused Working Capital Commitments and Unused
Acquisition Commitments at such time. In the event that any Defaulted Advance
shall be owing by any Defaulting Lender at any time, such Lender Party's
Commitment with respect to the Facility under which such Defaulted Advance was
required to have been made shall be considered to be unused for purposes of this
Section 8.05(b) to the extent of the amount of such Defaulted Advance. The
failure of any Lender Party to reimburse the Issuing Bank promptly upon demand
for its ratable share of any amount required to be paid by the Lender Parties to
the Issuing Bank as provided herein shall not relieve any other Lender Party of
its obligation hereunder to reimburse the Issuing Bank for its ratable share of
such amount, but no Lender Party shall be responsible for the failure of any
other Lender Party to reimburse the Issuing Bank for such other Lender Party's
ratable share of such amount. Without prejudice to the survival of any other
agreement of any Lender Party hereunder, the agreement and obligations of each
Lender Party contained in this Section 8.05(b) shall survive the payment in full
of principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
SECTION 8.06. Successor Agents. Any Agent may resign at any time by
giving written notice thereof to the Lender Parties. Upon any such resignation
or removal, the Required Lenders shall have the right to appoint a successor
Agent, subject to the approval of the Borrower which shall not be unreasonably
withheld or delayed. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation, the retiring Agent may, on
behalf of the Lender Parties, appoint a successor
<PAGE>
113
Agent, subject to the approval of the Borrower which shall not be unreasonably
withheld or delayed, which shall be a commercial bank organized under the laws
of the United States or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent and upon the execution and filing or
recording of such financing statements, or amendments thereto, and such
amendments or supplements to the Mortgages, and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Collateral Documents, such successor Agent shall succeed to
and become vested with all the rights, powers, discretion, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article VIII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by any Loan Party therefrom, shall in any event be effective
unless the same shall be in writing and signed (or, in the case of the
Collateral Documents, consented to) by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that (a) no amendment,
waiver or consent shall, unless in writing and signed by all of the Lenders
(other than any Lender Party that is, at such time, a Defaulting Lender), do any
of the following at any time: (i) waive any of the conditions specified in
Section 3.01 or, in the case of the Initial Extension of Credit, Section 3.02 or
3.03, (ii) change the number of Lenders or the percentage of (x) the
Commitments, (y) the aggregate unpaid principal amount of the Advances or (z)
the aggregate Available Amount of outstanding Letters of Credit, that, in each
case, shall be required for the Lenders or any of them to take any action
hereunder, (iii) release all or substantially all of the Collateral in any
transaction or series of related transactions or permit the creation,
incurrence, assumption or existence of any Lien on all or substantially all of
the Collateral in any transaction or series of related transactions to secure
any Obligations other than Obligations owing to the Secured Parties under the
Loan Documents or (iv) amend this Section 9.01 and (b) no amendment, waiver or
consent shall, unless in writing and signed by the Required Lenders and each
Lender that has a Commitment under the Term A Facility, Term B Facility, the
Acquisition Facility or Working Capital Facility if affected by such amendment,
waiver or consent, (i) increase the Commitments of such Lender or subject such
Lender to any additional obligations,
<PAGE>
114
(ii) reduce the principal of, or interest on, the Notes held by such Lender or
any fees or other amounts payable hereunder to such Lender, (iii) postpone any
date fixed for any payment of principal of, or interest on, the Notes held by
such Lender or any fees or other amounts payable hereunder to such Lender or
(iv) change the order of application of any prepayment set forth in Section 2.06
in any manner that materially affects such Lender; provided further that no
amendment, waiver or consent shall, unless in writing and signed by the Issuing
Bank, in addition to the Lenders required above to take such action, affect the
rights or obligations of the Issuing Bank under this Agreement; and provided
further that no amendment, waiver or consent shall, unless in writing and signed
by any Agent in addition to the Lenders required above to take such action,
affect the rights or duties of such Agent under this Agreement.
SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
by an overnight courier of nationally recognized standing, if to the Borrower,
at its address at One MEDIQ Plaza, Pennsauken, New Jersey 08110, Attention:
Chief Financial Officer and General Counsel, telecopier number (609) 661-0958;
if to any Initial Lender or any Initial Issuing Bank, at its Domestic Lending
Office specified opposite its name on Schedule I hereto; if to any other Lender
Party, at its Domestic Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender Party; if to BNP, at its address at 499
Park Avenue, New York, New York 10022, Attention: Structured Finance Group,
telecopier number (212) 418-8269; and if to NationsBank, at its address at 1
NationsBank Plaza, 5th Floor, Nashville, TN 37239-1697, Attention: Health Care
Finance Group, telecopier number (615) 749-4640 with a copy to NationsBank,
N.A., 100 North Tryon Street, NationsBank Corporate Center, Charlotte, NC 28255,
Attention: Health Care Finance Group, telecopier number (704) 388-6002; or, as
to each party, at such other address as shall be designated by such party in a
written notice to the other parties. All such notices and communications shall,
when mailed, telegraphed, telecopied, telexed or sent by courier, be effective
when deposited in the mails, delivered to the telegraph company, transmitted by
telecopier, confirmed by telex answerback or delivered to the overnight courier,
respectively, except that notices and communications to the Administrative Agent
pursuant to Article II, III or VIII shall not be effective until received by the
Administrative Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
Lender Party or any Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
<PAGE>
115
SECTION 9.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all reasonable out-of-pocket costs and expenses of the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents (including, without limitation,
(A) all due diligence, collateral review, syndication, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and expenses of counsel
for the Administrative Agent with respect thereto, with respect to advising the
Administrative Agent as to its rights and responsibilities, or the perfection,
protection or preservation of rights or interests, under the Loan Documents,
with respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto) and (ii) all reasonable out-of-pocket costs and
expenses of the Administrative Agents and the Lender Parties in connection with
the enforcement of the Loan Documents, whether in any action, suit or
litigation, any bankruptcy, insolvency or other similar proceeding affecting
creditors' rights generally (including, without limitation, the reasonable fees
and expenses of counsel for the Administrative Agent and each Lender Party with
respect thereto).
(b) The Borrower agrees to indemnify and hold harmless each Agent,
each Lender Party and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and reasonable out-of-pocket
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with (i) the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby (including, without limitation, the Refinancing and any of the other
transactions contemplated hereby) or (ii) the actual or alleged presence of
Hazardous Materials on any property of any Loan Party or any of its Subsidiaries
or any Environmental Action relating in any way to any Loan Party or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by any Loan Party, its directors, shareholders or
creditors or an Indemnified Party or any Indemnified Party is otherwise a party
thereto and whether or not the transactions contemplated hereby are consummated,
except to the extent such claim, damage, loss, liability or expense is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
The Borrower also agrees not to assert any claim against any Agent, any Lender
Party or any of their Affiliates, or any of their respective officers,
directors, employees, attorneys and agents, on any theory of liability, for
special, indirect,
<PAGE>
116
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment pursuant to Section 2.05, a payment or Conversion pursuant to
Section 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to
a Lender Party other than on the last day of the Interest Period for such
Advance upon an assignment of rights and obligations under this Agreement
pursuant to Section 9.07 as a result of a demand by the Borrower pursuant to
Section 9.07(a), the Borrower shall, upon demand by the Administrative Agent on
behalf of a Lender Party, pay to the Administrative Agent for the account of
such Lender Party any amounts required to compensate such Lender Party for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender Party to fund or
maintain such Advance. The calculations of any amounts required to be paid by
the Borrower pursuant to this Section 9.04(c) shall be provided by the
Administrative Agent to the Borrower.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by any Agent or any Lender Party, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
9.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing
<PAGE>
117
under this Agreement and the Note or Notes (if any) held by such Lender Party,
irrespective of whether such Lender Party shall have made any demand under this
Agreement or such Note or Notes and although such obligations may be unmatured.
Each Lender Party agrees promptly to notify the Borrower after any such set-off
and application; provided, however, that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of each
Lender Party and its respective Affiliates under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender Party and its respective Affiliates may have.
SECTION 9.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and each Agent and when each
Agent shall have been notified by each Initial Lender and the Initial Issuing
Bank that such Initial Lender and the Initial Issuing Bank has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrower, each
Agent and each Lender Party and their respective successors and assigns, except
that the Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of all of the Lender Parties.
SECTION 9.07. Assignments and Participations. (a) Each Lender may
and, if demanded by the Borrower (following a demand by such Lender pursuant to
Section 2.10 or 2.12) upon at least 10 Business Days' notice to such Lender and
the Administrative Agent, will assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it and the Note or Notes held by it); provided, however, that (i) each
such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations under and in respect of one or more Facilities, (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 and shall be in an integral multiple of
$500,000, or, if the aggregate amount of the Commitment of such assigning Lender
is less than $5,000,000, all of such Lender's Commitment, (iii) each such
assignment shall be to an Eligible Assignee, (iv) each such assignment made as a
result of a demand by the Borrower pursuant to this Section 9.07(a) shall be
arranged by the Borrower after consultation with the Administrative Agent and
shall be either an assignment of all of the rights and obligations of the
assigning Lender under this Agreement or an assignment of a portion of such
rights and obligations made concurrently with another such assignment or other
such assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (v) no Lender shall be obligated to make
any such assignment as a result of the demand by the Borrower pursuant to this
Section 9.07(a) unless and until such Lender shall have received one or more
payments from either
<PAGE>
118
the Borrower or one or more Eligible Assignees in an aggregate amount at least
equal to the aggregate outstanding principal amount of the Advances owing to
such Lender, together with accrued interest thereon to the date of payment of
such principal amount and all other amounts payable to such Lender under this
Agreement, (vi) no such assignments shall be permitted without the consent of
the Administrative Agent until the Administrative Agent shall have notified the
Lender Parties that syndication of the Commitments hereunder has been completed
as determined by the Agents, and (vii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment and a processing and recordation fee of
$3,000.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as
the case may be, hereunder and (y) the Lender or Issuing Bank assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's or Issuing Bank's rights and obligations under this
Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender Party or
any other Lender Party and based on such documents and information as it shall
<PAGE>
119
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Loan Documents as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender or
Issuing Bank, as the case may be.
(d) The Administrative Agent, acting for this purpose (but only for
this purpose) solely as the agent of the Borrower, shall maintain at its address
referred to in Section 9.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lender Parties and the Commitment under each Facility of, and
principal amount of the Advances owing under each Facility to, each Lender Party
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, each Agent and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. In the case of any assignment by a Lender, within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it under a Facility pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder under such Facility, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A-1, A-2, A-3 or A-4 hereto, as the case may be.
(f) Each Lender Party may sell participations in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it) to any
<PAGE>
120
Person other than any Loan Party or any of its Subsidiaries or Affiliates;
provided, however, that (i) such Lender Party's obligations under this Agreement
(including, without limitation, its Commitments) shall remain unchanged, (ii)
such Lender Party shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) such Lender Party shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, each Agent and the other Lender Parties shall continue to deal solely
and directly with such Lender Party in connection with such Lender Party's
rights and obligations under this Agreement and (v) no participant under any
such participation shall have any right to approve any amendment or waiver of
any provision of any Loan Document, or any consent to any departure by any Loan
Party therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, or release all or
substantially all of the Collateral.
(g) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(h) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) including, without
limitation, in favor of any Federal Reserve Bank in accordance with Regulation A
of the Board of Governors of the Federal Reserve System.
SECTION 9.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;
<PAGE>
121
(b) the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms of the
Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful
payment under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 9.10. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any of the
other Loan Documents to which it is a party in any New York State or federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
<PAGE>
122
SECTION 9.11. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.12. Waiver of Jury Trial. Each of the Borrower, each Agent
and the Lender Parties irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Loan Documents, the Advances
or the actions of any Agent or any Lender Party in the negotiation,
administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC., as Borrower
By /s/ Jay M. Kaplan
------------------------------
Title: Senior Vice President
MEDIQ INCORPORATED, as Parent
Guarantor
By /s/ Michael F. Sandler
------------------------------
Title: Senior Vice President
PRN HOLDINGS, INC., as Parent
Guarantor
By /s/ Jay M. Kaplan
------------------------------
Title: Senior Vice President
<PAGE>
123
BANQUE NATIONALE DE PARIS, as
Administrative Agent
By /s/ Alan Mustacchi
------------------------------
Title: Vice President
By /s/ Stephen Kovacs
------------------------------
Title: AT
NATIONSBANK, N.A., as
Documentation Agent
By /s/ Ashley M. Crabltee
------------------------------
Title: Vice President
Initial Lenders
BANQUE NATIONALE DE PARIS
By /s/ Alan Mustacchi
------------------------------
Title: Vice President
By /s/ Stephen Kovacs
------------------------------
Title: AT
NATIONSBANK, N.A.
By Ashley M. Crabltee
------------------------------
Title: Vice President
<PAGE>
124
THE FIRST NATIONAL BANK OF
BOSTON
By /s/ Kimberly F. Harris
------------------------------
Title: Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE
By /s/ S. Well
------------------------------
Title: First Vice President
CREDITANSTALT CORPORATE
FINANCE, INC.
By /s/ Clifford L. Wells
------------------------------
Title: Vice President
By /s/ Stacy Harmon
------------------------------
Title: Senior Associate
FIRST SOURCE FINANCIAL, LLP
By: First Source Financial, Inc.
as Agent/Manager
By /s/ John Wabling
------------------------------
Title: Vice President
ING CAPITAL ADVISORS, INC., as
Agent for Bank Syndication Account
By /s/ Kathleen A. Lenarcic
------------------------------
Title: Vice President and
Portfolio Manager
<PAGE>
125
LASALLE NATIONAL BANK
By /s/
------------------------------
Title: First Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ John B. Joyce
------------------------------
Title: Managing Director
MELLON BANK, N.A.
By /s/ Jonathan H. Sprogell
------------------------------
Title: Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ Anthony R. Clemente
------------------------------
Title: Authorized Signatory
PILGRIM AMERICA PRIME RATE
TRUST
By /s/ Thomas C. Hunt
------------------------------
Title: Portfolio Analyst
<PAGE>
126
SUMMIT BANK
By /s/ Gail L. Powers
------------------------------
Title: Vice President
USTRUST
By /s/ Thomas Z. Macicet
------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
------------------------------
Title: Senior Vice President -
Portfolio Manager
<PAGE>
127
Initial Issuing Bank
BANQUE NATIONALE DE PARIS
By /s/ Alan Mustacchi
------------------------------
Title: Vice President
By /s/ Stephen Kovacs
------------------------------
Title: AT
<PAGE>
Page 1 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Banque Nationale de Paris
Working Capital Facility Commitment: $ 3,906,250.00
Term A Facility Commitment: $ 5,468,750.00
Term B Facility Commitment: $ 40,000,000.00
Acquisition Facility Commitment: $ 15,625,000.00
Letter of Credit Commitment: $ 7,500,000.00
Domestic Lending Office:
Banque Nationale de Paris
499 Park Avenue
New York, NY 10022
Credit Operations
Attn: Alan Mustacchi Attn: Kimberly Williams
Tel: (212) 418-8231 Tel: (212) 415-9432
Fax: (212) 418-8269 or 838-7590 Fax: (212) 415-9805
Eurodollar Lending Office:
Banque Nationale de Paris
499 Park Avenue
New York, NY 10022
Credit Operations
Attn: Alan Mustacchi Attn: Kimberly Williams
Tel: (212) 418-8231 Tel: (212) 415-9432
Fax: (212) 418-8269 or 838-7590 Fax: (212) 415-9805
<PAGE>
Page 2 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Caisse Nationale de Credit Agricole
Working Capital Facility Commitment: $ 1,562,500.00
Term A Facility Commitment: $ 2,187,500.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 6,250,000.00
Domestic Lending Office:
Credit Operations
Caisse Nationale de Credit Agricole Caisse Nationale de Credit Agricole
520 Madison Avenue 55 E. Monroe Street, Suite 4700
New York, NY 10022 Chicago, IL 60603
Attn: Michael Fought Attn: Stacey Mannion
Tel: (212) 418-2254 Tel: (312) 917-7560
Fax: (212) 418-2228 Fax: (312) 372-4421
Attn: Caroline Baurez
Eurodollar Lending Office:
Credit Operations
Caisse Nationale de Credit Agricole Caisse Nationale de Credit Agricole
520 Madison Avenue 55 E. Monroe Street, Suite 4700
New York, NY 10022 Chicago, IL 60603
Attn: Michael Fought Attn: Stacey Mannion
Tel: (212) 418-2254 Tel: (312) 917-7560
Fax: (212) 418-2228 Fax: (312) 372-4421
Attn: Caroline Baurez
<PAGE>
Page 3 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Creditanstalt Corporate Finance, Inc.
Working Capital Facility Commitment: $ 2,343,750.00
Term A Facility Commitment: $ 3,281,250.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 9,375,000.00
Domestic Lending Office:
Creditanstalt Corporate Finance, Inc.
Two Greenwich Plaza
Greenwich, CT 06830
Credit Operations
Attn: Cliff Wells Attn: Richard Meneses
Tel: (203) 861-6417 Tel: (203) 861-6421
Fax: (203) 861-6594 Fax: (203) 861-6594
Attn: Stacy Harmon Attn: Jennifer Poccia
Tel: (203) 861-6581 Tel: (203) 861-6423
Fax: (203) 861-6594 Fax: (203) 861-6594
Eurodollar Lending Office:
Creditanstalt Corporate Finance, Inc.
Two Greenwich Plaza
Greenwich, CT 06830
Credit Operations
Attn: Cliff Wells Attn: Richard Meneses
Tel: (203) 861-6417 Tel: (203) 861-6421
Fax: (203) 861-6594 Fax: (203) 861-6594
Attn: Stacy Harmon Attn: Jennifer Poccia
Tel: (203) 861-6581 Tel: (203) 861-6423
Fax: (203) 861-6594 Fax: (203) 861-6594
<PAGE>
Page 4 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: First Source Financial, LLP
Working Capital Facility Commitment: $ 3,125,000.00
Term A Facility Commitment: $ 4,375,000.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 12,500,000.00
Domestic Lending Office:
First Source Financial Inc.
2850 W. Golf Rd.
Rolling Meadows, IL 60008
Credit Operations
Attn: Rich Christensen Attn: Janet Haack
Tel: (847) 734-2042 Tel: (847) 734-2053
Fax: (847) 734-7911 Fax: (847) 734-7910
Eurodollar Lending Office:
First Source Financial Inc.
2850 W. Golf Rd.
Rolling Meadows, IL 60008
Credit Operations
Attn: Rich Christensen Attn: Janet Haack
Tel: (847) 734-2042 Tel: (847) 734-2053
Fax: (847) 734-7911 Fax: (847) 734-7910
<PAGE>
Page 5 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: ING Capital Advisors, Inc., as Agent for Bank Syndication
Account
Working Capital Facility Commitment: $ 0.00
Term A Facility Commitment: $ 0.00
Term B Facility Commitment: $ 10,000,000.00
Acquisition Facility Commitment: $ 0.00
Domestic Lending Office:
ING Capital Advisors, Inc., as Agent
for Bank Syndication Account
333 S. Grand Avenue, Suite 400
Los Angeles, CA 90071
Credit Operations
Attn: Kathleen Lenarcic, Vice Pres. & Attn: Lenore Crummey,
Portfolio Mgr. Asst. Vice President
Tel: (213) 621-9063 Tel: (213) 621-9059
Fax: (213) 626-6552 Fax: (213) 626-6552
Eurodollar Lending Office:
ING Capital Advisors, Inc., as Agent
for Bank Syndication Account
333 S. Grand Avenue, Suite 400
Los Angeles, CA 90071
Credit Operations
Attn: Kathleen Lenarcic, Vice Pres. & Attn: Lenore Crummey,
Portfolio Mgr. Asst. Vice President
Tel: (213) 621-9063 Tel: (213) 621-9059
Fax: (213) 626-6552 Fax: (213) 626-6552
<PAGE>
Page 6 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: LaSalle National Bank
Working Capital Facility Commitment: $ 2,343,750.00
Term A Facility Commitment: $ 3,281,250.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 9,375,000.00
Domestic Lending Office:
LaSalle National Bank
120 S. LaSalle Street, Suite 211
Chicago, IL 60603
Credit Operations
Attn: Olga Georgiev Attn: Nancy Lopez
Tel: (312) 904-2698 Tel: (312) 904-6533
Fax: (312) 904-6189 Fax: (312) 904-6189
Eurodollar Lending Office:
La Salle National Bank
120 S. LaSalle Street, Suite 211
Chicago, IL 60603
Credit Operations
Attn: Olga Georgiev Attn: Nancy Lopez
Tel: (312) 904-2698 Tel: (312) 904-6533
Fax: (312) 904-6189 Fax: (312) 904-6189
<PAGE>
Page 7 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Massachusetts Mutual Life Insurance Co.
Working Capital Facility Commitment: $ 0.00
Term A Facility Commitment: $ 0.00
Term B Facility Commitment: $ 20,000,000.00
Acquisition Facility Commitment: $ 0.00
Domestic Lending Office:
Mass Mutual
1295 State Street
Springfield, MA 01111
Credit Operations
Attn: John Wheeler Attn: Laura A. Hamel
Tel: (413) 744-6228 Tel: (413) 744-3878
Fax: (413) 744-6127 Fax: (413) 744-7922
Eurodollar Lending Office:
Mass Mutual
1295 State Street
Springfield, MA 01111
Credit Operations
Attn: John Wheeler Attn: Laura A. Hamel
Tel: (413) 744-6228 Tel: (413) 744-3878
Fax: (413) 744-6127 Fax: (413) 744-7922
<PAGE>
Page 8 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Mellon Bank, N.A.
Working Capital Facility Commitment: $ 1,562,500.00
Term A Facility Commitment: $ 2,187,500.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 6,250,000.00
Domestic Lending Office:
Credit Operations
- ------ ----------
Mellon Bank, N.A. Mellon Bank, N.A.
610 W. Germantown Pike Loan Administration
Suite 200 5B South
Plymouth Meeting, PA 19462 701 Market Street
Attn: Mark Avallone Philadelphia, PA 19106
Tel: (610) 941-8401 Attn: Jeff Gillard
Fax: (610) 941-4136 Tel: (215) 553-4582
Fax: (215) 553-4789
Eurodollar Lending Office:
Credit Operations
- ------ ----------
Mellon Bank, N.A. Mellon Bank, N.A.
610 W. Germantown Pike Loan Administration
Suite 200 5B South
Plymouth Meeting, PA 19462 701 Market Street
Attn: Mark Avallone Philadelphia, PA 19106
Tel: (610) 941-8401 Attn: Jeff Gillard
Fax: (610) 941-4136 Tel: (215) 553-4582
Fax: (215) 553-4789
<PAGE>
Page 9 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Merrill Lynch Senior Floating Rate Fund, Inc.
Working Capital Facility Commitment: $ 0.00
Term A Facility Commitment: $ 0.00
Term B Facility Commitment: $ 10,000,000.00
Acquisition Facility Commitment: $ 0.00
Domestic Lending Office:
Credit Operations
Merrill Lynch Senior Floating Rate MLAM Accounting
Fund, Inc. 500 College Road - 4E
800 Scudders Mill Road - Area 2C Plainsboro, NJ 08536
Plainsboro, NJ 08536 Attn: John Dugan
Attn: Jill Montanye Tel: (609) 282-7705
Tel: (609) 282-3102 Fax: (609) 282-7616
Fax: (609) 282-2550
Eurodollar Lending Office:
Credit Operations
Merrill Lynch Senior Floating Rate MLAM Accounting
Fund, Inc. 500 College Road - 4E
800 Scudders Mill Road - Area 2C Plainsboro, NJ 08536
Plainsboro, NJ 08536 Attn: John Dugan
Attn: Jill Montanye Tel: (609) 282-7705
Tel: (609) 282-3102 Fax: (609) 282-7616
Fax: (609) 282-2550
<PAGE>
Page 10 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: NationsBank, N.A.
Working Capital Facility Commitment: $ 3,125,000.00
Term A Facility Commitment: $ 4,375,000.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 12,500,000.00
Domestic Lending Office:
Credit Operations
- ------ ----------
NationsBank, N.A. Nationsbank, N.A.
NationsBank Plaza TN 101 N. Tryon Street
1 NationsBank Plaza NC1-001-15-05
TN1-100-05-11 Charlotte, NC 28255
Nashville, TN 37239-1697 Attn: Jacquetta Banks
Attn: Ashley Crabtree Tel: (704) 388-1111
Tel: (615) 749-3524 Fax: (704) 386-9923
Fax: (615) 749-4640
Eurodollar Lending Office:
Credit Operations
- ------ ----------
Nationsbank, N.A. Nationsbank, N.A.
NationsBank Plaza TN 101 N. Tryon Street
1 NationsBank Plaza NC1-001-15-05
TN1-100-05-11 Charlotte, N.C. 28255
Nashville, TN 37239-1697 Attn: Jacquetta Banks
Attn: Ashley Crabtree Tel: (704) 388-1111
Tel: (615) 749-3524 Fax: (704) 386-9923
Fax: (615) 749-4640
<PAGE>
Page 11 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Pilgrim America Prime Rate Trust
Working Capital Facility Commitment: $ 0.00
Term A Facility Commitment: $ 0.00
Term B Facility Commitment: $ 10,000,000.00
Acquisition Facility Commitment: $ 0.00
Domestic Lending Office:
Pilgrim America Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-3444
Credit Operations
Attn: Michael Bacevich, Vice President Attn: Robert Clouse,
Tel: (602) 417-8258 Manager -
Fax: (602) 417-8327 Administration
Tel: (602) 417-8268
Fax: (602) 417-8321
Eurodollar Lending Office:
Pilgrim America Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-3444
Credit Operations
Attn: Michael Bacevich, Vice President Attn: Robert Clouse,
Tel: (602) 417-8258 Manager -
Fax: (602) 417-8327 Administration
Tel: (602) 417-8268
Fax: (602) 417-8321
<PAGE>
Page 12 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Summit Bank
Working Capital Facility Commitment: $ 3,125,000.00
Term A Facility Commitment: $ 4,375,000.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 12,500,000.00
Domestic Lending Office:
Credit Operations
Summit Bank Summit Bank
1800 Chapel Hill 55 Challenger Road, 6th Fl.
Cherry Hill, NJ 08002 Ridgefield Park, NJ 07660
Attn: Gail Powers Attn: Ionetta Walker
Tel: (609) 486-3655 Tel: (201) 296-3747
Fax: (609) 486-3716 Fax: (201) 296-3751 or -3891
Eurodollar Lending Office:
Credit Operations
Summit Bank Summit Bank
1800 Chapel Hill 55 Challenger Road, 6th Fl.
Cherry Hill, NJ 08002 Ridgefield Park, NJ 07660
Attn: Gail Powers Attn: Ionetta Walker
Tel: (609) 486-3655 Tel: (201) 296-3747
Fax: (609) 486-3716 Fax: (201) 296-3751or -3891
<PAGE>
Page 13 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: The First National Bank of Boston
Working Capital Facility Commitment: $ 1,562,500.00
Term A Facility Commitment: $ 2,187,500.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 6,250,000.00
Domestic Lending Office:
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Credit Operations
Attn: Kimberly F. Harris, Vice President Attn: Kristine R. Millet,
Tel: (617) 434-2111 Administrative Officer
Fax: (617) 434-4929 Tel: (617) 434-8993
Fax: (617) 434-4929
Attn: Diane Exter, Director
Tel: (617) 434-1442
Fax: (617) 434-4929
Eurodollar Lending Office:
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Credit Operations
Attn: Kimberly F. Harris, Vice President Attn: Kristine R. Millet,
Tel: (617) 434-2111 Administrative Officer
Fax: (617) 434-4929 Tel: (617) 434-8993
Fax: (617) 434-4929
Attn: Diane Exter, Director
Tel: (617) 434-1442
Fax: (617) 434-4929
<PAGE>
Page 14 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: USTrust
Working Capital Facility Commitment: $ 2,343,750.00
Term A Facility Commitment: $ 3,281,250.00
Term B Facility Commitment: $ 0.00
Acquisition Facility Commitment: $ 9,375,000.00
Domestic Lending Office:
Credit Operations
USTrust USTrust
30 Court Street 55 Court Street
Boston, MA 02108 Boston, MA 02108
Attn: Thomas F. Macina, VP Attn: Agnes C. Savini, AVP
Tel: (617) 695-4029 Tel: (617) 726-7147
Fax: (617) 695-4185 Fax: (617) 726-7309
Eurodollar Lending Office:
Credit Operations
USTrust USTrust
30 Court Street 55 Court Street
Boston, MA 02108 Boston, MA 02108
Attn: Thomas F. Macina, VP Attn: Agnes C. Savini, AVP
Tel: (617) 695-4029 Tel: (617) 726-7147
Fax: (617) 695-4185 Fax: (617) 726-7309
<PAGE>
Page 15 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Lender: Van Kampen American Capital Prime Rate Income Trust
Working Capital Facility Commitment: $ 0.00
Term A Facility Commitment: $ 0.00
Term B Facility Commitment: $ 10,000,000.00
Acquisition Facility Commitment: $ 0.00
Domestic Lending Office:
Credit Operations
- ------ ----------
Van Kampen American Capital State Street Bank and Trust
One Parkview Plaza Corporate Trust Department
Oakbrook Terrace, IL 60181 P.O. Box 778
Attn: Jeffrey Maillet Boston, MA 02102
Tel: (630) 684-6438 Attn: Laura Magazu
Fax: (630) 684-6740 or 6741 Tel: (617) 664-5481
Fax: (617) 664-5366 or 5367
Eurodollar Lending Office:
Credit Operations
- ------ ----------
Van Kampen American Capital State Street Bank and Trust
One Parkview Plaza Corporate Trust Department
Oakbrook Terrace, IL 60181 P.O. Box 778
Attn: Jeffrey Maillet Boston, MA 02102
Tel: (630) 684-6438 Attn: Laura Magazu
Fax: (630) 684-6740 or 6741 Tel: (617) 664-5481
Fax: (617) 664-5366 or 5367
<PAGE>
Page 16 of 16
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
TOTAL COMMITMENTS
Total Term B Facility Commitments: $ 100,000,000.00
Total Working Capital Facility Commitments: $ 25,000,000.00
Total Term A Facility Commitments: $ 35,000,000.00
Total Acquisition Facility Commitments: $ 100,000,000.00
--------------
TOTAL COMMITMENTS $ 260,000,000.00
TOTAL LETTER OF CREDIT COMMITMENTS $ 7,500,000.00
================================================================================
<PAGE>
SCHEDULE II - EBITDA SCHEDULE
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF EBITDA
MONTHLY
MONTH AMOUNT
----- ------
SEPTEMBER 1995 $4,705,000
OCTOBER 1995 3,961,000
NOVEMBER 1995 4,042,000
DECEMBER 1995 4,977,000
JANUARY 1996 5,458,000
FEBRUARY 1996 6,939,000
MARCH 1996 5,657,000
APRIL 1996 5,025,000
MAY 1996 4,894,000
JUNE 1996 4,738,000
<PAGE>
Schedule III
I. Discontinued Operations
MEDIQ Mobile X-Ray Services, Inc.
Health Examinetics, Inc.
Thera-Kinetics Acquisition Corporation
MDTC Haddon, Inc.
MEDIQ Diagnostic Centers Inc.
MEDIQ Diagnostic Centers - I Inc.
MEDIQ Imaging Services, Inc.
American Cardiovascular Imaging Labs, Inc.
Alpha Health Consultants, Inc.
P. I. Corporation
MEDIQ Services, Inc.
MEDIQ Home Therapy Services of Arizona, Inc.
II. Joint Ventures
Borrower's membership interest in MEDIQ PRN/HNE, L.L.C.
(d/b/a SpectraCair)
The interest of MEDIQ Surgical Equipment Services, Inc. in
MEDIQ PRN/SLT, a joint venture
III. Equity Investments
The ownership interests of either MEDIQ Incorporated or MEDIQ
Investment Services, Inc. in the following publicly-traded
corporations: PCI Services, Inc., NutraMax Products, Inc. and
InnoServ Technologies, Inc.
<PAGE>
Schedule IV
Discontinued Subsidiaries
MEDIQ Mobile X-Ray Services, Inc.
Health Examinetics, Inc.
Thera-Kinetics Acquisition Corporation
MDTC Haddon, Inc.
MEDIQ Diagnostic Centers Inc.
MEDIQ Diagnostic Centers - I Inc.
MEDIQ Imaging Services, Inc.
American Cardiovascular Imaging Labs, Inc.
Alpha Health Consultants, Inc.
P. I. Corporation
MEDIQ Services, Inc.
MEDIQ Home Therapy Services of Arizona, Inc.
<PAGE>
SCHEDULE 2.14(a) - REFINANCING DEBT
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF DEBT TO BE REFINANCED
<TABLE>
<CAPTION>
=======================================================================================================================
PREPAYMENT
PRINCIPAL INTEREST PENALTY TOTAL
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. MEDIQ Incorporated
- -----------------------------------------------------------------------------------------------------------------------
A. Revolving Credit Facility with Summit Bank, $ 13,020,000.00 $ 89,158.85 $ 0.00 $ 13,109,158.85
plus accrued interest
- -----------------------------------------------------------------------------------------------------------------------
B. Revolving Credit Facility with First 1,000,000.00 5,500.04 0.00 1,005,500.04
Executive, plus accrued interest
- -----------------------------------------------------------------------------------------------------------------------
2. PRN Holdings, Inc.
- -----------------------------------------------------------------------------------------------------------------------
A. Subordinated debt Note Agreement (Mass 10,000,000.00 512,500.00 2,000,000.00 12,512,500.00
Mutual, et al), plus accrued interest
and prepayment penalty
- -----------------------------------------------------------------------------------------------------------------------
B. Subordinated debt Promissory Notes (KCI 8,750,000.00 504,110.00 0.00 9,254,110.00
Therapeutic Services, Inc.), plus
accrued interest
- -----------------------------------------------------------------------------------------------------------------------
C. Mass Mutual warrant to purchase 10% of 0.00 0.00 12,500,000.00 12,500,000.00
Holdings
- -----------------------------------------------------------------------------------------------------------------------
3. MEDIQ/PRN Life Support Services - I, Inc.
- -----------------------------------------------------------------------------------------------------------------------
A. Loan and Security Agreement (Congress 27,448,031.44 344,523.29 430,000.00 28,222,554.73
Financial), plus accrued interest and
prepayment penalty
- -----------------------------------------------------------------------------------------------------------------------
4. MEDIQ/PRN Life Support Services, Inc.
- -----------------------------------------------------------------------------------------------------------------------
A. Accounts Financing Agreement (Congress 12,010,292.12 8,436.75 150,000.00 12,168,728.87
Financial), plus accrued interest and
prepayment penalty
- -----------------------------------------------------------------------------------------------------------------------
B. Senior Secured Notes, plus accrued interest 98,260,000.00 3,011,600.76 7,736,992.40 109,008,593.16
and redemption premium
- -----------------------------------------------------------------------------------------------------------------------
C. Defeasance Amount for all Senior Secured 1,677,939.00 193,288.00 58,728.00 1,929,955.00
--------------- ------------- -------------- ---------------
Notes not redeemed
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEBT TO BE REFINANCED $172,166,262.56 $4,669,117.69 $22,875,720.40 $199,711,100.65
--------------- ------------- -------------- ---------------
=======================================================================================================================
</TABLE>
<PAGE>
SCHEDULE 3.01(e) - SURVIVING DEBT
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF SURVIVING DEBT
PRINCIPAL
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.: AMOUNT
A. Capital Leases:
GE Capital (Charter-ITT) 540,000
GE Capital (Charter-ITT) 482,000
CIT Group (Copelco) 584,000
Heller (Amplicon) 486,000
NYNEX 124,000
NYNEX 82,000
NYNEX 1,436,000
NYNEX 267,000
NYNEX 588,000
Medical Equip Fin (Execulease) 294,000
Medical Equip Fin (Execulease) 328,000
Medical Equip Fin (Execulease) 306,000
Sanwa 670,000
Alco Resources 2,000
Bimeco 14,000
-----------
Total 6,203,000
TOTAL SURVIVING DEBT $69,932,000
-----------
<PAGE>
SCHEDULE 3.01(e) - SURVIVING DEBT
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF SURVIVING DEBT
PRINCIPAL
AMOUNT
---------
MEDIQ INCORPORATED:
A. Guarantee of certain liabilities of ATS Medical
Services, Inc., a wholly-owned subsidiary
of MEDIQ Mobile X-Ray Services, Inc. to
the United States Government an original
amount of $2,100,000 and a remaining
balance of $1,350,000. 0.00
B. Guarantee of the term loan and the line of
credit, and accrued interest thereon, of
MEDIQ PRN/HNE, LLC (dba SpectraCair).
Amounts available are $6,000,000 and
$1,500,000 for the term loan and the
line of credit, respectively. As of
September 30, 1996, the outstanding
balances on the term loan and the line
of credit are $6,000,000 and $285,000,
respectively. 0.00
C. Guarantee of the capital lease obligations
of MEDIQ PRN/SLT, a joint venture, in the
principal amount of $996,225 as of
September 30, 1996. 0.00
D. Guarantee of certain capital lease obligations
of Health Examinetics, Inc. in the
principal amount of $461,000 as of
September 30, 1996. 0.00
E. 7.50% Exchangeable Subordinated Debentures
due 2003 34,500,000
F. 7.25% Convertible Subordinated Debentures
due 2006 29,229,000
<PAGE>
Schedule 3.01(g)(iii)
Subsidiary Guarantors
MEDIQ Investment Services, Inc.
MEDIQ Management Services, Inc.
MEDIQ Surgical Equipment Services, Inc.
Value-Med Products, Inc.
MEDIQ Mobile X-Ray Services, Inc.
Health Examinetics, Inc.
Thera-Kinetics Acquisition Corporation
MDTC Haddon, Inc.
MEDIQ Diagnostic Centers Inc.
MEDIQ Diagnostic Centers - I Inc.
MEDIQ Imaging Services, Inc.
American Cardiovascular Imaging Labs, Inc.
Alpha Health Consultants, Inc.
P. I. Corporation
MEDIQ Services, Inc.
MEDIQ Home Therapy Services of Arizona, Inc.
<PAGE>
Schedule 3.01(g)(iv)
Good Standing Certificates
Borrower -- all fifty states and the District of Columbia
PRN Holdings, Inc. -- New Jersey
MEDIQ Incorporated -- New Jersey, Pennsylvania, California
<PAGE>
SCHEDULE 3.01(g)(vii)(B)
UCC FILING JURISDICTIONS
DEBTOR STATE JURISDICTION
- ------------------------------------------------------------
MEDIQ/PRN Life Support Services, Inc.
One MEDIQ Plaza
Pennsauken, NJ 08110 AL SOS
AK DEPT OF NATL RESOURCE
Fed Tax ID No. 95-3692387 AZ SOS
AR SOS
CA SOS
CO SOS
CT SOS
DE SOS
DC RECORDER OF DEEDS
FL SOS
GA COBB COUNTY
GA BIBB COUNTY
HI BUREAU OF CONVEYANCE
IA SOS
ID SOS
IL SOS
IN SOS
KS SOS
KY JEFFERSON COUNTY
LA UCC DATABASE
LA CADDO PARISH
ME SOS
MA SOC
MA AUBURNDALE CITY
MA NEWTON CITY
MA WALTHAM CITY
MA WEST SPRINGFIELD TOWN
MD DEPT. OF A & T
MI SOS
MN SOS
MO SOS
MO ST. LOUIS COUNTY
MS SOS
MS RANKIN COUNTY
MT SOS
NC SOS
NC WAKE COUNTY
ND SOS
NE SOS
NJ SOS
NJ BURLINGTON COUNTY
NJ CAMDEN COUNTY
<PAGE>
NJ UNION COUNTY
NM SOS
NV SOS
NH SOS
NY SOS
NY KINGS COUNTY
NY NASSAU COUNTY
NY WESTCHESTER COUNTY
OH SOS
OH CUYAHOGA COUNTY
OH DELAWARE COUNTY
OH FAIRFIELD COUNTY
OH FRANKLIN COUNTY
OH HAMILTON COUNTY
OK SOS
OK OKLAHOMA COUNTY
OK TULSA COUNTY
OR SOS
PA SOC
PA ALLEGHENY PROTHO
PA LANCASTER PROTHO
RI SOS
SC SOS
SD SOS
TN SOS
TX SOS
UT SOS
VT SOS
VA SCC
VA HENRICO COUNTY
VA NEWPORT NEWS CITY
VA RICHMOND CITY
WA DOL
WV SOS
WI SOS
WY SOS
Mediq Investment Services, Inc.
1403 Faulk Road
Suite 102
Wilmington, DE 19803 DE SOS
NJ SOS
Fed Tax ID No. 51-0261761 NJ CAMDEN COUNTY
PRN Holdings, Inc.
1403 Faulk Road
Suite 102
Wilmington, DE 19803 DE SOS
NJ SOS
Fed Tax ID No. 51-0356222 NJ CAMDEN COUNTY
<PAGE>
Mediq Surgical Equipment Services, Inc.
One MEDIQ Plaza
Pennsauken, NJ 08110 NJ SOS
NJ CAMDEN COUNTY
Fed Tax ID No. 22-3259731
Value-Med Products, Inc.
One MEDIQ Plaza
Pennsauken, NJ 08110 NJ SOS
NJ CAMDEN COUNTY
Fed Tax ID No. 22-338717
Mediq Management Services, Inc.
One MEDIQ Plaza
Pennsauken, NJ 08110 NJ SOS
NJ CAMDEN COUNTY
Fed Tax ID No. 22-2744388
MEDIQ Incorporated
One MEDIQ Plaza NJ SOS
Pennsauken, NJ 08110 NJ CAMDEN COUNTY
Fed Tax ID No. 51-0219413
<PAGE>
Schedule 3.01(g)(xviii)
Landlord Consents
Easton Distribution Center -- Premises located at 634 North
Challenger Road, Salt Lake City, Utah 84116
<PAGE>
Schedule 3.01(g)(xix)(1)
Termination Letters
Summit Bank
Summit Bank, as Trustee with respect to the 12.125% Notes
KCI Therapeutic Services, Inc.
First Republic Bank
Congress Financial Corporation
Massachusetts Mutual Life Insurance Company, MassMutual Corporate
Investors, MassMutual Participation Investors and MassMutual
Corporate Value Partners, Ltd.
<PAGE>
SCHEDULE 3.01(g)(xix)(2) - EXISTING DEBT
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF EXISTING DEBT
PRINCIPAL
AMOUNT
---------
1. MEDIQ Incorporated
A. Revolving Credit Facility with Summit Bank $ 13,020,000
B. Revolving Credit Facility with First Executive 1,000,000
C. Guarantee of certain liabilities of ATS Medical
Services, Inc., a wholly-owned subsidiary of
MEDIQ Mobile X-Ray Services, Inc. to the
United States Government an original amount
of $2,100,00 and a remaining balance of
$1,350,000. 0
D. Guarantee of the term loan and the line of
credit, and accrued interest thereon, of
MEDIQ PRN/HNE, LLC (dba SpectraCair).
Amounts available are $6,000,000 and
$1,500,000 for the term loan and the line of
credit, respectively. As of September 30,
1996, the outstanding balances on the term
loan and the line of credit are $6,000,000
and $285,000, respectively. 0
E. Guarantee of the capital lease obligations of
MEDIQ PRN/SLT, a joint venture, in the
principal amount of $996,000 as of September
30, 1996. 0
F. Guarantee of certain capital lease obligations of
Health Examinetics, Inc. in the principal
amount of $461,000 as of September 30, 1996. 0
G. 7.50% Exchangeable Subordinated Debentures due
2003 34,500,000
H. 7.25% Convertible Subordinated Debentures due
2006 29,229,000
2. PRN Holdings, Inc.
A. Subordinated debt Note Agreement (Mass Mutual, et
al) 10,000,000
<PAGE>
B. Subordinated debt Promissory Notes (KCI
Therapeutic Services, Inc.) par value
$10,000,000 8,750,000
3. MEDIQ/PRN Life Support Services - I, Inc.
A. Loan and Security Agreement (Congress Financial) 27,448,000
4. MEDIQ/PRN Life Support Services, Inc.
A. Accounts Financing Agreement (Congress Financial) 12,010,000
B. Senior Secured Notes 100,000,000
C. Capital Leases:
GE Capital (Charter-ITT) 540,000
GE Capital (Charter-ITT) 482,000
CIT Group (Copelco) 584,000
Heller (Amplicon) 486,000
NYNEX 124,000
NYNEX 82,000
NYNEX 1,436,000
NYNEX 267,000
NYNEX 588,000
Medical Equip Fin (Execulease) 294,000
Medical Equip Fin (Execulease) 328,000
Medical Equip Fin (Execulease) 306,000
Sanwa 670,000
Alco Resources 2,000
Bimeco 14,000
------------
6,203,000
TOTAL $242,160,000
------------
<PAGE>
SCHEDULE 3.01(g)(xxi)
LOCAL COUNSEL
Texas
- -----
Karen Nelson, Esq.
HAYNES AND BOONE
901 Main Street, Suite 3100
Dallas, TX 75202-3789
Florida
- -------
Charles Hedrick, Esq.
FOLEY & LARDNER
The Greenleaf Building
200 Laura Street, P.O. Box 240
Jacksonville, FL 32201-0240
California
- ----------
Barry L. Burten, Esq.
JEFFER, MANGELS, BUTLER & MARMARO, L.L.P.
2121 Avenue of the Stars, 10th Floor
Los Angeles, CA 90067
<PAGE>
Schedule 4.01(a)
Parent Guarantors
MEDIQ Incorporated owns 1000 shares of the common stock of PRN Holdings, Inc.,
being all of the outstanding shares of capital stock of PRN Holdings, Inc.
<PAGE>
Schedule 4.01(b)
Subsidiaries
Shares Shares %
Subsidiary Jurisdiction Authorized Outstanding Owned
- ---------- ------------ ---------- ----------- -----
PRN Holdings, Inc. Delaware 2,000 1,000 100
MEDIQ/PRN Life Support Delaware 20,000 10,000 100
Services, Inc. 2,000* 0 0
MEDIQ Investment
Services, Inc. Delaware 100 100 100
MEDIQ Management
Services, Inc. Delaware 100 100 100
MEDIQ Surgical Equipment
Services, Inc. Delaware 100 100 100
Value-Med Products,
Inc. Delaware 100 100 100
* Class A Common
<PAGE>
Schedule 4.01(d)
Authorizations, etc.
None other than filing and/or recordation of the Mortgage and UCC-1 financing
statements in the appropriate governmental offices.
<PAGE>
SCHEDULE 4.01(k) - PLANS, MULTIEMPLOYER PLANS AND WELFARE PLANS
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF PLANS, MULTIEMPLOYER PLANS AND WELFARE PLANS
MEDIQ Incorporated Pension Plan dated July 1, 1979
The MEDIQ Incorporated Employee's Savings Plan dated October 1, 1983
The MEDIQ Life Insurance Plan MEDIQ Incorporated Accident, Sickness
and Disability Plan
The MEDIQ/PRN Employee Health Plan
The MEDIQ/PRN Employee Dental Plan
The MEDIQ/PRN Long-Term Disability Plan
The MEDIQ/PRN Life Insurance Plan
MEDIQ/PRN Section 125 Cafeteria Plan
MEDIQ/PRN Educational Assistance Program
<PAGE>
Schedule 4.01(t)
Environmental Investigations
See information disclosed in the Phase I Environmental Site Assessment Report,
regarding the property located at One MEDIQ Plaza and 1700 Suckle Highway,
Pennsauken, New Jersey, dated July 22, 1996 issued by Sadat Associates, Inc. as
well as materials contained in the subsequent report regarding asbestos
investigation conducted on the same property by Sadat Associates, Inc. during
August 1996. The Borrower does not believe that these disclosed investigations
will have a Material Adverse Effect.
<PAGE>
Schedule 4.01(y)
Open Years
A waiver of the statute of limitations is in effect until December 31, 1997 for
the consolidated tax returns of MEDIQ and its Subsidiaries for the fiscal years
ended September 30, 1989 through September 30, 1993. The expiration of the
statute of limitations for fiscal years ended September 30, 1994 and September
30, 1995 is June 15, 1998 and June 15, 1999, respectively.
A waiver of the statute of limitations is in effect until December 31, 1997 for
the consolidated tax returns of the Borrower for the fiscal years ended July 31,
1989 through May 31, 1992.
<PAGE>
Schedule 4.01(aa)
Tax Disputes
MEDIQ and its Subsidiaries have been assessed $429,068 of additional tax by the
State of California as a result of a California unitary income tax audit for the
fiscal years ended September 30, 1989, 1990, and 1991. MEDIQ has protested
$140,954 of the assessment for various reasons. To date, the state has agreed to
$63,793 of the protested amount. The remaining issues have yet to be addressed
by the state.
<PAGE>
Schedule 4.01(ff)
Owned Real Property
One MEDIQ Plaza (also known as 1700 Suckle Highway)
Pennsauken, New Jersey. Located in Camden County, New Jersey.
As of Closing title will be in MEDIQ/PRN Life Support Services,
Inc.
<PAGE>
SCHEDULE 4.01(gg) - INVESTMENTS
MEDIQ INCORPORATED AND SUBSIDIARIES
INVESTMENTS
Following is a list of all Investments of MEDIQ Incorporated and its Ongoing
Subsidiaries, except for Investments in wholly-owned subsidiaries of the Loan
Parties:
A. MEDIQ Incorporated:
1. The Mental Health Management Promissory Note in the
original amount of $11,500,000.
2. The Non-negotiable Subordinated Note from Medifac, Inc.
dated June 27, 1995 in the original amount of
$1,500,000.
3. Note A from Granary Partners, L.P. dated June 27, 1996
in the original amount of $2,500,000.
4. The amounts on deposit with Meridian Bank in the
approximate amount of $340,000.
5. The certificate of deposit with Summit Bank in the
principal amount of $1,000,000.
6. The investment in the common stock of InnoServ
Technologies, Inc. of 2,026,438 shares representing
approximately 40% of the common shares outstanding as
of August 31, 1996.
7. The cash surrender value of certain life insurance policies on
former officers of MEDIQ subject to the borrowings against such
value in a net value of approximately $9,000 as of August 31, 1996.
B. MEDIQ Investment Services, Inc.:
1. The investment in the common stock of PCI Services,
Inc. of 2,875,000 shares representing approximately 46%
of the common shares outstanding as of August 31, 1996.
2. The investment in the common stock of NutraMax
Products, Inc. of 4,037,258 shares representing
approximately 47% of the common shares outstanding as
of August 31, 1996.
C. MEDIQ/PRN Life Support Services, Inc.:
1. Advances to employees of approximately $138,000 as of
August 31, 1996.
2. Outstanding deposits for leases (operating and capital)
and utilities of approximately $413,000 as of
August 31, 1996.
3. The amounts on deposit in the Citibank account of
approximately $64,000 as of August 31, 1996.
<PAGE>
4. The investment in MEDIQ PRN/HNE, LLC (dba SpectraCair)
of approximately $1,430,000 as of August 31, 1996.
5. The amounts on deposit in the Congress Account pursuant
to the Congress Agreement.
D. MEDIQ/PRN Life Support Services - I, Inc.
1. The amounts on deposit in the Severance Escrow account
at Frost Bank of approximately $118,000 as of
August 31, 1996.
<PAGE>
Schedule 4.01(hh)
Intellectual Property
See attached.
<PAGE>
SCHEDULE 4.01(hh)
INTELLECTUAL PROPERTY
U.S. TRADEMARK/SERVICE MARK REGISTRATIONS/PENDING APPLICATIONS OWNED BY
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
================================================================================
MARK SERIAL/REGISTRATION NUMBER GOODS/SERVICES
- --------------------------------------------------------------------------------
CAMP 74-619,939 Customized Inventory
1,944,054 Control Services, Namely
Equipment Location
Tracking, Providing
Reminders for Equipment and
Preventive Maintenance
Programs and Assistant in
Equipment Manufacturer
Recalls
- --------------------------------------------------------------------------------
TELSTAR 74-534,977 Inventory Services in the
Nature of Equipment
Management and Order Entry
System for Hospitals and
Other Medical Institutions
- --------------------------------------------------------------------------------
TRACKSTAR 74-512,604 Inventory Control Services,
1,934,805 Namely Equipment Tracking
for Others Via Computer and
Bar Code Technology
- --------------------------------------------------------------------------------
MEDIQ/PRN 74-455,341 Rental of Medical
1,952,207 Equipment, Namely Adult
Ventilators; Infant
Ventilators; Portable
Volume Ventilators; Patient
Monitors; Pulse Oximeters
and Other Products
- --------------------------------------------------------------------------------
MEDIQ/PRN 73-818,806 Renting of Critical Care
1,642,364 Equipment
================================================================================
<PAGE>
U.S. SERVICE MARK REGISTRATION OWNED BY MEDIQ INCORPORATED
================================================================================
MARK SERIAL/REGISTRATION NUMBER GOODS/SERVICES
- --------------------------------------------------------------------------------
MEDIQ 74-061,359 Maintenance and Repair
1,691,946 Services for Medical
Ventilator and Computerized
Tomography Units (Int. Cl.
42) Retail and Wholesale
Outlet Services for Parts
for the Repair or
Replacement of Durable
Medical Equipment and
Related Supplies for
Hospitals, Nursing Homes
and Individuals
- --------------------------------------------------------------------------------
MEDIQ 73-540,734 Providing Mobile Diagnostic
1,391,164 Medical Services to
Hospitals, Nursing Homes
and Physician Offices,
Namely, Computed Tomography
Services, Magnetic
Resonance Imaging Services,
X-Ray Services, Ultrasound
and Breast Imaging
Diagnostic Services
- --------------------------------------------------------------------------------
MEDIQ 73-540,732 Managing Hospitals and
1,391,834 Healthcare Facilities for
Others; Cost Containment
and Reimbursement Analysis
Services, ada Data
Processing Services for
Hospitals, and Healthcare
Providers (Int. Cl. 38)
Telecommunications
Consulting Services for
Hospitals and Healthcare
Providers
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MEDIQ 73-540,553 Remanufacturing and Repair
1,391,874 of Medical Life Support
Equipment and Respiratory
Therapy Equipment for
Hospitals and Healthcare
Providers (Int. Cl. 42)
Rental of and Retail Outlet
Services for Medical Life
Support Ventilators,
Incubators and Pediatric
Tents, Air Compressors,
Apnea Fetal Heart and
Oxygen Monitors, Pulmonary
Resuscitation Equipment and
the Like
- --------------------------------------------------------------------------------
MEDIQ 73-307,846 Management Consulting
1,255,505 Services for the Health
Care and Health Care
Services Industries
- --------------------------------------------------------------------------------
MEDIQ CARE UNITS 73-616,249 Special Medical Care
1,480,121 Services Rendered in Acute
Care Facilities
================================================================================
<PAGE>
The following tradenames, used by the Loan Parties, have not been registered
with the United States Patent and Trademark Office, nor has a filing been made
there in connection with these tradenames:
Value-Med: Tradename used by Value-Med Products, Inc.
Criticare Hospital Services: Tradename of the Borrower
registered in the states of Washington and Oregon
MEDIQ Consulting Group: Tradename of MEDIQ Management
Services, Inc. registered in the states of New Jersey
and Pennsylvania
MEDIQ Healthcare Resources: Tradename of MEDIQ Management
Services, Inc. registered in the states of New Jersey
and Pennsylvania
<PAGE>
Schedule 5.02(a)(iii)
Existing Liens
(1) Liens during the 124-day defeasance period in connection with the 12.125%
Note Indenture.
(2) Lien on the common stock of Innoserv, owned by MEDIQ or one of its
Subsidiaries, pursuant to the Agreement of Merger and Plan of Reorganization
among MMI Medical, Inc., MMI Acquisition Subsidiary, Inc., MEDIQ and MEDIQ
Equipment and Maintenance Services, Inc., dated May 18, 1994, as amended.
(3) Lien on 2,254,902 shares of the common stock of NutraMax, owned by MEDIQ
Investment Services, Inc., pursuant to the NutraMax Escrow Agreement.
(4) Lien on the cash deposited in the Citibank Account.
(5) Lien on Certificate of Deposit Number 1000063553030, issued by Summit Bank
to MEDIQ, in the original principal amount of $1,000,000 which has been
collaterally assigned to Summit Bank by MEDIQ in connection with MEDIQ's
guarantee of the obligations of MEDIQ PRN/HNE, L.L.C. under a loan agreement
between MEDIQ PRN/HNE, L.L.C. and Summit Bank.
(6) Lien on cash in the approximate amount of $340,000, in account at Meridian
Bank, in connection with open liability and workers compensation claims during
the years May 29, 1988 through May 29, 1990.
(7) Lien on Escrow Account at Frost Bank, in approximate amount of $120,000, in
connection with severance payments owed by KCI Therapeutic Services, Inc. as a
result of acquisition consummated on September 30, 1994.
(8) Lien on cash surrender value of certain life insurance policies with respect
to former officers of MEDIQ to the extent of the corresponding debt.
(9) Subordination Agreement by and among MEDIQ, Medifac, Inc. and Meridian Bank,
dated June 27, 1995 and Subordination Agreement by and among MEDIQ, Granary
Partners, L.P. and Meridian Bank, dated June 27, 1995 in connection with certain
obligations owed by said Medifac, Inc. and Granary Partners, L.P. to MEDIQ.
(10) Lien on the cash deposited in the Congress Account in favor of Congress
Financial Corporation pursuant to the Congress Agreement.
<PAGE>
SCHEDULE 5.02(b)(i)(A) - PARENT GUARANTOR DEBT - A
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF PARENT GUARANTOR DEBT - A
AMOUNT
Guarantee of the term loan and the line of credit, and accrued
interest thereon, of MEDIQ PRN/HNE, LLC (dba SpectraCair).
Total amounts available are $6,000,000 and $1,500,000 for
the term loan and the line of credit, respectively. $7,500,000
<PAGE>
SCHEDULE 5.02(b)(i)(B) - PARENT GUARANTOR DEBT - B
MEDIQ INCORPORATED AND SUBSIDIARIES
SCHEDULE OF PARENT GUARANTOR DEBT - B
AMOUNT
Guarantee of certain liabilities of ATS Medical
Services, Inc., a wholly-owned subsidiary of
MEDIQ Mobile X-Ray Services, Inc. to the
United States Government. $1,350,000
Guarantee of the capital lease obligations of MEDIQ
PRN/SLT, a joint venture. 996,000
Guarantee of certain capital lease obligations of
Health Examinatics, Inc. 461,000
----------
TOTAL $2,807,000
----------
<PAGE>
SCHEDULE 5.02(b)(ii)(F) - EXISTING BORROWER DEBT
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
SCHEDULE OF EXISTING BORROWER DEBT
PRINCIPAL
AMOUNT
Capital Leases:
GE Capital (Charter-ITT) $ 540,000
GE Capital (Charter-ITT) 482,000
CIT Group (Copelco) 584,000
Heller (Amplicon) 486,000
NYNEX 124,000
NYNEX 82,000
NYNEX 1,436,000
NYNEX 267,000
NYNEX 588,000
Medical Equip Fin (Execulease) 294,000
Medical Equip Fin (Execulease) 328,000
Medical Equip Fin (Execulease) 306,000
Sanwa 670,000
Alco Resources 2,000
Bimeco 14,000
----------
TOTAL $6,203,000
----------
<PAGE>
Schedule 6.01(k)
"Investor Group"
Bessie G. Rotko, the issue of Bessie G. Rotko and Bernard B. Rotko, and their
spouses, and trusts, corporations, partnerships and other entities controlled by
any of the foregoing or of which such persons are the beneficiaries. Such
persons and entities, as of September 1, 1996, beneficially owned, to the
knowledge of MEDIQ, the following shares of MEDIQ's capital stock:
===========================================================================
Shareholder Common Preferred
- ---------------------------------------------------------------------------
Rotko Trust 3,570,969 3,570,969
- ---------------------------------------------------------------------------
Michael J. Rotko 448,655 448,655
- ---------------------------------------------------------------------------
Bessie Rotko 240,489 269,089
- ---------------------------------------------------------------------------
Judith Shipon 460,657 460,407
- ---------------------------------------------------------------------------
Jacob A. Shipon 1,150 1,650
===========================================================================
<PAGE>
EXHIBIT A-1 TO THE
CREDIT AGREEMENT
FORM OF TERM A NOTE
$_______________ Dated: ___________ __, 199_
FOR VALUE RECEIVED, the undersigned, MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
__________ (the "Lender") for the account of its Applicable Lending Office (as
defined in the Credit Agreement referred to below) the principal amount of the
Term A Advance (as defined below) owing to the Lender by the Borrower pursuant
to the Credit Agreement dated as of October 1, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"; terms defined
therein being used herein as therein defined) among the Borrower, MEDIQ
Incorporated, a Delaware corporation and PRN Holdings, Inc., a Delaware
corporation, as Parent Guarantors, the Lender and certain other lender parties
party thereto, Banque Nationale de Paris, as Administrative Agent and Initial
Issuing Bank, and NationsBank, N.A., as Documentation Agent, on the dates and in
the amounts specified in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of the
Term A Advance from the date of such Term A Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Banque Nationale de Paris, as Administrative Agent, at the
Administrative Agent's Account, in same day funds. The Term A Advance owing to
the Lender by the Borrower and the maturity thereof, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto, which is part of this
Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of a single advance (the "Term A Advance") by the
Lender to the Borrower in an amount not to exceed the U.S. dollar amount first
above mentioned, the indebtedness of the Borrower resulting from such Term A
Advance being evidenced by this Promissory Note, and (ii) contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
<PAGE>
A-1-2
maturity hereof upon the terms and conditions therein specified. The Obligations
of the Borrower under this Promissory Note, and the Obligations of the other
Loan Parties under the Loan Documents, are secured by the Collateral as provided
in the Loan Documents.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By ____________________________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
================================================================================
Amount of Amount of Unpaid
Term A Principal Paid Principal Notation
Date Advance or Prepaid Balance Made By
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT A-2 TO THE
CREDIT AGREEMENT
FORM OF TERM B NOTE
$_____________ Dated: _______ __, 199_
FOR VALUE RECEIVED, the undersigned, MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY [to the order
of] __________(the "Lender") [or its registered assigns] for the account of its
Applicable Lending Office (as defined in the Credit Agreement referred to below)
the principal amount of the Term B Advance (as defined below) owing to the
Lender by the Borrower pursuant to the Credit Agreement dated as of October 1,
1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"; terms defined therein being used herein as therein defined)
among the Borrower, MEDIQ Incorporated, a Delaware corporation and PRN Holdings,
Inc., a Delaware corporation, as Parent Guarantors, the Lender and certain other
lender parties party thereto, Banque Nationale de Paris, as Administrative Agent
and Initial Issuing Bank, and NationsBank, N.A., as Documentation Agent, on the
dates and in the amounts specified in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of the
Term B Advance from the date of such Term B Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Banque Nationale de Paris, as Administrative Agent, at the
Administrative Agent's Account, in same day funds. The Term B Advance owing to
the Lender by the Borrower and the maturity thereof, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto, which is part of this
Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of a single advance (the "Term B Advance") by the
Lender to the Borrower in an amount not to exceed the U.S. dollar amount first
above mentioned, the indebtedness of the Borrower resulting from such Term B
Advance being evidenced by this Promissory Note, and (ii) contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
<PAGE>
A-2-2
maturity hereof upon the terms and conditions therein specified. The Obligations
of the Borrower under this Promissory Note, and the Obligations of the other
Loan Parties under the Loan Documents, are secured by the Collateral as provided
in the Loan Documents.
Notwithstanding anything to the contrary contained herein or in the Credit
Agreement, this Note may not be transferred except pursuant to and in accordance
with the registration and other provisions of subsection 9.07(b,d) of the Credit
Agreement.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By __________________________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
================================================================================
Amount of Amount of Unpaid
Term B Principal Paid Principal Notation
Date Advance or Prepaid Balance Made By
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT A-3 TO THE
CREDIT AGREEMENT
FORM OF WORKING CAPITAL NOTE
$__________ Dated: ________, 199_
FOR VALUE RECEIVED, the undersigned, MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
___________ (the "Lender") for the account of its Applicable Lending Office (as
defined in the Credit Agreement referred to below) the aggregate principal
amount of the Working Capital Advances (as defined below) owing to the Lender by
the Borrower pursuant to the Credit Agreement dated as of October 1, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"; terms defined therein being used herein as therein defined) among
the Borrower, MEDIQ Incorporated, a Delaware corporation and PRN Holdings, Inc.,
a Delaware corporation, as Parent Guarantors, the Lender and certain other
lender parties party thereto, Banque Nationale de Paris, as Administrative Agent
and Initial Issuing Bank, and NationsBank, N.A., as Documentation Agent, on the
Termination Date.
The Borrower promises to pay interest on the unpaid principal amount of
each Working Capital Advance from the date of such Working Capital Advance until
such principal amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Banque Nationale de Paris, as Administrative Agent, at the
[Administrative Agent's Account], in same day funds. Each Working Capital
Advance owing to the Lender by the Borrower and the maturity thereof, and all
payments made on account of principal thereof, shall be recorded by the Lender
and, prior to any transfer hereof, endorsed on the grid attached hereto, which
is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of advances (the "Working Capital Advances") by the
Lender to the Borrower from time to time in an aggregate amount not to exceed at
any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Working Capital Advance
being evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the
<PAGE>
A-3-2
terms and conditions therein specified. The Obligations of the Borrower under
this Promissory Note, and the Obligations of the other Loan Parties under the
Loan Documents, are secured by the Collateral as provided in the Loan Documents.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By __________________________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
================================================================================
Amount of
Working Amount of Unpaid
Capital Principal Paid Principal Notation
Date Advance or Prepaid Balance Made By
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT A-4 TO THE
CREDIT AGREEMENT
FORM OF ACQUISITION NOTE
$_______________ Dated: ______ __, 199_
FOR VALUE RECEIVED, the undersigned, MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
______________ (the "Lender") for the account of its Applicable Lending Office
(as defined in the Credit Agreement referred to below) the aggregate principal
amount of the Acquisition Advances (as defined below) owing to the Lender by the
Borrower pursuant to the Credit Agreement dated as of October 1, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"; terms defined therein being used herein as therein defined) among
the Borrower, MEDIQ Incorporated, a Delaware corporation, and PRN Holdings,
Inc., a Delaware corporation, as Parent Guarantors, the Lender and certain other
lender parties party thereto, Banque Nationale de Paris, as Administrative Agent
and Initial Issuing Bank, and NationsBank, N.A., as Documentation Agent, on the
dates and in the amounts specified in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Acquisition Advance from the date of such Acquisition Advance until such
principal amount is paid in full, at such interest rates, and payable at such
times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Banque Nationale de Paris, as Administrative Agent, at the
Administrative Agent's Account, in same day funds. Each Acquisition Advance
owing to the Lender by the Borrower and the maturity thereof, and all payments
made on account of principal thereof, shall be recorded by the Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto, which is part of
this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of acquisition advances (the "Acquisition Advances")
by the Lender to the Borrower from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Acquisition Advance being
evidenced by this Promissory Note, and (ii) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
<PAGE>
A-4-2
terms and conditions therein specified. The Obligations of the Borrower under
this Promissory Note, and the Obligations of the other Loan Parties under the
Loan Documents, are secured by the Collateral as provided in the Loan Documents.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By _____________________________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
================================================================================
Amount of Amount of Unpaid
Acquisition Principal Paid Principal Notation
Date Advance or Prepaid Balance Made By
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
S&S DRAFT
9/26/96
EXHIBIT B TO THE
CREDIT AGREEMENT
FORM OF NOTICE OF BORROWING
Banque Nationale de Paris,
as Administrative Agent under the
Credit Agreement referred to below
499 Park Avenue
New York, NY 10022 [Date]
Attention: Ms. Kimberly Williams
Ladies and Gentlemen:
The undersigned, MEDIQ/PRN Life Support Services, Inc., a Delaware
corporation (the "Borrower"), refers to the Credit Agreement dated as of October
1, 1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among the Borrower, MEDIQ Incorporated, a Delaware corporation, and
PRN Holdings, Inc., a Delaware corporation, as Parent Guarantors, the lender
parties party thereto (the "Lender Parties"), Banque Nationale de Paris, as
Administrative Agent and Initial Issuing Bank, and NationsBank, N.A., as
Documentation Agent, and hereby gives you notice, irrevocably, pursuant to
Section 2.02 of the Credit Agreement, that the Borrower hereby requests a
Borrowing under the Credit Agreement, and in that connection sets forth below
the information relating to such Borrowing (the "Proposed Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is _________ __, ____.
(ii) The Facility under which the Proposed Borrowing is requested is
the ___________________ Facility.
(iii) The Type of Advances comprising the Proposed Borrowing is [Base
Rate Advances] [Eurodollar Rate Advances].
(iv) The aggregate amount of the Proposed Borrowing is $__________.
[(v) The initial Interest Period for each Eurodollar Rate Advance made
as part of the Proposed Borrowing is __________ month[s].]
<PAGE>
B-2
The Borrower hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in each Loan Document
are correct on and as of such date, before and after giving effect to such
Borrowing and to the application of the proceeds therefrom, as though made
on and as of such date other than any such representations or warranties
that, by their terms, refer to a specific date other than the date of such
Borrowing, in which case as of such specific date;
(B) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, that
constitutes a Default;
(C) for each Acquisition Advance: (i) at the time of making such
Acquisition Advance the amount on deposit in the Asset Sale Blocked Account
is zero or all amounts on deposit therein are being applied simultaneously
with such Acquisition Advance, (ii) immediately prior to such Acquisition
Advance the Asset Sale Release Amount is equal to zero and (iii) if such
Acquisition Advance is used for the purposes set forth in:
(1) Section 2.14(b)(ii) of the Credit Agreement, subject to the
terms set forth in Section 5.02(k)(i)(y)(B) of the Credit Agreement,
including but not limited to the provision that immediately after
giving effect to each Borrowing consisting of Acquisition Advances the
Senior Leverage Ratio is less than or equal to 3.75 to 1, as
calculated on the attached Schedule I;
(2) Section 2.14(b)(iii)(x) of the Credit Agreement, from and
after the Asset Sale Threshold Date, subject to the terms set forth in
Section 5.02(f)(i) of the Credit Agreement, including but not limited
to the provisions that (x) immediately after giving effect to each
Borrowing consisting of Acquisition Advances the Leverage Ratio is
less than or equal to 3.5 to 1, (y) the requested Acquisition Advances
plus proceeds used from the Asset Sale Blocked Account used for
acquisitions of a Person or assets pursuant to Section 5.02(f)(i) are
less than or equal to 5.5 times the EBITDA for the prior 12 months of
the Person or assets acquired pursuant to Section 5.02(f)(i), and (z)
the aggregate amount Acquisition Advances plus the aggregate amount of
proceeds used from the Asset Sale Blocked Account plus an amount equal
to the aggregate value of the common stock of MEDIQ used for all such
Investments made pursuant to Section 5.02(f)(i) is less than or equal
to $100,000,000, each as calculated on the attached Schedule II;
(3) Section 2.14(b)(iii)(y) of the Credit Agreement, from and
after the Asset Sale Threshold Date, not less than twelve months after
the initial extension of credit, and subject to the terms set forth in
Section 5.02(g)(i) of
<PAGE>
B-3
the Credit Agreement, including but not limited to the provisions that
immediately after giving effect to each Borrowing consisting of
Acquisition Advances (x) the Leverage Ratio is less than or equal to
3.0 to 1 and (y) the aggregate amount of acquisition advances and
funds released from the Asset Sale Blocked Account used for dividends
paid or funds advanced directly or indirectly by the Borrower to MEDIQ
to permit MEDIQ to repurchase the common stock of MEDIQ and to pay
dividends does not exceed $20,000,000, each as calculated on the
attached Schedule III; and
(D) for each Working Capital Advance, the sum of the Loan Values of the
Eligible Receivables and Eligible Inventory (as determined based on the most
recent Borrowing Base Certificate delivered to the Lender Parties pursuant to
the Credit Agreement) exceeds the aggregate principal amount of the Working
Capital Advances plus Letter of Credit Advances to be outstanding plus the
aggregate Available Amount of all Letters of Credit then outstanding, after
giving effect to such Advance or issuance, respectively, plus the Asset Sale
Release Amount net of the amount of such Working Capital Advance to be deposited
in the Asset Sale Blocked Account as follows:
(1) Total Working Capital Commitments _____________
(2) Total Borrowing Base Availability from the
most recent Borrowing Base Certificate _____________
(3) Lesser of (1) and (2) _____________
(4) Working Capital Advances Outstanding _____________
(5) Letter of Credit Advances Outstanding _____________
(6) Available Amount of all Letters of
Credit then Outstanding _____________
(7) Total Working Capital Availability
[(3) less (4) less (5) less (6)] _____________
(8) Asset Sale Release Amount
net of the amount of such Working Capital
Advance to be deposited in the Asset Sale
Blocked Account _____________
(9) Working Capital Advance
permitted under Section 2.01(a)
[(7) minus (8)] _____________
<PAGE>
B-4
Very truly yours,
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By ___________________________________
Title:
<PAGE>
SCHEDULE I
SECTION 5.02(k)(i)(y)(B)
SENIOR LEVERAGE RATIO CALCULATION
FOR REPAYMENT OF SUBORDINATED NOTES
(1) outstanding Term Loan A Advances ______________
(2) outstanding Term Loan B Advances ______________
(3) outstanding Acquisition Advances ______________
(4) outstanding Working Capital Advances ______________
(5) outstanding Letter of Credit Advances ______________
(6) outstanding amount of other Senior Debt(1) ______________
(7) amount of requested Advance ______________
(8) TOTAL SENIOR DEBT
[sum of (1) through (7)] ______________
(9) Consolidated EBITDA for the Rolling Period
ended as of the most recent period for which
financial statements were required to be furnished
pursuant to Sections 5.03(b), (c) or (d) ______________
(10) SENIOR LEVERAGE RATIO
[(8) divided by (9)] ______________
- ----------
(1) excluding (i) contingent obligations of the type described in clause (f) or
(h) in the definition of "Debt" and (ii) Debt permitted under Section
5.02(b)(i)(A) (Parent Guarantor Debt-A), as specified in the definition of
"Senior Leverage Ratio".
<PAGE>
SCHEDULE II
SECTION 5.02(f)(i)
CALCULATIONS
FOR INVESTMENTS BY THE BORROWER
A. CALCULATION OF LEVERAGE RATIO
(1) outstanding Term Loan A Advances ___________
(2) outstanding Term Loan B Advances ___________
(3) outstanding Acquisition Advances ___________
(4) outstanding Working Capital Advances ___________
(5) outstanding amount of Letter of Credit Advances ___________
(6) outstanding amount of other Funded Debt(1) ___________
(7) amount of requested Advance* ___________
(8) Total Funded Debt
[sum of (1) through (7)] ___________
(9) principal amount of the NutraMax Note
to the extent secured by the NutraMax Letter of Credit ___________
(10) NUMERATOR TOTAL
[(8) minus (9)] ___________
(11) Consolidated EBITDA for the Monthly Rolling Period
ended as of the most recent month for which
financial statements were required to be furnished
pursuant to Sections 5.02(b), (c) or (d) ___________
(12) LEVERAGE RATIO
[(10) divided by (11)] ___________
- ----------
(1) excluding (i) contingent obligations of the type described in clause (f) or
(h) in the definition of "Debt" and (ii) Debt permitted under Section
5.02(b)(i)(A) (Parent Guarantor Debt-A), as specified in the definition of
"Leverage Ratio".
<PAGE>
* For Investments permitted under Section 5.02(f)(i), the amount of the
requested Advance is capped at the Acquisition Facility Sublimit,
calculated as follows:
(a) Acquisition Facility Commitment ___________
(b) Acquisition Advances outstanding ___________
(c) common stock used in Investments pursuant to
Section 5.02(f)(i) ___________
(d) Subordinated Notes outstanding ___________
(e) ACQUISITION FACILITY SUBLIMIT
[(a) minus (b) minus (c) minus (d)] ___________
B. RATIO OF REQUESTED ACQUISITION ADVANCE PLUS PROCEEDS USED
FROM THE ASSET SALE BLOCKED ACCOUNT TO EBITDA FOR PRIOR 12
MONTHS OF THE PERSON OR ASSETS ACQUIRED PURSUANT TO
SECTION 5.02(f)(i) WITH SUCH ADVANCE OR PROCEEDS
(1) amount of requested Acquisition Advance
used for the acquisition of the Person or assets
acquired pursuant to Section 5.02(f)(i) __________
(2) amount of proceeds from the Asset Sale Blocked
Account to be drawn simultaneously with the requested
Acquisition Advance for the acquisition of the Person
or assets pursuant to Section 5.02(f)(i) __________
(3) NUMERATOR TOTAL
[sum of (1) and (2)] __________
(4) EBITDA for the prior 12 months of the Person or assets
acquired pursuant to Section 5.02(f)(i) __________
(5) RATIO [(3) divided by (4)] __________
<PAGE>
C. CAP ON AGGREGATE AMOUNT OF INVESTMENTS PURSUANT TO
5.02(f)(i)
(1) aggregate amount of Acquisition Advances used for all
acquisitions of Persons or assets pursuant to Section
5.02(f)(i) (including the requested Acquisition Advance) __________
(2) aggregate amount of proceeds from the Asset Sale
Blocked Account (including proceeds drawn simultaneously
with the requested Acquisition Advance) used for all
acquisitions of Persons or assets pursuant to
Section 5.02(f)(i) __________
(3) aggregate amount of common stock used for all
acquisitions of Persons or assets pursuant to
Section 5.02(f)(i) __________
(4) TOTAL
[sum of (1) through (3)] __________
<PAGE>
SCHEDULE III
SECTION 5.02(g)(i)
CALCULATIONS
FOR PAYMENT OF DIVIDENDS OR ADVANCING OF FUNDS BY THE BORROWER
A. CALCULATION OF LEVERAGE RATIO __________
(1) outstanding Term Loan A Advances __________
(2) outstanding Term Loan B Advances __________
(3) outstanding Acquisition Advances __________
(4) outstanding Working Capital Advances __________
(5) outstanding Letter of Credit Advances __________
(6) amount of outstanding other Funded Debt(1) __________
(7) amount of requested Advance* __________
(8) TOTAL FUNDED DEBT
[sum of (1) through (7)] __________
(9) principal amount of the NutraMax Note
to the extent secured by the NutraMax Letter of Credit __________
(10) NUMERATOR TOTAL
[(8) minus (9)] __________
(11) Consolidated EBITDA for the Rolling Period
ended as of the most recent period for which
financial statements were required to be furnished
pursuant to Sections 5.03(b), (c) or (d) __________
(12) LEVERAGE RATIO
[(10) divided by (11)] __________
- ----------
(1) excluding (i) contingent obligations of the type described in clause (f) or
(h) in the definition of "Debt" and (ii) Debt permitted under Section
5.02(b)(i)(A) (Parent Guarantor Debt-A), as specified in the definition of
"Leverage Ratio".
<PAGE>
* For Investments permitted under Section 5.02(g)(i), the amount of the
requested Advance is capped at the Acquisition Facility Sublimit,
calculated as follows:
(a) Acquisition Facility Commitment __________
(b) Acquisition Advances outstanding __________
(c) Subordinated Notes outstanding __________
(d) ACQUISITION FACILITY SUBLIMIT
[(a) minus (b) minus (c)] __________
B. THE AGGREGATE AMOUNT OF ACQUISITION ADVANCES AND
ADVANCES FROM THE ASSET SALE BLOCKED ACCOUNT USED BY THE
BORROWER TO PAY DIVIDENDS OR ADVANCE FUNDS DIRECTLY OR
INDIRECTLY TO MEDIQ TO PERMIT MEDIQ TO REPURCHASE THE
COMMON STOCK OF MEDIQ AND TO PAY CASH DIVIDENDS __________
<PAGE>
EXHIBIT C TO THE
CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of October 1, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") among MEDIQ/PRN LIFE SUPPORT SERVICES, INC., a Delaware corporation
(the "Borrower"),MEDIQ Incorporated, a Delaware corporation and PRN Holdings,
Inc., a Delaware corporation, as Parent Guarantors, the Lender Parties (as
defined in the Credit Agreement), Banque Nationale de Paris, as Administrative
Agent and Initial Issuing Bank, and NationsBank N.A., as Documentation Agent.
Terms defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, an interest in and to the
Assignor's rights and obligations under the Credit Agreement as of the date
hereof equal to the uniform percentage interest specified on Schedule 1 hereto
of all outstanding rights and obligations under the Credit Agreement Facility or
Facilities specified on Schedule 1 hereto. After giving effect to such sale and
assignment, the Assignee's Commitments and the amount of the Advances owing to
the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of, or the perfection or priority of any lien or security interest
created or purported to be created under or in connection with, the Loan
Documents or any other instrument or document furnished pursuant thereto; (iii)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Loan Party or the performance or observance by
any Loan Party of any of its obligations under any Loan Document or any other
instrument or document furnished pursuant thereto; and (iv) attaches the Note or
Notes held by the Assignor and requests that the Administrative Agent exchange
such Note or Notes for a new Note or Notes payable to the order of the Assignee
in an amount equal to the Commitments assumed by the Assignee pursuant hereto or
new Notes payable to the order of the Assignee in an amount equal to the
Commitments assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitments retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.
<PAGE>
C-2
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor or any other Lender Party
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Loan Documents
as are delegated to the Administrative Agent by the terms thereof, together with
such powers and discretion as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a Lender
Party; and (vi) attaches any U.S. Internal Revenue Service forms required under
Section 2.12 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance and recording by the
Administrative Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by the Administrative
Agent, unless otherwise specified on Schedule 1 hereto, but in no event before
recording.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender Party thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement (and, if the Assignment
and Acceptance covers all or the remaining portion of the Assignor's rights and
obligations under the Credit Agreement, such Assignor shall cease to be a party
thereto).
6. Upon such acceptance and recording by the Administrative Agent, from and
after the Effective Date, the Administrative Agent shall make all payments under
the Credit Agreement and the Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute
<PAGE>
C-3
one and the same agreement. Delivery of an executed counterpart of Schedule 1 to
this Assignment and Acceptance by telecopier shall be effective as delivery of a
manually executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
As to each _______ Facility in respect of which an interest is being assigned:
Percentage interest assigned: __________%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of Advances assigned: $__________
Principal amount of Note payable to Assignee: $__________
Principal amount of Note payable to Assignor: $__________
Effective Date (if other than date of acceptance by Agent):
_________ __, ____ (1)
[NAME OF ASSIGNOR], as Assignor
By ___________________________________
Title:
Dated: _________ __, ____
[NAME OF ASSIGNEE], as Assignee
By ___________________________________
Title:
Dated: _________ __, ____
Domestic Lending Office:
Eurodollar Lending Office:
- ----------
(1) This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Administrative Agent.
<PAGE>
Schedule I-2
ACCEPTED (2)[AND APPROVED] this
______ day of _________, _____
BANQUE NATIONALE DE PARIS,
as Administrative Agent
By ________________________________
Title:
By ________________________________
Title:
(2)[APPROVED this ___ day of ______, _____
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
By ________________________________
Title:]
- ----------
(2) Required if the Assignee is an Eligible Assignee solely by reason of clause
(vii) of the definition of Eligible Assignee.
<PAGE>
EXHIBIT D TO THE
CREDIT AGREEMENT
FORM OF SECURITY AGREEMENT
Dated October 1, 1996
from
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF
as Grantors
to
BANQUE NATIONALE DE PARIS
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Grant of Security.................................................. 2
2. Security for Obligations........................................... 6
3. Grantors Remain Liable............................................. 6
4. Delivery of Security Collateral, Account Collateral, Agreement
Collateral and Receivables......................................... 6
5. Maintaining the L/C Cash Collateral Account and the Asset Sale
Blocked Account ................................................... 7
6. Maintaining the Blocked Accounts................................... 7
7. Investing of Amounts in the L/C Cash Collateral Account and the
Asset Sale Blocked Account......................................... 8
8. Release of Amounts................................................. 9
9. Representations and Warranties..................................... 9
10. Further Assurances................................................. 11
11. As to Equipment and Inventory...................................... 13
12. Insurance.......................................................... 14
13. Place of Perfection; Records; Collection of Receivables............ 15
14. Voting Rights; Dividends; Etc...................................... 16
15. As to the Assigned Agreements...................................... 17
16. Transfers and Other Liens; Additional Shares....................... 18
17. Administrative Agent Appointed Attorney-in-Fact.................... 18
18. Administrative Agent May Perform................................... 19
19. The Administrative Agent's Duties.................................. 19
20. Remedies........................................................... 19
21. Indemnity and Expenses............................................. 21
22. Security Interest Absolute......................................... 21
23. Amendments; Waivers; Etc........................................... 22
24. Addresses for Notices.............................................. 22
25. Continuing Security Interest; Assignments.......................... 23
26. Release and Termination............................................ 23
<PAGE>
ii
Section Page
27. The Mortgages...................................................... 24
28. Execution in Counterparts.......................................... 24
29. Governing Law; Terms............................................... 24
Schedule I - Initial Pledged Shares and Initial Pledged Debt
Schedule II - Assigned Agreements
Schedule III - Locations of Equipment and Inventory
Schedule IV - Trade Names
Schedule V - Blocked Accounts and Other Bank Accounts
Exhibit A - Form of Blocked Account Letter
Exhibit B - Form of Consent and Agreement
Exhibit C - Form of Security Agreement Supplement
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT dated October 1, 1996 made by the Persons listed on
the signature pages hereof and the Additional Grantors (as defined in Section
23(b)) (such Persons so listed and the Additional Grantors being, collectively,
the "Grantors") to BANQUE NATIONALE DE PARIS ("BNP"), as administrative agent
(the "Administrative Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
PRELIMINARY STATEMENTS.
(1) MEDIQ/PRN Life Support Services, Inc., a Delaware corporation (the
"Borrower"), has entered into a Credit Agreement dated as of October 1, 1996
(said Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Credit Agreement"), with BNP, as
Administrative Agent, NationsBank as Documentation Agent and the Lender Parties
party thereto. Capitalized terms used herein and not otherwise defined are used
herein as defined in the Credit Agreement.
(2) It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
that each Grantor shall have granted the assignment and security interest and
made the pledge and assignment contemplated by this Agreement.
(3) Each Grantor is the owner of the shares of stock set forth
opposite such Grantor's name in Part I of Schedule I hereto and issued by the
corporations indicated therein and of the indebtedness set forth opposite such
Grantor's name in Part II of Schedule I hereto and issued by the obligors
indicated therein.
(4) The Borrower has opened a non-interest bearing cash collateral
account (the "Asset Sale Blocked Account") with BNP at its office at 499 Park
Avenue, New York, New York 10022, Account No. 202506-001-48, in the name of the
Borrower but under the sole control and dominion of the Administrative Agent and
subject to the terms of this Agreement.
(5) The Borrower has opened a non-interest bearing cash collateral
account (the "L/C Cash Collateral Account") with BNP at its office at 499 Park
Avenue, New York, New York 10022, Account No. 200875-001-77, in the name of the
Borrower but under the sole control and dominion of the Administrative Agent and
subject to the terms of this Agreement.
(6) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Credit Agreement.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge
Agreements with the Borrower from time to time, each Grantor hereby agrees with
the Administrative Agent for the ratable benefit of the Secured Parties as
follows:
SECTION 1. Grant of Security. Each Grantor hereby assigns and pledges
to the Administrative Agent for the ratable benefit of the Secured Parties, and
hereby grants to the Administrative Agent for the ratable benefit of the Secured
Parties a security interest in, the following, in each case, as to each type of
property described below, whether now owned or hereafter acquired by such
Grantor, wherever located and whether now or hereafter existing (the
"Collateral"):
(a) All of the following (the "Security Collateral"):
(i) the shares of stock set forth opposite such Grantor's name in
Part I of Schedule I hereto and issued by the corporations indicated
therein (collectively referred to herein as the "Initial Pledged
Shares", and together with the shares referred to in clause (iii)
below, the "Pledged Shares"), together with the certificates
representing such Initial Pledged Shares and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such Initial Pledged Shares;
(ii) the indebtedness (whether or not evidenced by instruments)
set forth opposite such Grantor's name in Part II of Schedule I hereto
and issued by the obligors indicated therein (collectively referred to
herein as the "Initial Pledged Debt", and together with the
indebtedness referred to in clause (iv) below, the "Pledged Debt") and
the instruments (if any) evidencing such Initial Pledged Debt, all
security therefor and all interest, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Initial Pledged Debt;
(iii) all additional shares of stock of any issuer of any Initial
Pledged Shares or of any other Loan Party or any Subsidiary of any
Loan Party or of any other Person from time to time acquired by such
Grantor in any manner, and all additional shares of stock of each
other Subsidiary of such Grantor to the extent required pursuant to
Section 5.01(m) of the Credit Agreement, together with the
certificates representing such additional shares and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such shares;
<PAGE>
3
(iv) all additional indebtedness from time to time owed to such
Grantor by any obligor of the Initial Pledged Debt (whether or not
evidenced by instruments) and the instruments evidencing such
indebtedness (if any), and all additional indebtedness owed to such
Grantor by any other obligor to the extent required pursuant to
Section 5.01(m) of the Credit Agreement, all security therefor and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness; and
(v) within five days after acquiring or organizing any foreign
Subsidiary or joint venture or any domestic joint venture, (A) in the
case of any foreign Subsidiary or joint venture, 66% of the total
outstanding shares or other ownership interests of such Person held by
such Grantor and (B) in the case of any domestic joint venture, 100%
of the shares or other ownership interests of such Person held by such
Grantor;
(b) All of the following (collectively, the "Account Collateral"):
(i) the L/C Cash Collateral Account, all funds held therein and
all certificates and instruments, if any, from time to time
representing or evidencing the L/C Cash Collateral Account;
(ii) the Asset Sale Blocked Account, all funds held therein and
all certificates and instruments, if any, from time to time
representing or evidencing the Asset Sale Blocked Account;
(iii) all Blocked Accounts (as hereinafter defined), all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing the Blocked Accounts;
(iv) all other deposit accounts of such Grantor, all funds held
therein and all certificates and instruments, if any, from time to
time representing or evidencing such deposit accounts;
(v) all Collateral Investments (as hereinafter defined) from time
to time and all certificates and instruments, if any, from time to
time representing or evidencing the Collateral Investments;
(vi) all notes, certificates of deposit, deposit accounts, checks
and other instruments from time to time hereafter delivered to or
otherwise possessed by the Administrative Agent for or on behalf of
such Grantor,
<PAGE>
4
including, without limitation, those delivered to or possessed in
substitution for or in addition to any or all of the then existing
Account Collateral; and
(vii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral;
(c) All of such Grantor's right, title and interest, in and to all
equipment in all of its forms (including, without limitation, (i) all adult
and infant ventilators, portable volume ventilators, adult, infant,
neonatal and fetal monitors, infant apnea monitors, phototherapy units,
pediatric aerosol tents, compressors, infusion and suction pumps and poles,
incubators, infant warmers, pulse oximeters, sequential compression devices
and all other medical equipment of every kind and nature, and (ii) all
machinery, equipment, office machinery, furniture, computers, computer
hardware, automotive equipment, trucks and motor vehicles), wherever
located, all fixtures and all parts thereof and all accessions and
additions thereto, parts and appurtenances thereof, substitutions therefor
and replacements thereof (any and all such equipment, fixtures, accessions,
additions, parts, appurtenances, substitutions and replacements being the
"Equipment");
(d) All of such Grantor's right, title and interest, in and to all
inventory in all of its forms, wherever located (including, but not limited
to, (i) all medical equipment and raw materials and work in process
therefor, finished goods thereof and materials used or consumed in the
manufacture, production or preparation thereof, (ii) goods in which such
Grantor has an interest in mass or a joint or other interest or right of
any kind (including, without limitation, goods in which such Grantor has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed by such Grantor), and all accessions thereto and products
thereof and documents therefor (any and all such inventory, accessions,
products and documents being the "Inventory");
(e) All of such Grantor's right, title and interest, in and to all
accounts, contract rights, chattel paper, instruments, deposit accounts and
general intangibles and all other obligations of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services and whether or not earned by
performance (including, without limitation, any rights with respect to
workers' compensation or other deposits made by such Grantor and any rights
to receive tax refunds or other refunds, reimbursements and payments from
any federal, state or local government or any political subdivision, agency
or instrumentality thereof), and all rights now or hereafter existing in
and to all security agreements, leases and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, deposit accounts, general
<PAGE>
5
intangibles or obligations (any and all such accounts, contract rights,
chattel paper, instruments, deposit accounts, general intangibles and
obligations, to the extent not referred to in clause (a), (b), (f) or (g)
of this Section 1, being the "Receivables", and any and all such leases,
security agreements and other contracts being the "Related Contracts");
(f) All of such Grantor's right, title and interest in and to each of
the agreements listed on Schedule II hereto, and each Hedge Agreement to
which such Grantor is now or may hereafter become a party, in each case as
such agreements may be amended, supplemented or otherwise modified from
time to time (collectively, the "Assigned Agreements"), including, without
limitation, (i) all rights of such Grantor to receive moneys due and to
become due under or pursuant to the Assigned Agreements, (ii) all rights of
such Grantor to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Assigned Agreements, (iii) claims of such
Grantor for damages arising out of or for breach of or default under the
Assigned Agreements and (iv) the right of such Grantor to terminate the
Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder (all such Collateral being the
"Agreement Collateral");
(g) All general intangibles of such Grantor (other than general
intangibles for moneys due or to become due which are covered by Section
1(e) above, including, without limitation, (i) all partnership, corporate
and other interests in and to any Person (other than any Security
Collateral), (ii) all governmental permits, licenses (and any subsequent
renewals thereof), franchises, registrations, authorizations and approvals
and (iii) all trademarks, trade names, trade styles, trade secrets, service
marks, logos, copyrights, patents, patent applications and all licenses,
license applications, registrations and good will relating to or associated
with any of the foregoing (including, without limitation, all such items
listed on Schedule 4.01(ii));
(h) To the extent not otherwise covered above, all of the Borrower's
right, title and interest in and to any funds or other property under or
pursuant to the 12.125% Indenture, including, without limitation, the
Borrower's right to receive monies or U.S. Government Obligations (as
defined in the 12.125% Indenture) from the Trustee or the Paying Agent
(each such term as defined in the 12.125% Indenture) under or pursuant to
the 12.125% Indenture;
(i) All proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of the
types described in clauses (a) through (i) of this Section 1) and, to the
extent not otherwise included, all (i) payments under insurance (whether or
not the Administrative Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or
<PAGE>
6
damage to or otherwise with respect to any of the foregoing Collateral, and
(ii) cash; and
(j) With respect to any Alternative Lender, the Collateral shall be
limited to all of the foregoing Collateral except for Margin Stock
Collateral.
SECTION 2. Security for Obligations. This Agreement secures, in the
case of each Grantor, the payment of all Obligations of such Grantor now or
hereafter existing under the Loan Documents, whether direct or indirect,
absolute or contingent, including any extensions, modifications, substitutions,
amendments and renewals thereof, whether for principal (including reimbursement
for amounts drawn under Letters of Credit), interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise (all
such Obligations secured hereby being the "Secured Obligations"). Without
limiting the generality of the foregoing, this Agreement secures, as to each
Grantor, the payment of all amounts that constitute part of the Secured
Obligations of such Grantor and that would be owed by such Grantor to the
Secured Parties under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Grantor.
SECTION 3. Grantors Remain Liable. Anything contained herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of its rights hereunder shall not release any
Grantor from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) no Secured Party shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement or any other Loan Document, nor shall any Secured Party
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. Delivery of Security Collateral, Account Collateral,
Agreement Collateral and Receivables. All certificates or instruments
representing or evidencing any Security Collateral, Account Collateral,
Agreement Collateral or Receivables (and, to the extent requested by the
Administrative Agent, representing or evidencing any other Collateral) shall be
delivered to and held by or on behalf of the Administrative Agent pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Administrative Agent; provided,
however, that this Section 4 shall not apply to any certificate of title
representing automotive equipment, trucks and motor vehicles referred to in
Section 1(c). Upon and after an Event of Default, the Administrative Agent shall
have the right, at any time in its discretion and without notice to any Grantor,
to
<PAGE>
7
transfer to or to register in the name of the Administrative Agent or any of its
nominees any or all of the Security Collateral and Account Collateral, subject
only to the revocable rights specified in Section 14(a). In addition, upon and
after an Event of Default, the Administrative Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing the
Security Collateral or Account Collateral for certificates or instruments of
smaller or larger denominations.
SECTION 5. Maintaining the L/C Cash Collateral Account and the Asset
Sale Blocked Account. (a) So long as any Advance shall remain unpaid, any Letter
of Credit or Bank Hedge Agreement shall be outstanding or any Lender Party shall
have any Commitment under the Credit Agreement:
(i) The Borrower will maintain the L/C Cash Collateral Account with
BNP.
(ii) It shall be a term and condition of the L/C Cash Collateral
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the L/C Cash Collateral Account, and except as
otherwise provided by the provisions of Section 20, that no amount
(including interest on Collateral Investments) shall be paid or released to
or for the account of, or withdrawn by or for the account of, the Borrower
or any other Person from the L/C Cash Collateral Account.
(b) All Excess Cash from Permitted Asset Sales shall be promptly deposited
in the Asset Sale Blocked Account. It shall be a term and condition of the Asset
Sale Blocked Account, and except as otherwise provided by the provisions of
Section 8 and Section 20, that no amount (including interest on Collateral
Investments) shall be paid or released to or for the account of, or withdrawn by
or for the account of, the Borrower or any other Person from the Asset Sale
Blocked Account, provided, however, that so long as no Default has occurred and
is continuing, upon the request of the Borrower, such interest shall be released
to the Borrower on the last day of each fiscal quarter.
The L/C Cash Collateral Account and the Asset Sale Blocked Account shall be
subject to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other appropriate banking or
governmental authority, as may now or hereafter be in effect.
SECTION 6. Maintaining the Blocked Accounts. So long as any Advance
shall remain unpaid, any Letter of Credit or Bank Hedge Agreement shall be
outstanding or any Lender Party shall have any Commitment under the Credit
Agreement:
(a) Each Grantor shall, to the extent such Grantor shall have at any
time an aggregate amount on deposit in excess of $250,000, maintain blocked
deposit accounts
<PAGE>
8
("Blocked Accounts") only with banks ("Blocked Account Banks") that have
entered into letter agreements in substantially the form of Exhibit A (or
such other form as the Administrative Agent and such Grantor shall agree)
with such Grantor and the Administrative Agent ("Blocked Account Letters").
(b) At the end of each Business Day, the Grantors required to maintain
Blocked Accounts pursuant to the foregoing paragraph shall deposit all cash
in Blocked Accounts; provided, however, that the provisions of this Section
6(b) shall not apply to (i) the Citibank Account and payments required to
be made thereto and (ii) any deposit account held in the name of the
Borrower at PNC Bank for miscellaneous cash receipts and payments thereto
so long as the aggregate amount on deposit in such accounts shall not
exceed $25,000.
(c) Upon any termination of any Blocked Account Letter or other
agreement with respect to the maintenance of a Blocked Account by any
Grantor required to maintain any Blocked Account pursuant to Section 6(a)
or any Blocked Account Bank, such Grantor shall immediately notify all
Obligors that were making payments to such Blocked Account to make all
future payments to another Blocked Account. Following the occurrence and
during the continuance of an Event of Default, such Grantor agrees to
terminate any or all Blocked Accounts and Blocked Account Letters upon
request by the Administrative Agent.
SECTION 7. Investing of Amounts in the L/C Cash Collateral Account and
the Asset Sale Blocked Account. If requested by the Borrower, the Administrative
Agent will, subject to the provisions of Sections 8 and 20, from time to time
(a) invest amounts on deposit in the L/C Cash Collateral Account and the Asset
Sale Blocked Account in such Cash Equivalents in the name of the Administrative
Agent or as to which all action required by Section 10 shall have been taken as
the Borrower may select and the Administrative Agent may approve and (b) invest
interest paid on the Cash Equivalents referred to in clause (a) above, and
reinvest other proceeds of any such Cash Equivalents that may mature or be sold,
in each case in such Cash Equivalents in the name of the Administrative Agent or
as to which all actions required by Section 10 shall have been taken as the
Borrower may select and the Administrative Agent may approve (the Cash
Equivalents referred to in clauses (a) and (b) above being collectively
"Collateral Investments"). Interest and proceeds that are not invested or
reinvested in Collateral Investments as provided above shall be deposited and
held in the L/C Cash Collateral Account or the Asset Sale Blocked Account, as
the case may be; provided, however, that so long as no Default has occurred and
is continuing, upon the request of the Borrower, such interest deposited and
held in the Asset Sale Blocked Account shall be released to the Borrower on the
last day of each fiscal quarter.
<PAGE>
9
SECTION 8. Release of Amounts. Any amount on deposit in the Asset Sale
Blocked Account shall be released by the Administrative Agent in accordance with
the terms and conditions set forth in Section 2.16 of the Credit Agreement.
SECTION 9. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for the liens and security interests created under this
Agreement or permitted by the Credit Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of
such Collateral (including, without limitation, accounts and general
intangibles relating to the Collateral) or listing such Grantor or any of
its Subsidiaries or any trade name of such Grantor or any of its
Subsidiaries as debtor with respect to Collateral is on file in any
recording office, except such as may have been filed in favor of the
Administrative Agent relating to the Loan Documents or as permitted by
Section 5.02(a) of the Credit Agreement.
(b) The Pledged Shares owned by such Grantor have been duly authorized
and validly issued and are fully paid and non-assessable. The Pledged Debt
held by such Grantor has been duly authorized, authenticated or issued and
delivered, is the legal, valid and binding obligation of the issuers
thereof and is not in default.
(c) The Initial Pledged Shares owned by such Grantor constitute the
percentage of the issued and outstanding shares of stock of the issuers
thereof indicated on Schedule I hereto. The Initial Pledged Debt
constitutes all of the outstanding indebtedness owed to such Grantor for
money borrowed or for the deferred purchase price of property of the
issuers thereof.
(d) On the date hereof and thereafter on the most recent date on which
a revised Schedule III is required to be furnished to the Administrative
Agent pursuant to Section 11(d), all of the Equipment and Inventory of such
Grantor, other than such Equipment and Inventory as has been rented or
leased to such Grantor's customers, is located at the places specified in
Schedule III hereto. The chief place of business and chief executive office
of such Grantor and the office where such Grantor keeps its records
concerning the Receivables, and the original copies of each Assigned
Agreement and all originals of all Related Contracts and all chattel paper,
if any, that evidence Receivables (other than (i) those delivered to the
Administrative Agent and (ii) rental contracts located in the ordinary
course of business at the Borrower's branch offices), are located at the
address set forth on the signature pages hereto beneath such Grantor's
name. Such Grantor has delivered to the Administrative Agent the originals
of all agreements, certificates or instruments representing or
<PAGE>
10
evidencing any Collateral and all security therefor and guaranties thereof,
in each case to the extent that the delivery thereof to the Administrative
Agent is required under Section 4 above. None of the Receivables or
Agreement Collateral is evidenced by a promissory note or other instrument
that is required to be delivered to the Administrative Agent hereunder and
has not been so delivered (other than promissory notes issued to the
Borrower with respect to amounts due to the Borrower, in the ordinary
course of business on a basis consistent with current practice).
(e) The Assigned Agreements to which such Grantor is a party, true and
complete copies of which have been furnished to each Lender Party, have
been duly authorized, executed and delivered by all parties thereto, have
not been amended or otherwise modified, are in full force and effect and
are binding upon and enforceable against all parties thereto in accordance
with their terms. There exists no default under any Assigned Agreement to
which such Grantor is a party by any party thereto. Each party to any
Assigned Agreement to which such Grantor is a party (other than such
Grantor) has executed and delivered to such Grantor a consent, in
substantially the form of Exhibit B hereto or otherwise in form and
substance satisfactory to the Administrative Agent, to the assignment of
the Agreement Collateral to the Administrative Agent for the benefit of the
Secured Parties pursuant to this Agreement.
(f) Such Grantor has no Blocked Accounts or other deposit accounts
other than the Blocked Accounts listed on Part I of Schedule V hereto and
the other deposit accounts listed on Part II of Schedule V hereto. Each
Grantor has instructed all existing Obligors to make all payments to a
Blocked Account to the extent required by the terms hereof.
(g) This Agreement, the pledge of the Security Collateral pursuant
hereto and the pledge and assignment of the Account Collateral pursuant
hereto create in favor of the Administrative Agent for the benefit of the
Secured Parties a valid and perfected security interest in the Collateral
of such Grantor, securing the payment of the Secured Obligations of such
Grantor, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken. Such
security interest is subject in priority only to (i) the lien imposed on
the Collateral pursuant to the 12.125% Indenture as in effect on the date
of the Initial Extension of Credit, (ii) the existing lien of Meridian Bank
on the promissory note issued by Medifac, Inc. to MEDIQ, (iii) the existing
lien of Meridian Bank on the promissory note issued by Granary Partners,
L.P. to MEDIQ, and (iv) the prior liens permitted under Section 5.02(a) of
the Credit Agreement. Upon the release of the liens referred to in the
foregoing clauses (i), (ii), (iii) and (iv), such security interest shall
be a first priority security interest.
<PAGE>
11
(h) Such Grantor has no trade names except as set forth on Schedule IV
hereto; such trade names were adopted in good faith; and, to the best of
such Grantor's knowledge, there exist no adverse claims against such trade
names as of the Closing Date.
(i) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required (i) for the grant
by such Grantor of the assignment and security interest granted hereby, for
the pledge by such Grantor of any Security Collateral hereunder or for the
execution, delivery or performance of this Agreement by such Grantor, (ii)
for the perfection or maintenance of the pledge, assignment and security
interest created hereunder (including the first priority nature of such
pledge, assignment and security interest, except as otherwise permitted),
except for the filing of financing and continuation statements under the
Uniform Commercial Code, which financing statements have been duly filed,
or (iii) for the exercise by the Administrative Agent of its voting or
other rights provided for in this Agreement or the remedies in respect of
the Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of any portion of the Security Collateral
by laws affecting the offering and sale of securities generally.
(j) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(k) Such Grantor has, independently and without reliance upon any
Secured Party and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement, and such Grantor has established adequate means of obtaining
from any other Loan Parties on a continuing basis information pertaining
to, and is now and on a continuing basis will be completely familiar with,
the financial condition, operations, properties and prospects of such other
Loan Parties.
SECTION 10. Further Assurances. (a) Each Grantor agrees that from time
to time, at the expense of such Grantor, such Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
such Grantor believes may be necessary or desirable, or that the Administrative
Agent may reasonably request, in order to perfect and protect any pledge,
assignment or security interest granted or purported to be granted hereby or to
enable the Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will: (i) mark conspicuously (A) each invoice issued in
connection with the rental or lease of any Equipment or Inventory, from 60 days
after the Initial Extension of Credit, with the following legend: "THIS
EQUIPMENT MAY BE SUBJECT TO A SECURITY INTEREST GRANTED TO BANQUE NATIONALE DE
PARIS AS
<PAGE>
12
ADMINISTRATIVE AGENT" and (B) each Assigned Agreement of such Grantor included
in the Collateral, and each of its records pertaining to the Collateral, with a
legend, in form and substance satisfactory to the Administrative Agent,
indicating that such Collateral is subject to the security interest granted
hereby, (ii) if any Collateral shall be evidenced by a promissory note or other
instrument (other than promissory notes permitted pursuant to Section
5.02(f)(ix) of the Credit Agreement), deliver and pledge to the Administrative
Agent for the benefit of the Secured Parties hereunder such note or instrument
duly indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Administrative Agent,
(iii) deliver and pledge to the Administrative Agent for the benefit of the
Secured Parties hereunder certificates representing the Pledged Shares
accompanied by undated stock powers executed in blank and evidence that all
other action that the Administrative Agent may deem necessary or desirable in
order to perfect and protect the liens and security interests created under this
Agreement has been taken and (iv) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Administrative Agent may
request, in order to perfect and preserve the pledge, assignment and security
interests granted or purported to be granted hereunder.
(b) Each Grantor hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of such
Grantor where permitted by law. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Administrative Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Administrative
Agent may reasonably request, all in reasonable detail.
(d) The Borrower will furnish to the Administrative Agent, at any time
within six months prior to the fifth anniversary of the date hereof, an opinion
of counsel acceptable to the Required Lenders to the effect that all financing
or continuation statements have been filed, and all other action has been taken,
to perfect and validate continuously from the date hereof the pledge, assignment
and security interests granted hereunder (excluding, in the case of perfection,
any Collateral in which a security interest may not be perfected by the filing
of a financing statement under the Uniform Commercial Code of any jurisdiction).
<PAGE>
13
SECTION 11. As to Equipment and Inventory. Each Grantor shall:
(a) On the date hereof and thereafter on the most recent date on which
a revised Schedule III is required to be furnished to the Administrative
Agent pursuant to Section 11(d), all of the Equipment and Inventory of such
Grantor, other than such Equipment and Inventory as has been rented or
leased to such Grantor's customers, shall be located at the places
specified in Schedule III hereto or at such other places in jurisdictions
where all action required by Section 10 shall have been taken with respect
to such Equipment and Inventory.
(b) Cause all of its Equipment and Inventory to be maintained and
preserved, as is reasonably required in the conduct of its business, in
good working order and condition, excluding (i) ordinary wear and tear and
(ii) properties that have become obsolete or no longer fit for their
intended purposes, and shall forthwith, or in the case of any loss or
damage to any of such Equipment or Inventory as soon as practicable after
the occurrence thereof, make or cause to be made all repairs, replacements
and other improvements in connection therewith which are necessary or
desirable to such end.
(c) Pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory; provided, however, that such Grantor shall not be required to
pay or discharge any such tax, assessment, charge, levy or claim (x) that
is being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, or (y) in respect of which the
Lien resulting therefrom, if any, attaches to its property and becomes
enforceable against its other creditors, to the extent that the aggregate
amount of all such taxes, assessments, charges or claims does not exceed
$250,000.
(d) Furnish to the Administrative Agent, at the same time as the
quarterly financial statements are required to be furnished to the
Administrative Agent pursuant to Section 5.03(c) of the Credit Agreement,
unless no revisions are required, a revised Schedule III specifying each
place where the Equipment and Inventory of such Grantor is located
excluding such Equipment or Inventory rented or leased to such Grantor's
customers. Such revised Schedule III shall be deemed to replace the then
existing Schedule III and shall be of full force and effect as of the date
of delivery of such Schedule to the Administrative Agent.
(e) In the event that Equipment and/or Inventory of the Grantors with
a book value equal to or greater than 10% of the aggregate book value of
all Equipment and Inventory of the Grantors' is relocated, in one move or
in a series of moves, from one county to another, furnish within five
Business Days after such relocation
<PAGE>
14
notice of such relocation to the Administrative Agent (such notice to
include the percentage book value of the relocated Equipment and Inventory
and the old and new locations of such Equipment and Inventory).
(f) For each leased location at which at any time Equipment and
Inventory of the Grantors with a book value equal to or greater than 10% of
the aggregate book value of the Equipment and Inventory is located, use its
good faith efforts to furnish at such time to the Administrative Agent a
landlord access letter or consent on terms and conditions reasonably
acceptable to the Administrative Agent.
SECTION 12. Insurance. (a) Each Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be reasonably
satisfactory to the Administrative Agent from time to time. Each policy for
liability insurance shall provide for all losses to be paid on behalf of the
Administrative Agent and such Grantor as their interests may appear, and each
policy for property damage insurance shall provide for all losses (except for
losses of less than $1,000,000 per occurrence) to be paid directly to the
Administrative Agent, except to the extent permitted to be paid to a Grantor
pursuant to Section 12(b). Each such policy shall in addition (i) name such
Grantor and the Administrative Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Administrative Agent) as
their interests may appear, (ii) contain the agreement by the insurer that any
loss thereunder shall be payable to the Administrative Agent notwithstanding any
action, inaction or breach of representation or warranty by such Grantor, (iii)
provide that there shall be no recourse against the Administrative Agent for
payment of premiums or other amounts with respect thereto and (iv) provide that
at least 10 days' prior written notice of cancellation or of lapse shall be
given to the Administrative Agent by the insurer. Each Grantor shall, if so
requested by the Administrative Agent, deliver to the Administrative Agent
certificates evidencing such insurance, make the original policies of such
insurance reasonably available for inspection by the Administrative Agent and,
as often as the Administrative Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Further, each Grantor
shall, at the request of the Administrative Agent, duly exercise and deliver
instruments of assignment of such insurance policies to comply with the
requirements of Section 10 and cause the insurers to acknowledge notice of such
assignment.
(b) Reimbursement under any insurance maintained by any Grantor
pursuant to this Section 12 may be paid directly to the Person who shall have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 12 is not
applicable, such Grantor shall make or cause to be made the necessary repairs to
or replacements of such Equipment or Inventory, and any proceeds of insurance
properly received by or released to such Grantor
<PAGE>
15
shall be used by such Grantor, except as otherwise required or permitted
hereunder or by the Credit Agreement to pay or as reimbursement for the cost of
such repairs or replacements.
(c) Upon the occurrence and during the continuance of any Event of
Default, all insurance payments in respect of such Equipment or Inventory shall
be paid to and applied by the Administrative Agent as specified in Section
20(b).
SECTION 13. Place of Perfection; Records; Collection of Receivables.
(a) Each Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Collateral; and
the original copies of the Assigned Agreements of such Grantor, and all
originals of all chattel paper which evidences or constitutes Receivables (other
than rental contracts located in the ordinary course of business at the
Borrower's branch offices), at the location therefor specified in Section 9(d)
or, upon 30 days' prior written notice to the Administrative Agent, at such
other locations in a jurisdiction where all actions required by Section 10 shall
have been taken with respect to the Collateral. Each Grantor will hold and
preserve such records, Assigned Agreements and chattel paper and will permit
representatives of the Administrative Agent at any time during normal business
hours to inspect and make abstracts from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), such Grantor
shall continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Receivables and Related Contracts. In connection with
such collections, upon and after an Event of Default, such Grantor may take
(and, at the Administrative Agent's direction, shall take) such action as such
Grantor or the Administrative Agent may deem necessary or advisable to enforce
collection of the Receivables and Related Contracts; provided, however, that the
Administrative Agent shall have the right upon the occurrence and during the
continuance of an Event of Default and upon written notice to the Borrower of
its intention to do so, to notify the Obligors under any Receivables or Related
Contracts of the assignment of such Receivables or Related Contracts to the
Administrative Agent and to direct such Obligors to make payment of all amounts
due or to become due to such Grantor thereunder directly to the Administrative
Agent and, upon such notification and at the expense of such Grantor, to enforce
collection of any such Receivables or Related Contracts, and to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by such Grantor of the
notice from the Administrative Agent referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including instruments) received by such
Grantor in respect of the Receivables or the Related Contracts shall be received
in trust for the benefit of the Administrative Agent hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Administrative Agent in the same form as so received (with any necessary
indorsement) to be applied as provided by the terms of the Credit Agreement and
(ii) such Grantor shall not adjust, settle or compromise the amount or payment
of any Receivable, release wholly or partly any obligor thereof, or allow any
credit or discount thereon.
<PAGE>
16
SECTION 14. Voting Rights; Dividends; Etc. (a) So long as no Default
under Section 6.01(a) or (f) of the Credit Agreement or Event of Default shall
have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose not inconsistent with the terms
of this Agreement or the other Loan Documents; provided, however, that no
Grantor shall exercise or refrain from exercising any such right if, in the
Administrative Agent's judgment, such action would have a material adverse
effect on the value of the Security Collateral or any part thereof.
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Security Collateral of such
Grantor if and to the extent that the payment thereof is not otherwise
prohibited by the terms of the Loan Documents; provided, however, that any
and all
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Security
Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Security Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral,
shall be, and shall be forthwith delivered to the Administrative Agent to
hold as, Security Collateral except as otherwise required under the Credit
Agreement and shall, if received by any Grantor, be received in trust for
the benefit of the Administrative Agent, be segregated from the other
property or funds of such Grantor and be forthwith delivered to the
Administrative Agent as Security Collateral in the same form as so received
(with any necessary indorsement).
(iii) The Administrative Agent shall execute and deliver (or cause to
be executed and delivered) to each Grantor all such proxies and other
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
<PAGE>
17
(b) Upon the occurrence and during the continuance of any Default
under Section 6.01(a) or (f) of the Credit Agreement or Event of Default:
(i) All rights of each Grantor (A) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 14(a)(i) shall, upon notice to
such Grantor by the Administrative Agent, cease, and (B) to receive the
dividends and interest payments that it would otherwise be authorized to
receive and retain pursuant to Section 14(a)(ii) shall automatically cease,
and all such rights shall thereupon become vested in the Administrative
Agent, which shall thereupon have the sole right to exercise or refrain
from exercising such voting and other consensual rights and to receive and
hold as Security Collateral such dividends and interest payments.
(ii) All dividends and interest payments that are received by any
Grantor contrary to the provisions of paragraph (i) of this Section 14(b)
shall be received in trust for the benefit of the Administrative Agent,
shall be segregated from other funds of such Grantor and shall be forthwith
paid over to the Administrative Agent as Security Collateral in the same
form as so received (with any necessary indorsement).
SECTION 15. As to the Assigned Agreements. (a) Each Grantor shall at
its expense:
(i) perform and observe all the terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements to which it is a party in full force and effect, enforce the
Assigned Agreements in accordance with the terms thereof and take all such
action to such end as may be requested from time to time by the
Administrative Agent; and
(ii) furnish to the Administrative Agent promptly upon receipt thereof
copies of all notices, requests and other documents received by such
Grantor under or pursuant to the Assigned Agreements to which it is a
party, and from time to time (A) furnish to the Administrative Agent such
information and reports regarding the Assigned Agreements and such other
Collateral of such Grantor as the Administrative Agent may reasonably
request, and (B) upon request of the Administrative Agent make to each
other party to any Assigned Agreement to which it is a party such demands
and requests for information and reports or for action as such Grantor is
entitled to make thereunder.
(b) Each Grantor agrees that it shall perform and observe all of the
terms and provisions of each Assigned Agreement to be performed or observed by
it, maintain each such Assigned Agreement in full force and effect, enforce such
Assigned Agreement in
<PAGE>
18
accordance with its terms, take all such action to such end as may be from time
to time requested by the Administrative Agent.
(c) Each Grantor hereby consents on its behalf and on behalf of its
Subsidiaries to the assignment and pledge to the Administrative Agent for the
ratable benefit of the Secured Parties of each Assigned Agreement to which it is
a party by any other Grantor hereunder.
SECTION 16. Transfers and Other Liens; Additional Shares. (a) Each
Grantor agrees that it shall not (i) sell, assign (by operation of law or
otherwise), lease or otherwise dispose of, or grant any option with respect to,
any of the Collateral of such Grantor (other than sales, assignments, options,
leases and other dispositions permitted under the terms of the Credit Agreement
including, without limitation, Section 5.02(e) of the Credit Agreement) or (ii)
create or suffer to exist any Lien upon or with respect to any of the Collateral
of such Grantor, except for the Liens created under the Collateral Documents or
permitted under the Credit Agreement.
(b) Each Grantor agrees that it shall (i) cause each issuer of the
Pledged Shares owned by such Grantor not to issue any stock or other securities
in addition to or in substitution for the Pledged Shares issued by such issuer,
except to such Grantor, and (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of any Pledged Shares.
SECTION 17. Administrative Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints for the term that this Agreement is in
effect the Administrative Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Administrative Agent's discretion, to
take any action and to execute any instrument that the Administrative Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Administrative Agent pursuant to Section 12,
(b) to ask for, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) or (b) above, and
<PAGE>
19
(d) to file any claims or take any action or institute any proceedings
that the Administrative Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with
the terms and conditions of any Assigned Agreement or the rights of the
Administrative Agent with respect to any of the Collateral.
SECTION 18. Administrative Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Administrative Agent may, but
without any obligation to do so and without further notice, itself perform, or
cause performance of, such agreement, and the expenses of the Administrative
Agent incurred in connection therewith shall be payable by such Grantor under
Section 21.
SECTION 19. The Administrative Agent's Duties. The powers conferred on
the Administrative Agent hereunder are solely to protect its and the other
Secured Parties' interest in the Collateral and shall not impose any duty upon
it to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Administrative Agent shall have no duty as to any Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Security Collateral,
whether or not the Administrative Agent or any other Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.
SECTION 20. Remedies. If any Event of Default shall have occurred and
be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
upon default under the New York Uniform Commercial Code as in effect at
such time (the "Code"), whether or not the Code applies to the affected
Collateral, and also may (i) require any Grantor to, and each Grantor
hereby agrees that it will at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the Collateral as
directed by the Administrative Agent and make it available to the
Administrative Agent at a place and time to be designated by the
Administrative Agent which is reasonably convenient to both parties; (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Administrative Agent may
deem
<PAGE>
20
commercially reasonable; (iii) occupy any premises owned or leased by any
Grantor where the Collateral or any part thereof is assembled or located
for a reasonable period in order to effectuate its rights and remedies
hereunder or under law, without obligation to such Grantor in respect of
such occupation; and (iv) exercise any and all rights and remedies of any
Grantor under or in connection with the Assigned Agreements, the
Receivables and the Related Contracts or otherwise in respect of the
Collateral, including, without limitation, any and all rights of such
Grantor to demand or otherwise require payment of any amount under, or
performance of any provision of, the Assigned Agreements, the Receivables
and the Related Contracts. Each Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to such Grantor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Administrative Agent
may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) Any cash held by the Administrative Agent as Collateral and all
cash proceeds received by the Administrative Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Administrative Agent, be held by
the Administrative Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 21) in whole or in part by the
Administrative Agent for the ratable benefit of the Secured Parties against
all or any part of the Secured Obligations as permitted or required by the
Credit Agreement. Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all the Secured
Obligations shall be paid over to the Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
(c) All payments received by any Grantor under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Administrative Agent and the other
Secured Parties, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Administrative Agent in the same form
as so received (with any necessary indorsement).
(d) The Administrative Agent may, without notice to the Borrower
except as required by law and at any time or from time to time, charge,
set-off and otherwise apply all or any part of the Secured Obligations
against the L/C Cash Collateral Account and the Asset Sale Blocked Account
or any part thereof.
<PAGE>
21
SECTION 21. Indemnity and Expenses. (a) Each Grantor agrees to defend,
protect, indemnify and hold harmless each Secured Party from and against any and
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from such Secured Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction.
(b) Each Grantor will upon demand pay to the Administrative Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Administrative
Agent may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from or other realization upon, any of the Collateral of such Grantor, (iii) the
exercise or enforcement of any of the rights of the Administrative Agent or any
other Secured Party against such Grantor, or (iv) the failure by such Grantor to
perform or observe any of the provisions hereof.
(c) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Grantors contained in this Section 21 shall survive the
payment in full of principal, interest and all other amounts payable hereunder
and under any of the other Loan Documents.
SECTION 22. Security Interest Absolute. The obligations of each
Grantor under this Agreement are independent of the Secured Obligations, and a
separate action or actions may be brought and prosecuted against such Grantor to
enforce this Agreement, irrespective of whether any action is brought against
the other Grantors or whether the other Grantors are joined in any such action
or actions. All rights of the Administrative Agent and the pledge, assignment
and security interest hereunder, and all obligations of each Grantor hereunder,
shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any Loan Document, any
Hedge Agreement or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from any Loan
Document or any Hedge Agreement, including, without limitation, any
increase in the Secured Obligations resulting from the extension of
additional credit to any Grantor or any of its Subsidiaries or otherwise;
(iii) any taking, exchange, release or nonperfection of any other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
<PAGE>
22
(iv) any manner of application of collateral, or proceeds thereof, to
all or any of the Secured Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Secured Obligations or
any other assets of the Borrower or any of its Subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of any Grantor or any of its Subsidiaries; or
(vi) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, such Grantor or a third-party grantor of a
security interest.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by any Secured Party or by any other Person upon the
insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as
though such payment had not been made.
SECTION 23. Amendments; Waivers; Etc. (a) No amendment or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Administrative Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit C hereto (each a
"Security Agreement Supplement"), (i) such Person shall be referred to as an
"Additional Grantor" and shall be and become a Grantor and each reference in
this Agreement to "Grantor" shall also mean and be a reference to such
Additional Grantor, and (ii) the annexes attached to each Security Agreement
Supplement shall be incorporated into and become a part of and supplement
Schedules I, II, III, IV and V hereto, and the Administrative Agent may attach
such annexes as supplements to such Schedules; and each reference to such
Schedules shall mean and be a reference to such Schedules as supplemented
pursuant hereto.
SECTION 24. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and, mailed, telecopied, telegraphed,
telexed or delivered to the Borrower or to the Agent, as the case may be, in
each case addressed to it at its address specified in the Credit Agreement or,
as to either party at such other address as shall be designated by such
<PAGE>
23
party in a written notice to each other party complying as to delivery with the
terms of this Section 24. All such notices and other communications shall, when
mailed, telecopied, telegraphed, telexed or cabled, respectively, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively,
addressed as aforesaid.
SECTION 25. Continuing Security Interest; Assignments. This Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until the latest of the cash payment in full of
the Secured Obligations, the Termination Date and the termination or expiration
of all Bank Hedge Agreements, (b) be binding upon each Grantor, its successors
and assigns and (c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Secured Parties and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (c), any Lender Party may assign or otherwise transfer
all or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitments, the
Advances owing to it and the Note or Notes held by it) to any other Person and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender Party herein or otherwise, in each case as
provided in Section 8.07 of the Credit Agreement. No Grantor shall have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Secured Parties.
SECTION 26. Release and Termination. (a) Upon any sale, lease,
transfer or other disposition of any item of Collateral (including, without
limitation, as a result of the sale, in accordance with the terms of the Loan
Documents, of the Person that owns such Collateral) in accordance with the terms
of the Loan Documents (other than sales or rentals of Equipment and Inventory in
the ordinary course of business), the Administrative Agent will, at any
Grantor's expense, execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted hereby; provided,
however, that (i) at the time of such request and such release no Event of
Default shall have occurred and be continuing, (ii) the Borrower shall have
delivered to the Administrative Agent, at least five Business Days prior to the
date of the proposed release, a written request for release describing the item
of Collateral and the terms of the sale, lease, transfer or other disposition in
reasonable detail, including the price thereof and any expenses in connection
therewith, together with a form of release for execution by the Administrative
Agent and a certification by the Borrower to the effect that the transaction is
in compliance with the Loan Documents and as to such other matters as the
Administrative Agent may request and (iii) the proceeds of any such sale, lease,
transfer or other disposition required to be applied in accordance with Section
2.06(b)(ii) of the Credit Agreement shall be paid to, or in accordance with the
instructions of, the Administrative Agent at the closing.
<PAGE>
24
(b) With respect to the sale or other disposition of Equipment or
Inventory in the ordinary course of business permitted by the Loan Documents, so
long as at the time of such sale no Event of Default shall have occurred and be
continuing, such sale or other disposition may be made free from the lien of
this Agreement and the other Loan Documents without the necessity of any release
from or consent by the Administrative Agent and no purchaser of any such
property shall be bound to inquire into any question affecting the right of any
Grantor to sell or otherwise dispose of such Equipment or Inventory free from
the lien of this Agreement and the Loan Documents.
(c) In connection with any sale, lease, transfer or other disposition
of all or part of the stock of any Discontinued Subsidiary by any Grantor in
accordance with the terms of the Loan Documents, so long as no Event of Default
shall have occurred and be continuing and the Borrower shall have delivered to
the Administrative Agent, at least five Business Days prior to the date of the
such sale, lease, transfer or other disposition, written notice requesting that
the certificates held by the Administrative Agent evidencing such stock be
delivered to such Grantor, the pledge and assignment of, and security interest
in, such stock granted hereby shall be released and such certificates shall be
released to such Grantor.
(d) Upon the latest of the cash payment in full of the Secured
Obligations, the Termination Date and the termination or expiration of all Bank
Hedge Agreements, the pledge, assignment and security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the Grantors.
Upon any such termination, the Administrative Agent will, at the Borrower's
expense, execute and deliver to the Borrower such documents as the Borrower
shall reasonably request to evidence such termination.
SECTION 27. The Mortgages. In the event that any of the Collateral
hereunder is also subject to a valid and enforceable Lien under the terms of any
Mortgage and the terms of such Mortgage are inconsistent with the terms of this
Agreement, then with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of fixtures and leases, letting and licenses
of, and contracts and agreements relating to the lease of real property, and the
terms of this Agreement shall be controlling in the case of all other
Collateral.
SECTION 28. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 29. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the validity or perfection of the security interest hereunder,
or remedies hereunder, in
<PAGE>
25
respect of any particular Collateral are governed by the laws of a jurisdiction
other than the State of New York. Unless otherwise defined herein or in the
Credit Agreement, terms used in Article 8 or Article 9 of the Code are used
herein as therein defined.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
One MEDIQ Plaza
Pennsauken, NJ 08110
Attention: Chief Financial Officer
MEDIQ INCORPORATED
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
One MEDIQ Plaza
Pennsauken, NJ 08110
Attention: Chief Financial Officer
<PAGE>
26
PRN HOLDINGS, INC.
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
1403 Faulk Road
Suite 102
Wilmington, DE 19803
Attention: Chief Financial Officer
MEDIQ INVESTMENT SERVICES, INC.
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
1403 Faulk Road, Suite 102
Wilmington, DE 19803
Attention: Chief Financial Officer
MEDIQ MANAGEMENT SERVICES, INC.
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
One MEDIQ Plaza
Pennsauken, NJ 08110
Attention: Chief Financial Officer
<PAGE>
27
MEDIQ SURGICAL EQUIPMENT
SERVICES, INC.
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
One MEDIQ Plaza
Pennsauken, NJ 08110
Attention: Chief Financial Officer
VALUE-MED PRODUCTS, INC.
By ________________________________________
Name:
Title:
Address of Chief Executive Office and for Notices:
One MEDIQ Plaza
Pennsauken, NJ 08110
Attention: Chief Financial Officer
<PAGE>
SCHEDULE 1
Initial Pledged Shares and Initial Pledged Debt
Initial Pledged Shares
Part I
Initial Pledged Debt
Part II
<PAGE>
SCHEDULE 2
Assigned Agreements
<PAGE>
SCHEDULE 3
Locations of Equipment and Inventory
<PAGE>
SCHEDULE 4
Trade Names
<PAGE>
SCHEDULE 5
Blocked Accounts and Other Bank Accounts
<PAGE>
EXHIBIT A TO THE SECURITY AGREEMENT
FORM OF BLOCKED ACCOUNT LETTER
October 1, 1996
[Blocked Account Bank Address]
Attn: [ ]
[Grantor]
Ladies and Gentlemen:
Reference is made to the deposit accounts listed on the attached
Schedule I into which certain monies, instruments and other properties are
deposited from time to time (the "Accounts") maintained with you by [Grantor], a
________ corporation (the "Company"). Pursuant to a Security Agreement dated as
of October 1, 1996 (the "Security Agreement"), the Company has granted to Banque
Nationale de Paris, as administrative agent (the "Administrative Agent") for the
Secured Parties referred to in the Credit Agreement dated as of October 1, 1996
(the "Credit Agreement") with the Company, a security interest in certain
property of the Company, including, among other things, the following (the
"Account Collateral"): the Accounts, all funds held therein and all certificates
and instruments, if any, from time to time representing or evidencing the
Accounts, all interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Account Collateral and all proceeds
of any and all of the foregoing Account Collateral and, to the extent not
otherwise included, all (i) payments under insurance (whether or not the
Administrative Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Account Collateral and (ii) cash. It is a condition to the
continued maintenance of the Accounts with you that you agree to this letter
agreement.
By signing this letter agreement, you acknowledge notice of the
Security Agreement and confirm to the Administrative Agent that you have
received no notice of any other pledge or assignment of the Accounts. Further,
you hereby agree with the Administrative Agent that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Accounts, the Accounts are and will be subject to the terms
and conditions of the Security Agreement, will be maintained solely for the
benefit of the Administrative Agent, will be entitled "Banque Nationale de
Paris, as Administrative
<PAGE>
2
Agent, Re: [Grantor]" and will be subject to written instructions only from
an officer of the Administrative Agent.
(b) Upon the written request of the Administrative Agent to you, which
request shall specify that an "Event of Default" under the Credit Agreement
has occurred and is continuing (which writing may be by telex or telecopy
and upon which you may conclusively rely, absent manifest error), you shall
immediately transfer (at the cost and expense of the Company) subject to
your usual deposit terms, all funds then or thereafter deposited in the
Accounts by wire transfer into the Administrative Agent's Account at the
Federal Reserve Bank of New York, 33 Liberty Street, New York, NY, 10048,
ABA No. 026007689, for further credit to Account No. 750420-701-03.
(c) From and after the date that the Administrative Agent shall have
sent to you a written notice (which writing may be by telex or telecopy and
upon which you may conclusively rely, absent manifest error) that an "Event
of Default" under the Credit Agreement has occurred and until the date, if
any, that the Administrative Agent shall have advised you in writing (which
writing may be by telex or telecopy and upon which you may conclusively
rely, absent manifest error) that no Event of Default is continuing, you
shall not honor any withdrawal or transfer from, or any check, draft or
other item of payment on, the Accounts, other than any withdrawal,
transfer, check, draft or other item made in writing by the Administrative
Agent or bearing the written consent of the Administrative Agent, and, to
the extent of collected funds in the Accounts, you shall honor each such
withdrawal, transfer, check, draft or other item made in writing by the
Administrative Agent or bearing the written consent of the Administrative
Agent.
(d) You will follow your usual operating procedures for the handling
of the Accounts, including any remittance received in the Accounts that
contains restrictive endorsements, irregularities (such as a variance
between the written and numerical amounts), undated or postdated items,
missing signatures, incorrect payees, etc.
(e) You shall furnish to the Administrative Agent, promptly upon the
reasonable written request of the Administrative Agent in each instance,
all information regarding the Accounts, to the extent the same is provided
to the Company, for the period of time specified in such written notice,
and the Company hereby authorizes you to furnish same.
(f) You agree that you will not make, and you hereby waive all of your
rights to make, any charge, debit or offset to the Accounts for any reason
whatsoever, and waive any and all liens, whether contractual or provided
under law, which you may have or hereafter acquire on the Accounts or funds
therein, in each case, other than any charge, offset, debit or lien in
respect of your customary service charges relating to the Accounts.
<PAGE>
3
(g) All service charges and fees with respect to the Accounts shall be
payable by the Company.
(h) After the giving of notice referred to in paragraphs (b) and (c)
above, the Administrative Agent shall be entitled to exercise any and all
rights of the Company in respect of the Accounts, and the undersigned shall
comply in all respects with such exercise.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Administrative Agent, the
other Secured Parties and their successors, transferees and assigns. You may
terminate this letter agreement only upon thirty days' prior written notice to
the Company and the Administrative Agent. Upon such termination you shall close
the Accounts and transfer all funds in the Accounts to the Administrative
Agent's Account specified in paragraph (b) above.
<PAGE>
4
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York.
Very truly yours,
[GRANTOR]
By_____________________________________
Name:
Title:
BANQUE NATIONALE DE
PARIS, as Administrative Agent
By_____________________________________
Title:
By_____________________________________
Title:
Acknowledged and agreed to as of
the date first above written:
[BLOCKED ACCOUNT BANK NAME]
By______________________________
Title:
<PAGE>
SCHEDULE I TO EXHIBIT A TO THE
SECURITY AGREEMENT
Accounts
<PAGE>
EXHIBIT B TO THE SECURITY AGREEMENT
FORM OF CONSENT AND AGREEMENT
The undersigned hereby acknowledges notice of, and consents to the
terms and provisions of, the Security Agreement dated October 1, 1996 (the
"Security Agreement", the terms defined therein being used herein as therein
defined) from MEDIQ/PRN Life Support Services, Inc. (the "Borrower") and certain
other parties thereto (together with the Borrower, the "Grantors") to Banque
Nationale de Paris as agent (the "Administrative Agent") for the Secured Parties
referred to therein, and hereby agrees with the Administrative Agent that:
(a) Upon written notice from the Administrative Agent, the undersigned
will make all payments to be made by it under or in connection with the
__________ Agreement dated _______________, 19__ (the "Assigned Agreement")
between the undersigned and the Borrower in accordance with the
instructions of the Administrative Agent.
(b) All payments referred to in paragraph (a) above shall be made by
the undersigned irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off and shall be final, and the
undersigned will not seek to recover from the Administrative Agent or any
Lender for any reason any such payment once made.
(c) The Administrative Agent shall be entitled to exercise any and all
rights and remedies of the Borrower under the Assigned Agreement in
accordance with the terms of the Security Agreement, and the undersigned
shall comply in all respects with such exercise.
(d) The undersigned will not, without the prior written consent of the
Administrative Agent, (i) cancel or terminate the Assigned Agreement or
consent to or accept any cancellation or termination thereof, [or] (ii)
amend or otherwise modify the Assigned Agreement [, or (iii) make any
prepayment of amounts to become due under or in connection with the
Assigned Agreement, except as expressly provided therein].
This Consent and Agreement shall be binding upon the undersigned and
its successors and assigns, and shall inure, together with the rights and
remedies of the Administrative Agent hereunder, to the benefit of the
Administrative Agent, the other Secured Parties and their successors,
transferees and assigns. This Consent and Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has duly executed this Consent and
Agreement as of the date set opposite its name below.
<PAGE>
2
Dated: _______________, ____ [NAME OF OBLIGOR]
By____________________________________
Name:
Title:
<PAGE>
EXHIBIT C TO THE SECURITY AGREEMENT
FORM OF SECURITY AGREEMENT SUPPLEMENT
Banque Nationale de Paris, as Administrative Agent
under the Credit Agreement
referred to below
[Address]
[Date]
Attention:
Security Agreement dated as of October 1, 1996
made by MEDIQ/PRN Life Support Services, Inc. and
the other Grantors to Banque Nationale de Paris, as Administrative Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Security Agreement (such Security
Agreement, as in effect on the date hereof and as it may hereafter be amended,
modified or otherwise supplemented from time to time, being the "Security
Agreement"). The terms defined in the Security Agreement (or in the Credit
Agreement referred to therein) and not otherwise defined herein are used herein
as therein defined.
The undersigned hereby agrees, as of the date first above written, to
become a Grantor under the Security Agreement as if it were an original party
thereto and agrees that each reference in the Security Agreement to "Grantor"
shall also mean and be a reference to the undersigned.
The undersigned hereby assigns and pledges to the Administrative Agent for
the ratable benefit of the Secured Parties, and hereby grants to the
Administrative Agent for the ratable benefit of the Secured Parties as security
for the Secured Obligations a lien on and security interest in, all of the
right, title and interest of the undersigned, whether now owned or hereafter
acquired, in and to the Collateral owned by the undersigned, including, but not
limited to, the property listed on Annex I hereto. Schedules I, II, III, IV and
V to the Security Agreement are hereby supplemented by Annexes I, II, III, IV
and V hereto, respectively. The undersigned hereby certifies that such Annexes
have been prepared by the undersigned in substantially the form of Schedules I,
II, III, IV and V to the Security Agreement and are accurate and complete as of
the date hereof.
The undersigned hereby makes each representation and warranty set forth in
Section 9 of the Security Agreement (as supplemented by the attached Annexes) to
the same extent as
<PAGE>
2
each other Grantor and hereby agrees to be bound as a Grantor by all of the
terms and provisions of the Security Agreement to the same extent as each other
Grantor.
This Security Agreement Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
[NAME OF ADDITIONAL
GRANTOR]
By__________________________________
Name:
Title:
Address of Chief Executive
Office and for Notices:
[Address]
Attention: Chief Financial Officer
<PAGE>
EXHIBIT E TO THE
CREDIT AGREEMENT
FORM OF MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND FIXTURE FILING
Dated as of October 1, 1996
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
Mortgagor
to
BANQUE NATIONALE DE PARIS,
as Administrative Agent for the Lender Parties,
as hereinafter defined, Mortgagee
<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND FIXTURE FILING
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE
FILING ("Mortgage"), made as of the 30th day of September, 1996, by MEDIQ/PRN
LIFE SUPPORT SERVICES, INC., a Delaware corporation, having its principal office
at One Mediq Plaza, Pennsauken, NJ 08110 ("Mortgagor") to BANQUE NATIONALE DE
PARIS, having an office at 499 Park Avenue, New York, New York 10022
("Mortgagee").
W I T N E S S E T H:
WHEREAS, Mortagor, MEDIQ Incorporated, and PRN Holdings, Inc. have
entered into that certain Credit Agreement, dated as of October 1, 1996 with the
banks, financial institutions and other institutional lenders listed on the
signature pages thereof as the Initial Lenders, Mortgagee, as administrative
agent for the Lender Parties, as defined in the Credit Agreement, and as the
initial issuing bank and Nationsbank, N.A., as documentation agent for the
Lender Parties (said Agreement, as it may hereafter be amended or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined);
and
WHEREAS, pursuant to the Credit Agreement and subject to the terms
and conditions therein set forth, the Lender Parties have agreed to make
Advances to Mortgagor; and
WHEREAS, the aggregate principal amount of Advances outstanding from
time to time under the Credit Agreement may not exceed $260,000,000, excluding
advances made to protect the lien and security of this Mortgage; and
WHEREAS, to evidence such indebtedness Mortgagor has executed and
delivered the Credit Agreement and certain of the Loan Documents; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby agrees that to secure the full and final payment
of any and all indebtedness and obligations due and owing or which may hereafter
become due and owing from Mortgagor to Mortgagee (and to the Lender Parties),
whether now existing or hereafter arising, of every nature, type and
description, together with any and all renewals, extensions, substitutions
thereto and modifications thereof and whether absolute or contingent, direct or
indirect, joint or several, matured or unmatured, including without limitation,
all indebtedness and obligations arising at any time and from time to time under
the Credit Agreement and other Loan Documents to be paid with interest thereon
pursuant thereto, Mortgagor hereby gives, grants, bargains, warrants, aliens,
premises, releases, conveys,
<PAGE>
2
assigns, transfers, mortgages, hypothecates, deposits, pledges, sets over and
confirms to Mortgagee, ALL that certain real property, including without
limitation all plots, pieces or parcels of land, situate, lying and being in the
Township of Pennsauken, County of Camden, the State of New Jersey (hereinafter
called the "Land"), more particularly bounded and described in SCHEDULE A hereto
annexed and made a part hereof;
TOGETHER, ALSO, with all fixtures, equipment, machinery, chattels,
apparatus and articles of personal property now or hereafter attached to or
located in or upon the Premises (defined below), and used or usable in
connection with any present or future operation or letting of the Premises or
the activities at any time conducted therein and all substitutions and
replacements therefor (hereinafter called "Building Equipment"), including, but
not limited to, furnaces, boilers, oil burners, radiators and piping, coal
stokers, plumbing and bathroom fixtures, refrigeration, air conditioning and
sprinkler systems, wash-tubs, sinks, gas and electric fixtures, stoves, ranges,
awnings, screens, window shades, elevators, motors, dynamos, refrigerators,
kitchen cabinets, incinerators, plants and shrubbery and all other machinery,
vending machines, appliances, fittings, furniture, furnishings and fixtures of
every kind used in the operation of the buildings standing or hereafter erected
on the Premises, together with any and all replacements thereof and additions
thereto, and all right, title and interest of Mortgagor in and to any Building
Equipment which may be subject to any security agreements, as defined in
subdivision (1) (h) of Section 9-105 of the Uniform Commercial Code of the State
of New Jersey (hereinafter called "Security Agreements"), superior in lien to
the lien of this Mortgage; it being understood and agreed that all Building
Equipment is part and parcel of the Premises and appropriated to the use thereof
and, whether affixed or annexed to the Premises or not, shall for the purposes
of this Mortgage, be deemed conclusively to be real estate and mortgaged hereby;
TOGETHER, ALSO, with any and all awards, damages, payments and other
compensation and any and all claims therefor and rights thereto which may result
from taking or injury, including interest thereon, heretofore and hereafter made
to Mortgagor by virtue of the exercise of the power of eminent domain of or any
damage, injury or destruction in any manner caused to the whole or any part of
the Premises or any easement therein, including but not limited to insurance
proceeds, condemnation awards and settlements, any awards for changes of grade
of streets, all of which are hereby assigned to Mortgagee, who is hereby
authorized to collect and receive the proceeds of such items and to give proper
receipts and acquittances therefor, and to apply the same toward the payment of
the mortgage debt, notwithstanding the fact that the amount owing thereon may
not then be due and payable;
TOGETHER, ALSO, with all the estate, right, title, claim or demand
whatsoever of Mortgagor in and to all rents, income, profits and other benefits
to which Mortgagor may now or hereafter be entitled from the property described
above (such granting constituting an absolute and present assignment of such
property, subject to conditional permission of Mortgagor to collect such rents
as provided herein below);
<PAGE>
3
TOGETHER, ALSO with the appurtenances, all estate and rights of
Mortgagor in and to the Premises and all right, title and interest, if any, of
Mortgagor, in and to the land lying in the streets, roads or avenues, open or
proposed, in front of or adjoining the Premises and of, in and to any strips or
gores of land adjoining the Premises;
TOGETHER, ALSO with all right, title and interest of Mortgagor in
and to all agreements, contracts, plans and specifications relative to the
construction of the improvements built or to be built on the Land; the sale
including the proceeds thereof, of the Premises; leasing, brokerage, management,
sale and/or operation of the Premises;
TOGETHER, ALSO, with all and singular the tenements, hereditaments
and appurtenances belonging to the Land or any part thereof, and the buildings,
structures, and improvements thereon, or in any way appertaining thereto
(including, but not limited to, all income, rents, issues and profits arising
therefrom), all streets, alleys, passages, ways, watercourses, easements, all
other rights, liberties and privileges of whatsoever kind or character, the
provisions and remainders, and all the estate, right, title, interest, property,
possession, claim and demand whatsoever, as well at law as in equity, of
Mortgagor in and to all the foregoing or any or every part thereof (all Land,
buildings, structures, improvements, fixtures, equipment, machinery, chattels,
goods, apparatus, personal property, Building Equipment, tenements, awards,
damages, payments, compensation, claims, rights, rents, income, profits and
other property interests described and enumerated herein are hereinafter
collectively referred to as the "Premises") .
TO HAVE AND TO HOLD the Premises and other property, privileges,
rights, interests and franchises hereby granted or mortgaged, or intended so to
be, unto Mortgagee, its successors and assigns forever;
PROVIDED, HOWEVER, and these presents are upon the condition, that
if Mortgagor shall fully and finally pay or cause to be paid all of the
Obligations on the abovementioned Loan Documents, at the times and in the manner
therein and herein provided, and shall keep, perform and observe all and
singular the covenants, agreements and provisions in the abovementioned Loan
Documents and in this Mortgage expressed to be kept, performed and observed by
or on the part of Mortgagor, then this Mortgage and the estate and rights hereby
granted shall cease, determine and be void but otherwise shall be and remain in
full force and effect.
All capitalized terms used herein not defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
MORTGAGOR'S LIABILITY UNDER THE CREDIT AGREEMENT FOR THE OBLIGATIONS
SHALL NOT EXCEED THE PRINCIPAL AMOUNT OF $260,000,000 THEREOF, PLUS, FROM AND
AFTER THE DEMAND FOR PAYMENT
<PAGE>
4
THEREUNDER, INTEREST THEREON AT THE HIGHEST RATE THEN APPLICABLE TO THE
INDEBTEDNESS OF BORROWER TO MORTGAGEE SET FORTH IN THE CREDIT AGREEMENT, PLUS
ANY AND ALL COSTS, EXPENSES AND CHARGES OF COLLECTION THEREUNDER (INCLUDING, BUT
NOT LIMITED TO, ATTORNEYS' FEES AND LEGAL EXPENSES).
AND Mortgagor covenants and agrees with Mortgagee as follows:
1. Payment of Indebtedness. That Mortgagor will pay all indebtedness
as hereinbefore provided and if default shall be made in the payment of the said
indebtedness or in the interest which shall accrue thereon, or of any part of
either, Mortgagee shall have power to sell the Premises, including without
limitation the Building Equipment and other property covered hereby according to
law.
2. Insurance. (a) That Mortgagor will keep the buildings on the
Premises and the Building Equipment insured for the benefit of Mortgagee (i)
against loss by fire, (ii) by means of an extended coverage endorsement, against
loss or damage by windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, aircraft, vehicle and smoke, (iii) against loss of rentals due
to any of the foregoing causes, (iv) against loss by flood if the Premises are
located in an area identified by the Secretary of Housing and Urban Development
as an area having special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968, as amended, and
(v) when and to the extent required by Mortgagee, against any other risk insured
against by persons operating like properties in the locality of the Premises;
that Mortgagor will assign and deliver to Mortgagee the policies of such
insurance and the proceeds thereof; that Mortgagor will reimburse Mortgagee for
any premiums paid for insurance made by Mortgagee on Mortgagor's default in
taking out such insurance, or in so delivering such policies, together with
interest thereon at the rate per annum specified in Article 4 hereof, and the
same shall be added to the indebtedness secured hereby and be secured by this
Mortgage;
(b) that such insurance shall be provided by policies written in
terms and amounts, and by companies, reasonably satisfactory to Mortgagee, and
losses thereunder shall be payable to Mortgagee pursuant to a standard
non-contributory mortgagee endorsement required by Mortgagee, which endorsement
may only be cancelled or modified upon not less than thirty (30) days prior
written notice to Mortgagee. Mortgagee shall not by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits, and Mortgagor hereby
expressly assume full responsibility therefor and all liability, if any, with
respect thereto.
<PAGE>
5
(c) that regardless of the types or amounts of insurance required
and approved by Mortgagee Mortgagor will deliver to Mortgagee certificates
evidencing all policies of insurance acquired by Mortgagor to insure against any
loss or damage to the Premises, as additional security for the indebtedness
secured hereby;
(d) that Mortgagee shall be entitled to retain and apply the
proceeds of any insurance, whether against fire or other hazard, to the payment
of the indebtedness secured hereby, or, if Mortgagee, in its sole discretion,
shall so elect, Mortgagee may hold any or all of such proceeds for application
to payment of the cost of restoration;
(e) that not less than fifteen (15) days prior to the expiration
date of each policy furnished by Mortgagor pursuant to this Article, Mortgagor
will deliver to Mortgagee a certificate evidencing a renewal policy or policies
marked "premium paid" or accompanied by other evidence of payment satisfactory
to Mortgagee; and
(f) that in the event of a foreclosure of this Mortgage the
purchaser of the Premises shall succeed to all the rights of Mortgagor,
including any rights to the proceeds of insurance and to unearned premiums, in
and to all policies of insurance certificates for which have been delivered to
Mortgagee pursuant to this Article.
3. Premises and Improvements. That no building or other property now
or hereafter covered by the lien of this Mortgage shall be removed, demolished
or materially altered without the prior written consent of Mortgagee, except
that Mortgagor shall have the right, without such consent, to remove and dispose
of, free from the lien of this Mortgage, such Building Equipment as from time to
time may become worn out or obsolete, provided that simultaneously with or prior
to such removal, any such equipment shall be replaced with other equipment of a
value at least equal to that of the replaced equipment and free from any
security agreement, and by such removal and replacement Mortgagor shall be
deemed to have subjected such Building Equipment to lien of this Mortgage.
4. Mortgagee's Optional Performance. That in the event of any
default in the performance of any of Mortgagor's covenants or agreements herein,
Mortgagee may, at the option of Mortgagee, perform the same and the cost
thereof, with interest at a rate per annum equal to the highest rate then
applicable to the indebtedness of Borrower to Mortgagee set forth in the Credit
Agreement (but not in excess of the maximum rate allowed by law to be charged to
Mortgagor), shall immediately be due from Mortgagor to Mortgagee and secured by
this Mortgage.
5. Taxes, Assessments and Escrows. (a) That Mortgagor will pay all
taxes, assessments, water rates, sewer rents fines, impositions and other claims
and/or charges now or hereafter levied and all charges for utilities with
respect to or against the Premises or any part thereof, and also any and all
license fees or similar charges which may
<PAGE>
6
be imposed by the municipality in which the Premises are situated for the use of
walks, chutes, areas and other space beyond the lot line on or abutting the
public sidewalks in front of or adjoining the Premises, together with any
penalties or interest on any of the foregoing (collectively "Impositions"), and
in default thereof Mortgagee may pay the same and Mortgagor will repay the same
with interest thereon at the rate per annum specified in Article 4 hereof and
the same shall be added to the indebtedness secured hereby and be additionally
secured by this Mortgage; that upon request of Mortgagee, Mortgagor will exhibit
to Mortgagee receipts for the payment of all items specified in this Article
within ten (10) days of the date when the same shall become delinquent. If any
law, rule, regulation or ordinance adopted hereafter by any federal, state or
local government, or any department, agency or bureau thereof, imposes a tax on
Mortgagee with respect to the Premises, the value of Mortgagor's equity therein,
the amount of the indebtedness secured hereby, or this Mortgage, Mortgagee shall
have the right at its election from time to time to give Mortgagor sixty (60)
days' written notice to pay such indebtedness secured hereby, whereupon such
indebtedness shall become due, payable and collectible at the expiration of such
period of sixty (60) days, unless prior thereto, lawfully and without violation
of usury or other laws, Mortgagor shall have paid any such tax in full as the
same became due and payable, in which event such notice shall be deemed to have
been rescinded with respect to any right of Mortgagee hereunder arising by
reason of the tax so paid. No prepayment charge or premium shall apply to the
payment of the indebtedness secured hereby pursuant to any such notice, if the
payment is made before the expiration of such period of sixty (60) days.
(b) That Mortgagee will not permit Mortgagor to claim and Mortgagor
will not claim or demand any credit on or make any deduction from any secured
indebtedness hereunder including without limitation any interest or principal
of, on, or with respect to the Notes, by reason of the payment of any taxes
levied or to be levied upon the Premises or any part thereof during the
continuance of the lien of this Mortgage.
(c) That, after an event of default hereunder, Mortgagee may, at its
option to be exercised by twenty (20) days' written notice to Mortgagor, require
that Mortgagor deposit with Mortgagee, on the first day of each and every month,
a sum equal to one-twelfth (1/12) of the annual real estate taxes, assessments,
water rates, sewer rents and other charges specified in this Article 5
(hereinafter collectively referred to as "taxes") plus one-twelfth (1/12) of the
premiums required to keep in force for one year the insurance specified in
Article 2 hereof. If such deposits shall be so required, Mortgagor shall also
deposit with Mortgagee, at least thirty (30) days prior to the due date of each
installment of such taxes and each insurance premium, such additional amount as
may be determined by Mortgagee in order to provide Mortgagee with funds
sufficient to pay such installment or premium. It is the intention of the
parties that, if such deposits shall be so required, Mortgagor shall deposit
with Mortgagee the necessary funds so that Mortgagee, at all times until the
full payment and satisfaction of this Mortgage, shall have on hand sufficient
deposits covering the accrued amounts of such taxes and insurance premiums. The
amount of such taxes and premiums,
<PAGE>
7
when unknown, shall be reasonably estimated by Mortgagee; any insufficiency to
pay such charges when due shall be paid by Mortgagor to Mortgagee on demand. If
permitted by law, the said funds shall bear no interest and shall not be deemed
to be trust funds but may be commingled with other funds of Mortgagee and no
interest shall be payable upon any such funds. (The foregoing sentence shall not
apply to any assignee of this Mortgage.) Mortgagee shall have no obligation to
use said funds to pay an installment of taxes prior to the last day on which
payment thereof may be made without penalty or interest or to pay an insurance
premium prior to the due date thereof. If the whole of said principal sum and
interest shall be declared due and payable by Mortgagee pursuant to Article 20
hereof, all such deposits may, at the option of Mortgagee, be applied in
reduction of said principal sum and/or interest, as Mortgagee shall elect. Upon
an assignment of this Mortgage, Mortgagee shall have the right to pay over the
balance of such deposits in its possession to the assignee and Mortgagee shall
thereupon be completely released from all liability with respect to such
deposits and Mortgagor or owner of the Premises shall look solely to the
assignee or transferee in reference thereto. This provision shall apply to every
transfer of such deposited to a new assignee. Upon full payment and satisfaction
of this Mortgage or at any prior time, at the election of Mortgagee, the balance
of the deposits in its possession shall be paid over to the record owner of the
Premises and no other party shall have any right or claim thereto in any event.
Mortgagor agrees, at Mortgagee's request, to make the aforesaid deposits with
such service or financial institution as Mortgagee shall from time to time
designate.
6. Appointment of Receiver and Other Powers. That Mortgagee shall
have the right in case of failure of Mortgagor to perform any of the acts,
covenants, or conditions in this Mortgage or in the Credit Agreement, upon a
complaint filed or any proper action being commenced for the foreclosure of this
Mortgage, to apply for, and Mortgagee shall be entitled as a matter of right
without consideration of the value of the Premises as security for the amounts
due Mortgagee, or of the solvency of any person or persons obligated for the
payment of such amounts, to the appointment by any competent court or tribunal,
without notice to any party, of a receiver of the rents, issues, and profits of
the Premises, with power to lease the Premises, or such part thereof as may not
then be under lease, and with such other powers as may be deemed necessary, who,
after deducting all proper charges and expenses attending the execution of the
trust as receiver, shall apply the residue of the rents and profits to the
payment and satisfaction of the amount remaining secured hereby, or to any
deficiency which may exist after applying the proceeds of any judicially decreed
sale of the Premises to the payment of the amount due, including interest and
the costs of the foreclosure and sale.
7. Estoppel Certificate. That Mortgagor, within five (5) days upon
request in person or within ten (10) days upon request by mail, will furnish a
written statement duly acknowledged of the amount due on this Mortgage and
whether any offsets or defenses exist against the secured mortgage debt.
<PAGE>
8
8. Notice. That notice and demand or request shall be made in
accordance with the Credit Agreement.
9. Title and Further Assurances. (a) That Mortgagor warrants that
Mortgagor has good title to the Premises, including without limitation the
Building Equipment and other property covered hereby free and clear of all liens
and encumbrances, except for current real property taxes not yet delinquent and
this Mortgage ("Permitted Encumbrances"), and has full power and lawful
authority to mortgage the same; that Mortgagor shall and will make, execute,
acknowledge and deliver, in due form required by applicable law, all such
further assurances as may at any time hereafter be reasonably required to
effectuate the mortgaging of the Premises and other property covered hereby or
intended so to be, unto Mortgagee, its successors or assigns, for the purpose
aforesaid, and unto all and every person or persons deriving any estate, right,
title or interest therein under this Mortgage; and that Mortgagor will warrant
and defend title to the Premises, including without limitation the Building
Equipment and said other property against all persons whomsoever claiming the
same or any part thereof, including without limitation all persons claiming by,
through or under Mortgagor.
(b) That Mortgagor and shall execute and deliver, from time to time,
such further instruments (including further security agreements and Uniform
Commercial Code financing statements) as may be requested by Mortgagee to
confirm the lien of this Mortgage on any Building Equipment.
(c) That Mortgagor upon request, shall make, execute and deliver any
and all instruments sufficient for the purpose of confirming the assignment to
Mortgagee of awards for the taking by eminent domain of the whole or any part of
the Premises or any easement therein, including any awards for changes of grade
of streets, free, clear and discharged of any encumbrances of any kind or nature
whatsoever.
(d) That Mortgagor shall not further encumber the Premises for debt
and hereby (1) represents as a special inducement to Mortgagee to make the loans
secured hereby that, as of the date hereof, this is a first mortgage and there
are no encumbrances to secure debt junior to this Mortgage and (2) covenants
that there are to be none as of the date when this Mortgage becomes of record
and thereafter will be none, except, in either case, encumbrances having the
prior written consent of Mortgagee.
(e) Mortgagor will promptly perform and observe, or cause to be
performed or observed, all of the terms, covenants and conditions of all
instruments of record affecting the Premises, non-compliance with which may
affect the security of this Mortgage or which may impose any duty or obligation
upon Mortgagor or any other occupant of the Premises or any part thereof, and
Mortgagor shall do or cause to be done all
<PAGE>
9
things necessary to preserve intact and unimpaired any and all easements,
appurtenances and other interest and rights in favor of or constituting any
portion of the Premises.
10. Sale by Parcel. That in case of any foreclosure sale, the
Premises, or so much thereof as may be affected by this Mortgage, may be sold in
one or more parcels.
11. Additional Lien. That if any action or proceeding be commenced
(including an action to foreclose this Mortgage or to collect the indebtedness
secured hereby), in which Mortgagee becomes a party or participates, by reason
of being the holder of this Mortgage or the debt secured hereby, all sums paid
by Mortgagee for the expense of so becoming a party or participating (including
reasonable counsel fees and disbursements) shall on notice and demand be paid by
Mortgagor, together with interest thereon at the rate per annum specified in
Article 4 hereof, and shall also be a lien on the Premises, prior to any right
or title to, interest in, or claim upon, the Premises subordinate to the lien of
this Mortgage, and shall be deemed to be additionally secured by this Mortgage
and that in any action or proceeding to foreclose this Mortgage, or to recover
or collect the debt secured hereby, the provisions of law respecting the
recovery of costs, disbursements and allowances shall apply in addition to the
foregoing.
12. Care and Maintenance of Premises. That the Premises and any
buildings on the Premises have not been damaged to any material extent and
Mortgagor will maintain the Premises and the Building Equipment in good
condition and repair, will not commit or suffer any waste thereof or the conduct
of any nuisance or unlawful occupation or business on, or use of, the Premises,
and will comply with, or cause to be complied with, all statutes, ordinances and
requirements of any governmental authority relating to the Premises; that
Mortgagor will promptly repair, restore, replace or rebuild any part of the
Premises or the Building Equipment now or hereafter subject to the lien of this
Mortgage which may be damaged or destroyed by any casualty whatsoever or which
may be affected by any proceeding of the character referred to in Article 13;
and that Mortgagor shall not initiate, join in, or consent to any change in any
private restrictive covenant, zoning ordinance, or other public or private
restrictions, limiting or defining the uses which may be made of the Premises or
any part thereof.
13. Eminent Domain and Condemnation. The proceeds of any award or
claim for damages, direct or consequential, in connection with any condemnation
or other taking of or damage or injury to the Premises, or any part thereof, or
for conveyance in lieu of condemnation, are hereby assigned to and shall be paid
to Mortgagee. In addition, all causes of action, whether accrued before or after
the date of this Mortgage, of all types for damages or injury or affecting the
Premises or any part thereof, including, without limitation, causes of action
arising in tort or contract and causes of action for fraud or concealment of a
material fact, are hereby assigned to Mortgagee as additional security and the
proceeds shall be paid to Mortgagee. Mortgagee may, at its option, appear in and
<PAGE>
10
prosecute in its own name, any action or proceedings relating to condemnation or
other taking of or damage or injury to the Premises or any portion thereof. If
Mortgagor at any time suspects or has knowledge of any casualty damages to the
Premises or damage in any other manner, Mortgagor will immediately notify
Mortgagee in writing. Mortgagor may participate in any such proceedings and may
join Mortgagee in adjusting any loss covered by insurance.
That notwithstanding any taking by eminent domain or other
governmental action (of which there are no such pending proceedings) causing
injury to, or decrease in value of, the Premises and creating a right to
compensation therefor, including, without limitation, the change of the grade of
any street, Mortgagor shall continue to be fully liable for all indebtedness or
liability secured hereby.
All compensation, awards, proceeds, damages, claims, insurance
recoveries, rights of action and payments which Mortgagor may receive, or to
which Mortgagor may become entitled with respect to the Premises or any part
thereof, shall be paid over to Mortgagee and shall be applied first toward
reimbursement of all costs and expenses of Mortgagee in connection with recovery
of the same. Thereafter the same need not be applied by Mortgagee in reduction
of principal but may be applied in such proportions and priority as Mortgagee,
in Mortgagee's sole discretion, may elect, to the payment of principal, interest
or other sums secured by this Mortgage and/or to payment to Mortgagor, on such
terms as Mortgagee may specify, for the sole purpose of altering, restoring or
rebuilding any part of the Premises which may have been altered, damaged or
destroyed as a result of any such taking or other action; that if, prior to the
receipt by Mortgagee of such award or compensation, the Premises shall have been
sold on foreclosure of this Mortgage, Mortgagee shall have the right to receive
said award or compensation to the extent of any deficiency found to be due upon
such sale, with legal interest thereon, whether or not a deficiency judgment on
this Mortgage shall have been sought or recovered, together with reasonable
counsel fees and the costs and disbursements incurred by Mortgagee in connection
with the collection of such award or compensation. In the event Mortgagee elects
to permit Mortgagor to repair or restore the Premises following any damage or
injury to the Premises, or any part thereof, then the balance of such
compensation, awards, proceeds, damages, claims, insurance recoveries, rights of
action or payments shall be applied to the reimbursement of Mortgagor for
expenses incurred by it in such repair or restoration of the Premises, subject,
however, to the following conditions:
(i) any such work of repair or restoration shall be of such a
character as not to reduce, or otherwise adversely affect, the value of
the buildings, improvements and fixtures on the Premises immediately
before such damage or injury, nor to diminish the general utility of such
buildings, improvements or fixtures for the purposes the same were used
immediately prior to such damage;
<PAGE>
11
(ii) such work of repair or restoration shall be commenced as soon
as reasonably possible after such damage or injury occurs and shall be
completed by Mortgagor forthwith and with due diligence;
(iii) such work of repair or restoration shall be done in accordance
with plans, specifications and drawings submitted to and approved by
Mortgagee;
(iv) any such monies made available for such repair or restoration
shall be disbursed in accordance with standard construction lending
practices approved by Mortgagee or in any other manner approved by
Mortgagee; and
(v) in the event such compensation, awards, proceeds, damages,
claims, insurance recoveries, rights of action or payments are
insufficient to complete such repairs or restoration, Mortgagor shall
provide the balance of the cost of such repairs or restoration. Any
balance of monies held by Mortgagee and remaining after completion of such
repair or restoration shall be applied to the payment or prepayment
(without premium) of the indebtedness or liability secured hereby in such
order as Mortgagee may determine.
In the event Mortgagor does not elect to repair or restore the
Premises following any such damage or injury referred to herein, or if Mortgagor
elects to repair or restore the Premises but fails to comply with any of the
conditions hereinabove set forth, then all such compensation, awards, proceeds,
damages, claims, insurance recoveries, rights of action and payments, which
remain after the reimbursement of all costs and expenses of Mortgagee in
connection with recovery of the same, shall be applied, in the sole and absolute
discretion of Mortgagee and without regard to the adequacy of its security
hereunder, to the payment or prepayment (without premium) of the indebtedness or
liability secured hereby. Any application of such amounts or any portion thereof
to any indebtedness secured hereby shall not be construed to or waive any
default or notice of default hereunder or invalidate any act done pursuant to
any such default or notice.
14. Right to Inspect. That Mortgagee and any persons authorized by
Mortgagee shall have the right to enter and inspect the Premises at all
reasonable times and, prior to an event of default hereunder, upon reasonable
notice; and that if, at any time after default by Mortgagor in the performance
of any of the terms, covenants or provisions of this Mortgage, the management or
maintenance of the Premises shall be determined by Mortgagee to be
unsatisfactory, Mortgagor shall employ, for the duration of such default, as
managing agent of the Premises, such person or firm as from time to time shall
be approved by Mortgagee. That Mortgagee and its designated agents shall have
the right to inspect Mortgagor's books and records with respect to the Premises
at all reasonable times.
<PAGE>
12
15. Financial Information. That Mortgagor, in addition to the
financial information required in the Credit Agreement, shall furnish to
Mortgagee as promptly as reasonably possible, such interim financial or other
information with respect to the operation of the Premises and with respect to
Mortgagor as Mortgagee may reasonably request. If Mortgagor shall have leased
all or substantially all of the Premises to another, such statements shall cover
the earnings and expenses in the latest fiscal year of the lessee under such
lease. In the case of such lease, if the lessee shall be an affiliate of
Mortgagor, Mortgagor will also furnish to Mortgagee the lessee's balance sheet
as of the end of the lessee's fiscal year and the lessee's statement of income
and surplus for such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the end of and for the previous fiscal year,
and prepared, audited and reported upon by an independent certified public
accountant or, if permitted by Mortgagee, verified by an authorized financial
officer of the lessee.
16. Assignment of Rents. That Mortgagor hereby assigns to Mortgagee
the rents, issues and profits of the Premises, together with all leases,
licenses and other documents evidencing such rents, issues and profits now or
hereafter in effect and any and all deposits held as security under said leases,
and shall, upon demand, deliver to Mortgagee an executed counterpart of each
such lease or other document. Nothing contained in the foregoing sentence shall
be construed to bind Mortgagee to the performance of any of the covenants,
conditions or provisions contained in any such lease or other document or
otherwise to impose any Paragraph 16 obligation on Mortgagee (including, without
limitation, any liability under the covenant of quiet enjoyment contained in any
lease in the event that any tenant shall have been joined as a party defendant
in any action to foreclose this Mortgage and shall have been barred and
foreclosed thereby of all right, title and interest and equity of redemption in
the Premises), except that Mortgagee shall be accountable for money actually
received pursuant to such assignment. Mortgagor hereby further grant to
Mortgagee the right (i) to enter upon and take possession of the Premises for
the purpose of collecting the said rents, issues and profits, (ii) to dispossess
by the usual summary proceedings any tenant defaulting in the payment thereof to
Mortgagee, (iii) to let the Premises, or any part thereof, and (iv) to apply
said rents, issues and profits, after payment of all necessary charges and
expenses, on account of said indebtedness. Such assignment and grant shall
continue in effect until all indebtedness secured by this Mortgage is fully and
finally paid, the execution of this Mortgage constituting and evidencing the
irrevocable consent of Mortgagor to the entry upon and taking possession of the
Premises by Mortgagee pursuant to such grant, whether foreclosure has been
instituted or not and without applying for a receiver. After an event of default
hereunder, Mortgagor shall be entitled to collect and receive the same until the
occurrence of a default by Mortgagor under any of the covenants, conditions or
agreements contained in this Mortgage. Mortgagor agrees to use said rents,
issues and profits in payment of principal and interest becoming due on this
Mortgage and in payment of taxes, assessments, water rates, sewer rents and
carrying charges becoming due against the Premises. Such rights of Mortgagor to
collect and receive said rents, issues and profits
<PAGE>
13
may be revoked by Mortgagee upon any such default by Mortgagor, by giving
written notice of such revocation.
17. Rents and Profits. That, in the event of any default under this
Mortgage, Mortgagor will pay monthly in advance to Mortgagee, on its entry into
possession pursuant to Article 16 hereof, or to any receiver appointed to
collect said rents, issues and profits, the fair and reasonable rental value for
the use and occupation of the Premises or of such part thereof as may be in the
possession of Mortgagor, and upon default in any such payment, will vacate and
surrender possession of the Premises or such part thereof, as the case may be,
to Mortgagee or to such receiver and, in default thereof, may be evicted by
summary proceedings or otherwise.
18. Leases. (a) That Mortgagor has no right or power, as against
Mortgagee without its consent, to cancel, abridge or otherwise modify in any
material respect any of the leases or subleases now or hereafter affecting the
whole or any part of the Premises or any of the terms, provisions or covenants
thereof, or to accept prepayments of installments of rent to become due
thereunder and Mortgagor shall not do so without such consent.
(b) That Mortgagor shall not enter into a lease of all or
substantially all of the Premises, unless (i) such lease shall expressly provide
that the leasehold estate created thereby shall be subject and subordinate to
all mortgages on the Premises and to the leasehold estates of subtenants created
by existing subleases, notwithstanding any clause in any such sublease
purporting to subordinate such sublease and the rights of the subtenant
thereunder to ground or underlying leases, (ii) such lease shall require that
each sublease thereafter made and each renewal of any existing sublease shall
provide that, (A) in the event of the termination of the underlying lease, the
sublease shall not terminate or be terminable by the subtenant, (B) in the event
of any action for the foreclosure of this Mortgage, the sublease shall not
terminate or be terminable by the subtenant by reason of the termination of the
underlying lease unless the subtenant is specifically named and joined in any
such action and unless a judgment is obtained therein against the subtenant and
(C) in the event that the underlying lease is terminated as aforesaid, the
subtenant shall attorn to the lessor under the underlying lease or to the
purchaser at the sale of the Premises on such foreclosure, as the case may be,
and (iii) the lessee in such lease shall agree, and be authorized by Mortgagor,
to direct and require the subtenants and other occupants of space in the
Premises to pay to Mortgagee on its entry into possession pursuant to Article 16
hereof, or to a receiver appointed to collect the rents, issues and profits of
the Premises, the rents payable by them under the terms of their subleases or
occupancy agreements upon being notified by Mortgagee of any default under this
Mortgage and of Mortgagee's entry into possession of the Premises, or of the
appointment of any such receiver, with the same force and with like effect as if
said lease had not been entered into and Mortgagor were entitled to receive the
said space rents directly.
<PAGE>
14
19. Lease Assurances. That upon notice and demand, Mortgagor shall,
from time to time, execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered to Mortgagee, in form satisfactory to Mortgagee, one
or more separate assignments (confirmatory of the general assignment provided in
Article 16 hereof) of the lessor's interest in any lease or sublease now or
hereafter affecting the whole or any part of the Premises and which shall also
restrict Mortgagor's right or power, as against Mortgagee, without its consent,
to cancel, abridge or otherwise modify, or accept prepayments of installments of
rent to become due under, any such lease or sublease; that Mortgagor shall pay
to Mortgagee the expenses incurred by Mortgagee in connection with the
preparation and recording of any such instrument; that Mortgagor will (i)
fulfill or perform each and every condition and covenant of each such lease or
sublease to be fulfilled or performed by the lessor thereunder, (ii) give prompt
notice to Mortgagee of any notice of default by the lessor thereunder received
by Mortgagor together with a complete copy of any such notice, and (iii)
enforce, short of termination thereof, the performance or observance of each and
every covenant and condition thereof by the lessee thereunder to be performed or
observed.
20. Default. The following shall constitute events of default
hereunder:
(a) failure in the due and punctual payment of any indebtedness or
performance of any obligations secured hereunder, including any principal
or interest or any other amounts required to be paid or due or to become
due under this Mortgage, the Credit Agreement, or under any other
agreement(s) or instrument(s) now or hereafter securing the indebtedness
which is also secured hereunder; or
(b) non-payment of any tax, water rate, sewer rent, assessment or
for twenty (20) days after the same first becomes due and payable; or if
Mortgagor fails to furnish Mortgagee with receipted tax bills or other
proof of payment of the aforesaid items by no later than thirty (30) days
after the dates on which such items must be paid so as not to constitute a
default hereunder; or
(c) breach, after notice and demand, either in Mortgagor's
responsibility for assigning and delivering the policies of insurance
herein described or referred to, or in reimbursing Mortgagee for premiums
paid on such insurance, as hereinbefore provided; or
(d) the actual or threatened material waste, removal or demolition
of any building or other property on the Premises, except as permitted by
Article 3 after thirty (30) days notice to Mortgagor and its failure to
cure; or
(e) assignment by Mortgagor of the whole or any part of the rents,
issues or profits arising from the Premises to any person without the
written consent of Mortgagee; or
<PAGE>
15
(f) if the buildings on the Premises are not maintained in
reasonably good repair in any material respect after thirty (30) days'
notice to Mortgagor and its failure to cure; or
(g) failure to comply in any material respect with any requirement
or order or notice of violation of law or ordinance issued by any
governmental department claiming jurisdiction over the Premises within
thirty (30) days from the issuance thereof; or
(h) if, on application of Mortgagee, two or more fire insurance
companies lawfully doing business in the State of New Jersey refuse to
issue policies insuring the buildings on the Premises; or
(i) if Mortgagor shall fail to make payment of any other sums
required to be paid hereunder within the period required by specific
provision of this Mortgage or, if no such period is so provided, by not
later than ten (10) days after written notice; or
(j) if, without the prior consent of Mortgagee, the Premises or any
interest therein shall be sold, pledged, hypothecated, contracted to be
sold, leased with an option to purchase, conveyed, alienated or otherwise
disposed of or transferred or further encumbered for debt by Mortgagor; or
(k) if a lien for the performance of work or the supply of materials
is filed against the Premises or any portion thereof which shall not be
discharged or bonded within thirty (30) days from the filing thereof; or
(l) if an Event of Default shall occur under the Credit Agreement.
21. Remedies. Upon any default under paragraph 20, without notice or
presentment, each of which are hereby waived by Mortgagor, and without waiving
any rights and/or remedies Mortgagee may now or hereafter have under or in
connection with the Credit Agreement and under or in connection with any other
agreements Mortgagee may now or hereafter have with or concerning Mortgagor,
Mortgagee shall have the right to and may:
(a) declare the entire principal of all indebtedness secured
hereunder then outstanding (if not then due and payable), and all accrued
and unpaid interest thereon, and all other sums connected therewith, to be
due and payable immediately, and upon any such declaration all
indebtedness secured hereunder and said accrued and unpaid interest and
other sums shall become and be immediately due and payable, anything in
any of the Loan Documents or in this Mortgage to the contrary
notwithstanding;
<PAGE>
16
(b) personally, or by its agents or attorneys, may enter into and
upon all or any part of the Premises, and each and every part thereof,
with or without force and with or without process of law and may exclude
Mortgagor, its agents and servants wholly therefrom and from having and
holding the same, may use, operate, manage and control the Premises or any
part thereof and all records, documents, leases, books, papers and
accounts of Mortgagor relating thereto and conduct the business thereof,
either personally or by its superintendents, managers, agents, servants,
attorneys or receivers; and likewise, from time to time, at the expense of
Mortgagor, Mortgagee may make all necessary or proper repairs, renewals
and replacements and such useful alterations, additions, betterments and
improvements thereto and thereon as to it may seem advisable; and in every
such case Mortgagor shall, at any time, or times, upon demand of Mortgagee
forthwith surrender possession of the Premises and Mortgagee shall have
the right to manage and operate the Premises and to carry on the business
thereof and exercise all rights and powers of Mortgagor with respect
thereto either in the name of Mortgagor or otherwise as it shall deem
best; and Mortgagee shall be entitled to collect and receive all gross
receipts, earnings, revenues, rents, issues, profits and income of the
Mortgaged Property and every part thereof, all of which shall for all
purposes constitute property of Mortgagee; and after deducting the
expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments and
improvements and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Premises or any part
thereof, as well as just and reasonable compensation for the services of
Mortgagee and for all attorneys, counsel, agents, clerks, servants and
other employees by it properly engaged and employed, Mortgagee may apply
the monies arising as aforesaid in such manner, in such order and at such
times as Mortgagee shall determine in its discretion to the payment of any
indebtedness secured hereby and the interest thereon, when and as the same
shall become payable and/or to the payment of any other sums required to
be paid by Mortgagor under this Mortgage;
(c) (i) with or without entry, personally or by its agents or
attorneys, insofar as applicable, sell the Premises, including, without
limitation, the Building Equipment or any part thereof to the extent
permitted and pursuant to the procedures provided by law, and all estate,
right, title and interest, claim and demand therein, and right of
redemption thereof, at one or more sales as a single entity or in parcels,
and at such time and place, upon such terms and after such notice thereof
as may be required or permitted by law;
(ii) institute an action of judicial foreclosure on this Mortgage or
institute other proceedings according to law for the foreclosure hereof or
otherwise as may be allowed, at law or in equity, and may prosecute the
same to judgment, execution and sale for the collection of all of the
obligations secured hereby, and all interest with
<PAGE>
17
respect thereto, together with all taxes and insurance premiums advanced
by Mortgagee and other sums payable by Mortgagor hereunder, and all fees,
costs and expenses of such proceedings, including reasonable attorneys'
fees and expenses;
(iii) take such steps to protect and enforce its rights, whether by
action, suit or proceeding in equity or at law, for the specific
performance of any covenant, condition or agreement in the Credit
Agreement and/or in this Mortgage or in aid of the execution of any power
herein or therein granted, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or
otherwise as Mortgagee shall elect;
(iv) exercise in respect of the Premises consisting of personal
property or fixtures, or both, all of the rights and remedies available to
a secured party upon default under the applicable provisions of the
Uniform Commercial Code in effect in the State of New Jersey; and
(v) exercise any or all other rights and remedies afforded Mortgagee
under the Loan Documents, or at law or in equity.
(d) (i) Mortgagee may adjourn from time to time any sale by it to be
made under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law,
Mortgagee, without further notice or publication, may make such sale at
the time and place to which the same shall be so adjourned.
(ii) Upon any sale, it shall not be necessary for Mortgagee or any
public officer acting under execution or order of court to have present or
constructive possession of any of the Premises.
(iii) The recitals contained in any conveyance made by Mortgagee to
any purchaser at any sale made pursuant hereto or under applicable law
shall be full evidence of the matters therein stated, and all
prerequisites to such sale shall be presumed to have been satisfied and
performed.
(iv) To the extent permitted by law, any such sale or sales made
under or by virtue of this Mortgage, or under or by virtue of any judicial
proceedings, shall operate to divest all estate, right, title, interest,
claim and demand whatsoever, either at law or in equity, of Mortgagor in
and to the interest, rights, premises and property sold, and shall be a
perpetual bar, both at law and in equity, against Mortgagor, their
respective successors and assigns, and against any and all persons or
entities claiming
<PAGE>
18
the premises and property sold, or any part thereof, from, through or
under Mortgagor and their respective successors or assigns.
(v) The receipt of Mortgagee for the purchase money paid at any such
sale, or the receipt of any other person authorized to receive the same,
shall be sufficient discharge therefor to any purchaser of the property,
or any part thereof, sold as aforesaid, and no such purchaser, or his
representatives, grantees or assigns, after paying such purchase money and
receiving such receipt, shall be bound to see to the application of such
purchase money or any part thereof upon or for any trust or purpose of
this Mortgage, or be liable for misapplication or nonapplication of any
such purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(vi) In case the liens or security interests hereunder, or by the
exercise of any other right or power, shall be foreclosed by Mortgagee's
sale or by other judicial action, the purchaser at any such sale shall
receive, as an incident to his ownership, immediate possession of the
property purchased, and if Mortgagor or its respective successors shall
hold possession of said property, or any part thereof, subsequent to
foreclosure, Mortgagor or its respective successors shall be considered as
tenants at sufferance of the purchaser at foreclosure sale, and anyone
occupying the property after demand made for possession thereof shall be
guilty of forcible detainer and shall be subject to eviction and removal,
forcible or otherwise, with or without process of law, and all damages by
reason thereof are hereby expressly waived.
(vii) In the event a foreclosure hereunder shall be commenced by
Mortgagee, Mortgagee may at any time before the sale abandon the suit, and
may then institute suit for the collection of amounts due or to become due
under the Credit Agreement and for the foreclosure of the liens and
security interest hereof. If Mortgagee should institute a suit for the
collection of amounts due or to become due under the Credit Agreement and
for a foreclosure of the liens and security interest hereof, it may at any
time before the entry of a final judgment in said suit dismiss the same
and proceed to sell the Premises, or any part thereof, in accordance with
provisions of this Mortgage.
(viii) Should any default occur hereunder, any reasonable expenses
incurred by Mortgagee in consulting, negotiating, prosecuting, resettling
or settling the claim of Mortgagee, including, without limitation,
reasonable attorneys' fees and disbursements, shall become an additional
obligation of Mortgagor hereunder.
(ix) In the event of any sale made under or by virtue of this
Mortgage the entire principal of, interest on, and all other indebtedness
secured hereunder, if not previously due and payable, immediately
thereupon shall, anything in the Credit
<PAGE>
19
Agreement or in this Mortgage to the contrary notwithstanding, become due
and payable.
(x) The purchase money proceeds or avails of any sale made under or
by virtue of this Mortgage, together with any other sums which then may be
held by Mortgagee under this Mortgage, whether under the provisions hereof
or otherwise, shall be applied in accordance with the applicable law and,
to the extent not inconsistent therewith, as follows:
First: To the payment of the reasonable costs and expenses of
such sale, including reasonable compensation to Mortgagee, its
agents and counsel, and of any judicial proceedings wherein the same
may be made, and of all expenses, liabilities and advances made or
incurred by Mortgagee under this Mortgage, including without
limitation any such expenses, liabilities and/or advances to remedy
default by Mortgagor, or to otherwise establish, preserve or enforce
any rights hereunder, together with interest at the rate set forth
in Article 4 on all advances made by Mortgagee and all taxes or
assessments, except any taxes, assessments or other charges subject
to which the Premises shall have been sold.
Second: To the payment of the whole amount then due, owing or
unpaid upon indebtedness secured hereunder in accordance with the
provisions of the Credit Agreement, including, without limitation,
all principal and interest due and to become due under or in
connection with the Credit Agreement, with interest on the unpaid
principal at the rate set forth in Article 4 from and after the
happening of any event of default described in paragraph 20, from
the due date of any such payment of principal until the same is
paid.
Third: To the payment of any other sums required to be paid by
Mortgagor pursuant to any provision of this Mortgage or the Credit
Agreement, all with interest at the rate set forth in Article 4,
from the date such sums were or are required to be paid under this
Mortgage.
Fourth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
(xi) Upon any sale made under or by virtue of this Mortgage, by
virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, Mortgagee may bid for and acquire the Premises or any part
thereof and in lieu of paying cash therefor, and upon compliance with the
terms of said sale, may hold, retain and dispose of such property without
further accountability therefor. Mortgagee may also make settlement for
the purchase price by crediting upon the indebtedness of
<PAGE>
20
Mortgagor secured by this Mortgage the net sales price after deducting
therefrom the expense of the sale and the costs of the action and any
other sums which Mortgagee is authorized to deduct under this Mortgage.
22. Non-Waiver by Mortgagee. That any failure by Mortgagee to insist
upon the strict performance by Mortgagor of any of the terms and provisions
hereof shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor; that
neither Mortgagor nor any other person now or hereafter obligated for the
payment of the whole or any part of the sums now or hereafter secured by this
Mortgage shall be relieved of such obligation by reason of the failure of
Mortgagee to comply with any request of Mortgagor, or of any other person so
obligated, to take action to foreclose this Mortgage or otherwise enforce any of
the provisions of this Mortgage or any obligations secured by this Mortgage, or
by reason of the release, regardless of consideration, of the whole or any part
of the security held for the indebtedness secured by this Mortgage, or by reason
of any agreement or stipulation between any subsequent owner or owners of the
Premises and Mortgagee extending the time of payment or modifying the terms of
any indebtedness secured hereunder or this Mortgage without first having
obtained the consent of Mortgagor or such other person, and in the latter event,
Mortgagor and all such other persons shall continue liable to make such payments
according to the terms of any such agreement of extension or modification unless
expressly released and discharged in writing by Mortgagee; that, regardless of
consideration and without the necessity for any notice to or consent by the
holder of any subordinate lien on the Premises, Mortgagee may release the
obligation of anyone at any time liable for any of the indebtedness secured by
this Mortgage or any part of the security held for the indebtedness without, as
to the security or the remainder thereof, in any way impairing or affecting the
lien hereof or the priority thereof over any subordinate encumbrance; and that
Mortgagee may resort for the payment of the indebtedness secured hereby to any
other security therefor held by Mortgagee in such order and manner as Mortgagee
may elect.
23. Taxation of Mortgagee or Indebtedness. That if at any time the
United States of America, any state thereof or any department, agency, bureau or
governmental subdivision thereof, having jurisdiction, shall require revenue
stamps to be affixed to any indebtedness secured hereunder, or other tax paid on
or in connection therewith, Mortgagor will pay the same with any interest or
penalties imposed in connection therewith.
24. Building Equipment, Fixtures and Personal Property. That
Mortgagor shall execute any and all such documents, including Financing
Statements pursuant to the Uniform Commercial Code of the State of New Jersey as
Mortgagee may request, to preserve and maintain the priority of the lien created
hereby on property which may be deemed personal property or fixtures, and
Mortgagor shall pay to Mortgagee on demand any
<PAGE>
21
expenses incurred by Mortgagee in connection with the preparation, execution and
filing of any such documents. Mortgagor hereby authorizes and empowers Mortgagee
to execute and file, on Mortgagor's behalf, all Financing Statements, and
refilings and continuations thereof as Mortgagee deems necessary or advisable to
create, preserve and protect the lien granted to Mortgagee herein. When and if
Mortgagor and Mortgagee shall respectively become Debtor and Secured Party in
any Uniform Commercial Code Financing Statement affecting Building Equipment or
other property referred to or described herein, this Mortgage shall be deemed
the Security Agreement as defined in said Uniform Commercial Code and the
remedies for any violation of the covenants, terms and conditions of the
agreements herein contained shall be (i) as prescribed herein, (ii) by general
law or (iii) as to such part of the security which is also reflected in said
Financing Statement, by the specific statutory consequences now or hereafter
enacted and specified in said Uniform Commercial Code, all at Mortgagee's sole
election. The filing of such a Financing Statement in the records normally
having to do with personal property shall never be construed as in any way
derogating from or impairing this declaration and hereby stated intention of the
parties hereto, that all items of Building Equipment and other property used in
connection with the production of income from the Premises (furniture only
excepted) or adapted for use therein or which are described or reflected in this
Mortgage are, and at all times and for all purposes and in all proceedings, both
legal and equitable, shall be, regarded as part of the real estate irrespective
of whether or not (i) any such item is physically attached to the improvement,
serial numbers are used for the better identification of certain equipment items
capable of being thus identified in a recital contained herein or in any list
filed with Mortgagee or (iii) any such item is referred to or reflected in any
such Financing Statement so filed at any time. Similarly, the mention in any
such Financing Statement of (1) the rights in or the proceeds of any fire and/or
hazard insurance policy, (2) any award in eminent domain proceedings for a
taking or for loss of value or (3) the debtor's interest as lessor in any
present or future lease or rights to income growing out of the use or occupancy
of the Premises, whether pursuant to a lease or otherwise, shall never be
construed as in any way altering any of the rights of Mortgagee as determined by
this instrument or impugning the priority of Mortgagee's lien granted hereby or
by any other recorded document, but such mention in the Financing Statement is
declared to be for the protection of Mortgagee in the event any court or judge
shall at any time hold with respect to (1), (2) or (3) that notice of
Mortgagee's priority of interest, to be effective against a particular class of
persons, including but not limited to the Federal government and any
subdivisions or entity of the Federal government, must be filed in the Uniform
Commercial Code records.
25. Certain Waivers. That Mortgagor will not at any time insist
upon, or plead, or in any manner whatever claim or take any benefit or advantage
of any stay or extension or moratorium law, any exemption from execution or sale
of the Premises or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Mortgage, nor claim, take or insist upon any benefit or advantage of any
law now or hereafter in force providing for the valuation or
<PAGE>
22
appraisal of the Premises or any part thereof, prior to any sale or sales
thereof which may be made pursuant to any provision herein, or pursuant to the
decree, judgment or order of any court of competent jurisdiction; nor, after any
such sale or sales, claim or exercise any right under any statute heretofore or
hereafter enacted to redeem the property so sold or any part thereof and
Mortgagor hereby expressly waives all benefit or advantage of any such law or
laws and covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Mortgagee, but to suffer and permit the execution
of every power as though no such law or laws had been made or enacted.
Mortgagor, for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have the Premises marshaled upon any foreclosure
hereof.
26. Environmental Matters. (a) Definitions for this Section:
(i) "Environmental Laws" means and includes any federal, state or
local law, statute, regulation, charter, fire rule, code or ordinance,
concerning environmental, health or safety matters all as presently in
effect and as the same may hereafter be amended, including, without
limitation, the Industrial Site Recovery Act, as amended, N.J.S.A. 13:lK-6
et seq. ("ISRA"), the Spill Compensation and Control Act, as amended,
N.J.S.A. 58:10-23.11 et seq. (the "Spill Act"), the Federal Safe Drinking
Water Act, as amended, 42 U.S.C.A. ss.300F et seq. ("FSDWA"), the
Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 U.S.C.A. ss.9601 et seq. ("CERCLA"), the New Jersey
Underground Storage of Hazardous Substances Act, as amended, N.J.S.A.
58:10A-21 et seq. ("USTA"), the Resource Conservation and Recovery Act, as
amended, 42 U.S.C.A. ss.6901 et seq ("RCRA"), the Federal Water Pollution
Control Act, as amended, 33 U.S.C.A. ss.1251 et seq. ("FWPCA") and the
Federal Clean Air Act, as amended, 42 U.S.C.A. ss.7401 et seq. ("FCAA"),
and the Federal Toxic Substances Control Act, as amended, 15 U.S.C.A.
ss.2601 et seq. ("FTSCA") and any rule, regulation, binding
interpretation, binding policy, permit, order, directive, court order or
consent decree issued pursuant to any of the following activities: (A) the
emission, discharge, release or spilling of any substance into the air,
surface water, groundwater, soil or substrata, (B) the manufacturing,
processing, sale, generation, treatment, storage, disposal,
transportation, labeling or other management of any waste, Hazardous
Substance, Hazardous Waste, Pollutant or Contaminant as those terms are
hereinafter defined, or (C) any activity which involves any Hazardous
Substance, as that term is hereinafter defined.
(ii) "Hazardous Substances" means and includes any material or
substance that, whether by its nature or use, is subject to regulation
under any Environmental Laws.
(iii) "Premises" means the mortgaged premises.
<PAGE>
23
(iv) "Release" means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing
or dumping.
(v) "Notice" means any summons, citation, directive, order, claim,
litigation, investigation, proceeding, judgment, letter or other
communication, written or oral, actual or threatened, from the New Jersey
Department of Environmental Protection ("NJDEP"), the United States
Environmental Protection Agency ("USEPA") or other federal, state or local
agency or authority, or any other entity or any individual, concerning any
intentional or unintentional act or omission which has resulted or which
may result in the Release of Hazardous Substances into the waters or onto
the lands of the State of New Jersey, or into water outside the
jurisdiction of the State of New Jersey or into the environment from or on
the Premises, and shall include the imposition of any lien on the
Premises, pursuant to Environmental Laws, or any violation of any
Environmental Law or any knowledge, after due inquiry and investigation,
of any facts which could give rise to any of the above.
(b) Mortgagor warrants and represents to Mortgagee as follows,
knowing that Mortgagee is relying on in entering into this these representations
and warranties, Mortgage:
(i) To the best of Mortgagor's knowledge, after diligent inquiry and
investigation, no lien has been attached to any revenues or any real or
personal property owned by Mortgagor and located in the State of New
Jersey, including, but not limited to the Premises, in connection with any
Environmental Law.
(ii) Mortgagor has received no Notice.
(iii) In connection with the purchase of the Premises, and any other
ISRA-triggering transaction entered into by Mortgagor on or after January
1, 1984, (A) there has been obtained from NJDEP a letter certifying that
the transaction was not subject to the provisions of ISRA, or (B)
Mortgagor required that the party triggering ISRA comply with the
provisions of ISRA to the extent applicable to such transaction, and the
party did comply therewith, or (C) no interruption of Mortgagor's
business, or any portion thereof, will result from any ISRA-related issues
and/or by reason of or in connection with any ISRA compliance activities.
(iv) To the best of Mortgagor's knowledge, after diligent inquiry
and investigation, the Premises are in full compliance with all provisions
of Environmental Laws.
(v) Neither Mortgagor nor any other person or party (including prior
owner(s) or current or prior tenants) has caused or permitted the Premises
to be used
<PAGE>
24
to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce or process Hazardous Substances, or other
hazardous, dangerous, toxic substances, or solid waste, has not caused or
permitted and has no knowledge of the Release of any Hazardous Substances
on or off-site of the Premises except in accordance with all Environmental
Laws.
(c) Mortgagor hereby covenants and agrees with Mortgagee as follows:
(i) If Mortgagor is presently an owner or operator of a "Major
Facility" in the State of New Jersey, or if Mortgagor ever becomes such an
owner or operator, then Mortgagor shall furnish to the NJEP all the
information required by N.J.S.A. 58:10-23.11d.
(ii) Mortgagor shall not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part, a Release of
a Hazardous Substance into waters of the State of New Jersey or onto the
lands from which it might flow or drain into said waters, or into waters
outside the jurisdiction of the State of New Jersey, where damage may
result to the lands, waters, fish, shellfish, wildlife, biota, air and
other resources owned, managed, held in trust or otherwise controlled by
the State of New Jersey, unless said Release is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal and state governmental authorities.
(iii) So long as Mortgagor shall own or operate any real property
located in the State of New Jersey, which is used as a "Major Facility,"
Mortgagor shall duly file or cause to be duly filed with the Director of
the Division of Taxation in the New Jersey Department of the Treasury, a
tax report or return and shall pay or make provision for the payment of
all taxes due therewith, all in accordance with and pursuant to N.J.S.A.
58:10-23.11h.
(iv) In the event that there shall be filed a lien against the
Premises by NJDEP and/or USEPA, then Mortgagor shall, within thirty (30)
days after the date that Mortgagor is given notice that the lien has been
placed against the Premises or within such shorter period of time in the
event that the State of New Jersey has commenced steps to cause the
Premises to be sold pursuant to the lien, either (A) pay the claim and
remove the lien from the Premises, or (B) furnish a bond satisfactory to
Mortgagee in the amount of the claim out of which the lien arises or a
cash deposit in the amount of the claim out of which the lien arises or
other security reasonably satisfactory to Mortgagee in an amount
sufficient to discharge the claim out of which the lien arises.
<PAGE>
25
(v) If Mortgagor receives any notice of (i) the happening of any
event involving the use, spill, discharge or cleanup of any Hazardous
Substances, any toxic substance or waste or any oil or pesticides on or
about the Premises (a "Hazardous Discharge") or (ii) any complaint, order,
citation or notice with regard to air emissions, water discharges, noise
emissions or any other environmental, health or safety matter affecting
Mortgagor or the Premises (an "Environmental Complaint") from any person
or entity, including, without limitation the NJDEP, then Mortgagor will
give immediate oral and written notice of same to Mortgagee.
(vi) Mortgagor agrees that, as landlord, it shall use its best
efforts to include the language stated below in all non-residential leases
(which shall include renegotiations of existing leases) of all or any
portion of the Premises that it enters into:
"ARTICLE ____: ENVIRONMENTAL OBLIGATIONS OF TENANT"
" -.1 Use of Hazardous Substances. Tenant agrees not to use any
Hazardous Substances at the demised premises unless it has first taken all
necessary steps to obtain any necessary permits governing the use, storage and
disposal of such substances and has made adequate arrangements to use, store and
dispose of such substances safely.
" -.2 Notices. If Tenant receives any notice of the happening of any
event involving the use, spill, discharge or cleanup of any Hazardous Substance,
and toxic substance or waste, or any oil or pesticide on or about the demised
premises or into the sewer, septic system or waste treatment system servicing
the demised premises (any such event is hereinafter referred to as a "Hazardous
Discharge") or of any complaint, order, citation, or notice with regard to air
emissions, water discharges, noise emissions or any other environmental, health
or safety matter affecting Tenant (an "Environmental Complaint") from any person
or entity, including, without limitation, the Department of Environmental
Protection of New Jersey ("DEP") and the United States Environmental Protection
Agency ("EPA"), then Tenant shall give immediate oral and written notice of same
to Landlord and Landlord's mortgagee, detailing all relevant facts and
circumstances.
" -.3 Landlord's Option. (a) Without limiting the foregoing,
Landlord shall have the right, but not the obligation, to exercise any of its
rights as provided in this Lease or to enter onto the Premises or to take such
actions as it deems necessary or advisable to clean up, remove, resolve or
minimize the impact of or otherwise deal with any Hazardous Discharge or
Environmental Complaint upon its receipt of any notice from any person or
entity, including, without limitation, the DEP and the EPA, asserting the
happening of a Hazardous Discharge or an Environmental Complaint on or
pertaining to the demised premises. All costs and expenses incurred by Landlord
in the exercise of any such rights
<PAGE>
26
shall be deemed to be additional rent hereunder and shall be payable by Tenant
to Landlord upon demand.
" -.4 Insurance. To the extent available at reasonable rates, Tenant
shall at all times during the term of this Lease maintain in full force and
effect environmental impairment insurance satisfactory to Landlord and
Landlord's mortgagee as to carrier, amount, coverage and all other aspects.
" -.5 Default. The occurrence of any of the following events shall
constitute an Event of Default under this Lease:
"(a) If Tenant does not give Landlord notice of a Hazardous
Discharge or an Environmental Complaint on or pertaining to the demised
premises (which may be given in any oral or written form, provided same is
followed with all due dispatch by written notice given by certified mail,
return receipt requested) within three (3) business days of the time
Tenant first receives notice of such Hazardous Discharge or Environmental
Complaint; or
"(b) If the DEP, EPA, or any other local, state or federal agency
asserts or creates a lien upon any or all of the demised premises by
reason of the occurrence of a Hazardous Discharge or an Environmental
Complaint or otherwise; or
"(c) If the DEP, EPA or any other local, state or federal agency
asserts a claim against the Tenant, the demised premises or Landlord for
damages or cleanup costs related to a Hazardous Discharge or an
Environmental Complaint on or pertaining to the demised premises;
provided, however, such claim shall not constitute a default if, within
five (5) days of the occurrence giving rise to the claim:
"(i) Tenant can prove to Landlord's satisfaction that Tenant
has commenced and is diligently pursuing either: (x) cure or
correction of the event which constitutes the basis for the claim,
and continues diligently to pursue such cure or correction to
completion, or (y) proceedings for an injunction, a restraining
order or other appropriate emergent relief preventing such agency or
agencies from asserting such claim, which relief is granted within
ten (10) days of the occurrence giving rise to the claim and the
emergent relief is not thereafter dissolved or reversed on appeal;
and
"(ii) In either of the foregoing events, Tenant has posted a
bond, letter of credit or other security satisfactory in form,
substance and amount to Landlord and the agency or entity asserting
the claim to secure the proper and complete cure or correction of
the event which constitutes the basis for the claim.
<PAGE>
27
" -.6 Indemnification. Tenant hereby agrees to defend, indemnify and
hold Landlord and Landlord's mortgagee, their agents, employees and contractors
harmless from and against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, consequential damages, cleanup costs
and reasonable attorney's fees arising by reason of any of the aforesaid or any
action against Tenant under this indemnity) arising directly or indirectly from,
out of or by reason of any Hazardous Discharge or Environmental Complaint or
ISRA occurring either (i) during or attributable to the period of this Lease and
any other period of possession of the demised premises by Tenant or (ii) by
reason of or attributable to Tenant's operations.
" -.7 ISRA Compliance. (a) If Tenant's operations on the Premises
now or hereafter constitute an "Industrial Establishment" subject to the
requirements of the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1k-6 et
seq., and the regulations pertaining thereto, N.J.A.C. 26B-1.1 et seq., as same
may be amended from time to time ("ISRA"), then prior to the expiration or
sooner termination of this Lease and upon any and every condemnation, assignment
or sublease (if permitted), change in ownership or control of Tenant or any
other closure or transfer by, Landlord or Tenant covered by ISRA, Tenant shall
comply with all requirements of ISRA pertaining to an Industrial Establishment
closing or transferring operations, at its sole cost and expense, to the
satisfaction of the DEPE and Landlord. Without limiting the foregoing, Tenant's
obligations shall include (i) the proper filing of the Initial Notice to the
DEPE required by ISPA, (ii) the performance to DEPE's and Landlord's
satisfaction of all air, soil, ground water and surface water sampling and tests
required by ISRA, and (iii) either (x) obtaining an approved "Negative
Declaration" from the DEPE, without qualification, or (y) obtaining a
non-qualified final DEPE approval of the complete implementation of all
necessary cleanups and post cleanup sampling pursuant to an approved final
Cleanup Plan for the Premises, accomplished to Landlord's reasonable
satisfaction. Tenant shall immediately provide Landlord with copies of all
correspondence, reports, test results, notices, orders, findings, declarations
and other materials pertinent to Tenant's compliance and DEPE's requirements
under ISRA, as any of same are issued or received by Tenant from time to time.
"(b) In no event shall any remedial action work plan or any
remediation required to be conducted by Tenant under ISRA, the Spill Act or any
other state or federal law involve or permit engineering or institutional
controls, on, under or about the demised premises, or any part thereof,
including without limitation, capping, a notice of contamination recorded on the
land records, any use or excess restriction or the posting of signs and in all
respects, all remedial remediation shall meet then current residential
standards.
"(c) In the event that Landlord has reason to believe that there has
been a Hazardous Discharge on or about the demised premises, then
notwithstanding that Tenant is not obligated to comply with subparagraph
____.5(a) above for any reason, including without
<PAGE>
28
limitation because Tenant is not an "Industrial Establishment," then at least
thirty (30) but not more than sixty (60) days prior to the expiration or sooner
termination of this Lease, Tenant shall:
"(i) prepare a detailed air, soil, ground water and surface water
sampling plan for the demised premises in form and substance satisfactory
to the Landlord;
"(ii) implement the landlord-approved sampling plan;
"(iii) submit the results of the sampling plan to the Landlord; and
"(iv) after the Landlord's review of the results of the sampling
plan, comply with Landlord's requirements for additional testing and/or
cleanup and site detoxification of any and all toxic or hazardous wastes
or substances identified by reason of the sampling plan, or conduct
additional testing, including, without limitation, any of Landlord's
requirements corresponding to those which the DEP could require under ISRA
if same applied to Tenant and/or the demised premises. All costs
associated with Tenant's compliance with this Article, including, without
limitation, Landlord's costs in reviewing the sampling plan and test
results and developing a plan for and monitoring the cleanup and site
detoxification, shall be additional rent to be paid by Tenant to Landlord
upon demand. Upon completion of the cleanup and site detoxification to
Landlord's satisfaction expressed in writing, Tenant's obligations under
this subparagraph ____.5(b) shall cease.
" -.8 Performance by Landlord. In the event of Tenant's failure to
comply in full with this Article, Landlord may, at its option, perform any or
all of Tenant's obligations as aforesaid and all costs and expenses incurred by
Landlord in exercise of this right shall be deemed to be additional rent payable
on demand.
" -.9 General. This Article shall survive the expiration or
termination of the Lease."
(d) With regard to CERCLA and the Spill Act, Mortgagor agrees that
if NJDEP and/or USEPA shall serve upon Mortgagor a directive to remove or
arrange for the removal of any "Hazardous Substances" on the Premises, the
repayment of the indebtedness secured by this Mortgage may, at Mortgagee's
election, be accelerated, in the event that Mortgagor shall not comply with the
directive within thirty (30) days from its date or such other period as
described therein, to the satisfaction of NJDEP and/or USEPA, as applicable;
provided, however, that if Mortgagor shall furnish a bond, cash or other
security reasonably satisfactory to Mortgagee in an amount sufficient to pay the
costs of taking the actions required by said directive, then the debt shall not
be accelerated.
<PAGE>
29
(e) Mortgagor agrees to comply promptly with all applicable laws,
rules regulations and orders including, without limitation, Environmental Laws,
and to immediately notify Mortgagee, in writing, of (i) the discovery,
discharge, or release of any Hazardous Substances for which Mortgagor is in any
way responsible under CERCLA or the Spill Act or any similar federal or state
statute; or (ii) the use or proposed use of the Premises as a "Major Facility".
(f) Mortgagor agrees to indemnify, defend and hold harmless
Mortgagee, its agents, employees and contractors against any penalties,
obligations, damages, actions, judgments, suits, claims, disbursements, losses
or liabilities, costs or expenses of any kind (including, without limitation,
reasonable attorneys' fees and disbursements) which the Indemnitees may sustain
as a result of or on account of (1) any lien imposed upon the Premises pursuant
to CERCLA or the Spill Act or any amendments thereto; or (2) any other
Environmental Law governing Mortgagor or the Premises; or (3) the presence of
asbestoscontaining materials at the Premises; or (4) the past, present or future
operations of Mortgagor or any of Mortgagor's subsidiaries or any of its or
their predecessors in interest. The provisions of this paragraph shall survive
any transfer of the Premises, including a transfer after a foreclosure of this
Mortgage, and delivery of the deed effecting such transfer, or a satisfaction,
discharge, release or termination of this Mortgage; and shall apply
notwithstanding any negligent or contributory conduct by or on the part of
Mortgagee, its agents, employees, contractors, third parties or other parties.
(g) In the event that there has been, or Mortgagee reasonably
believes that there has been, a Release of a Hazardous Substance at the
Premises, Mortgagor shall promptly arrange for an environmental audit and tests,
as set forth in subparagraph (j) below, of such representative soil, air and/or
water samples of the Premises as Mortgagee may require. Mortgagor agrees that
the repayment of the indebtedness secured hereby may, at Mortgagee's election,
be accelerated if Mortgagee shall have determined that, based on such soil, air
and/or water samples, there exists a violation under any applicable
Environmental Law and Mortgagor shall not, within thirty (30) days (or a shorter
period of time if Mortgagee or its counsel shall determine, in their sole
discretion, that such shorter period is necessary to comply with any applicable
law, rule or regulation) of notice from Mortgagee that such violation exists,
have remedied such violation.
(h) At the option of Mortgagee, it shall constitute an Event of
Default if the effect of any Environmental Law that is modified or enacted after
the date hereof is to materially increase the liability that may be imposed on
Mortgagee as a result of any violation of an Environmental Law by Mortgagor or
in respect of the Premises.
(i) In addition to the rights of Mortgagee set forth above, all
costs and expenses incurred by Mortgagee pursuant to the terms of this Section
shall be paid by Mortgagor to Mortgagee upon demand, with interest at the rate
set forth in Article 4 hereof
<PAGE>
30
or at the maximum interest rate which Mortgagor may by law pay, whichever is
lower, for the period after notice from Mortgagee that such cost or expense was
incurred to the date of payment to Mortgagee. All such costs and expenses
incurred by Mortgagee pursuant to the terms of this Section, with interest,
shall be deemed to be secured by this Mortgage.
(j) Mortgagee may require that Mortgagor, at Mortgagor's expense,
from time to time promptly cause such audits, tests and procedures as Mortgagee
deems appropriate to be conducted, by such professionals and otherwise in a
manner satisfactory to Mortgagee, for the purpose of ensuring compliance with
all Environmental Laws. The results of such audits, tests and procedures shall
be promptly submitted to Mortgagee in writing and certified as true and complete
by such professionals. Such audits, tests and procedures shall be commenced
promptly after not less than ten (10) days notice from Mortgagee.
27. No Merger. In the event the holder of this Mortgage shall
acquire the fee title to the Premises or any part thereof or a leasehold
interest, or any other interest in the Premises, or any part thereof, by
foreclosure or otherwise, Mortgagor agrees that the title to the Premises or
such leasehold or any other interest in the Premises or any part thereof, shall
not merge with the interests conveyed and mortgaged hereunder as a result of
such acquisition or for any other reason, but shall remain separate and distinct
states for all purposes; provided, however, that in such event the holder of
this Mortgage may, at its option, elect to merge such interests.
28. Joint and Several Liability. That if Mortgagor consists of more
than one party, such parties shall be jointly and severally liable under any and
all obligations, covenants and agreements of Mortgagor contained herein.
29. Rights Cumulative. That the rights of Mortgagee arising under
the clauses and covenants contained in this Mortgage shall be separate, distinct
and cumulative and none of them shall be in exclusion of the others; that no act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision, anything herein or
otherwise to the contrary notwithstanding.
30. Construction. That wherever used in this Mortgage, unless the
context clearly indicates a contrary intent or unless otherwise specifically
provided herein, the word "lease" shall mean "tenancy, subtenancy, lease or
sublease", the word "Mortgagor" shall mean "Mortgagor and any subsequent owner
or owners of the Premises" and shall be construed as if it read "Mortgagors"
whenever the sense of any agreement or instrument secured hereunder so requires,
the word "Mortgagee" shall mean "Mortgagee or any subsequent holder or holders
of this Mortgage", the word "person" shall mean "an individual, corporation,
partnership or unincorporated association", and the word "Premises" shall mean
any, all or either of the parcels described in SCHEDULE A hereto, together with
<PAGE>
31
all Building Equipment, condemnation awards and any other rights or property
interests at any time made subject to the lien of this Mortgage by the terms
hereof. To the extent there is any inconsistency between the terms of this
Mortgage and the terms of the Credit Agreement, except for the remedy provisions
hereunder, the terms thereof shall govern.
31. No Oral Modification. That this Mortgage cannot be changed or
terminated orally.
32. No Impairment. That Mortgagor: shall keep this Mortgage a valid
mortgage lien upon the Premises; shall not at any time create or allow to accrue
or exist any debt, lien or charge which would be prior to or on a parity with
the lien of this Mortgage upon any part of the Premises; and shall not cause or
permit the lien of this Mortgage to be diminished or impaired in any way.
33. Fees and Expenses. That Mortgagor shall pay all fees and charges
incurred in the procuring and making of the loans secured by this Mortgage,
including, without limitation, the reasonable fees and disbursements of
Mortgagee's attorneys, charges for appraisals, fees and expenses relating to
examination of title, title insurance premiums, surveys and mortgage recording
documents, transfer or other similar taxes and revenue stamps, and in default
thereof Mortgagee may pay the same and Mortgagor will repay the same with
interest thereon at the rate per annum specified in Article 4 hereof and the
same shall be added to the indebtedness secured hereby and be secured by this
Mortgage.
34. Governing Law. This Mortgage shall, in all respects, be
governed, construed, applied and enforced in accordance with the laws of the
State of New Jersey.
35. Severability. In case any one or more of the covenants,
agreements, terms or provisions contained in this Mortgage and Security
Agreement or related documents shall be invalid, illegal or unenforceable in any
respect, the validity of the remaining covenants, agreements, terms or
provisions contained herein and in the related documents shall be in no way
affected, prejudiced or disturbed thereby.
36. Binding Effect. The covenants contained in this Mortgage shall
run with the land and bind Mortgagor, the heirs, personal representatives,
successors and assigns of Mortgagor and all subsequent encumbrances, tenants and
subtenants of the Premises and shall enure to the benefit of Mortgagee and their
respective successors and assigns.
37. Headings. The headings of this Mortgage are for the convenience
of reference only and are not to be considered a part hereof, and shall not
limit or expand or otherwise affect any of the terms hereof.
<PAGE>
32
BOTH MORTGAGOR AND MORTGAGEE HEREBY IRREVOCABLY WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS INSTRUMENT, INCLUDING, BUT NOT LIMITED TO, ALL TORT
ACTIONS.
IN WITNESS WHEREOF, this Mortgage has been duly executed by
Mortgagor the day and year first above written.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
BY:__________________________
<PAGE>
ACKNOWLEDGMENT
STATE OF _________ )
) ss.:
COUNTY OF _______ )
I CERTIFY that on September __, 1996, ____________ personally came
before me and this person acknowledged under oath, to my satisfaction that:
(a) this person signed, sealed and delivered the attached document
as ______________ of MEDIQ/PRN Life Support Services, Inc. the corporation named
in this document; and
(b) this document was signed and made by the corporation as its
voluntary act and deed by virtue of authority from its Board of Directors.
________________________________
Notary Public
<PAGE>
SCHEDULE A
DESCRIPTION OF MORTGAGED PREMISES
Schedule A
Legal Description
All the real property located in the Township of Pennsauken, County of Camden,
State of New Jersey and more particularly described as follows:
Tract #1
BEGINNING at a point in the Northeasterly line of Suckle Highway (60 feet wide)
said point being distant 834.59 feet measured South 24 degrees 41 minutes 20
seconds East along the Northeasterly line of said Suckle Highway from the
Southeasterly line of National Highway (60 feet wide): and running thence
1. North 65 degrees 18 minutes 40 seconds East a distance of 550.00
feet to a point; thence
2. South 24 degrees 41 minutes 20 seconds East a distance of 395.99
feet to a point corner to lands of Pacific Coast Realty Corporation
of Delaware; thence
3. along same South 65 degrees 18 minutes 40 seconds West a distance of
550.00 feet to a point in the Northeasterly line of said Suckle
Highway; thence
4. along same North 24 degrees 41 minutes 20 seconds West a distance of
396.00 feet, to the point or place of BEGINNING.
Tract #2
BEGINNING at a point in the Northeasterly line of Suckle Highway (60.00 feet
wide) said point being distant 1255.59 feet measured South 24 degrees 41 minutes
20 seconds East along the Northeasterly line of said Suckle Highway from the
intersection of same with the Southwesterly line of National Highway (60.00 feet
wide), said beginning point also being corner to lands of Pacific Coast Realty
Corporation of Delaware: and running thence
1. along said lands North 65 degrees 18 minutes 40 seconds East a
distance of 330.00 feet to a point corner to same; thence
<PAGE>
2
2. still along said lands South 24 degrees 41 minutes 20 seconds East a
distance of 60.00 feet to a point in same; thence
3. South 65 degrees 18 minutes 40 seconds West a distance of 330.00
feet to a point in the Northeasterly line of said Suckle Highway;
thence
4. along said highway North 24 degrees 41 minutes 20 seconds West a
distance of 60.00 feet, to the point or place of BEGINNING.
Tract #3
BEGINNING at a point in the Northeasterly line of Suckle Highway (60 feet wide)
said point being distant 1315.59 feet measured South 24 degrees 41 minutes 20
seconds East along the Northeasterly line of said Suckle Highway from the
intersection of same with the Southeasterly line of National Highway (60.00 feet
wide): and running thence
1. North 65 degrees 18 minutes 40 seconds East a distance of 330.00
feet to a point in line of lands of Pacific Coast Realty Corporation
of Delaware; thence
2. along same South 24 degrees 41 minutes 40 seconds East a distance of
309.81 feet to a point in the Northwesterly line of New Jersey State
Highway Route No. 130 (93.00 feet wide); thence
3. along same South 65 degrees 18 minutes 40 seconds West a distance of
169.00 feet to a point corner to same; thence
4. North 24 degrees 41 minutes 20 seconds West measured along the
Northeasterly line of said State Highway a distance of 2.50 feet to
a point of curve; thence
5. in a general Westerly direction curving to the right with a radius
of 190.00 feet an arc distance of 166.36 feet to a point of compound
curve in the curved Northeasterly line of said Route No. 130; thence
6. in a general Northwesterly direction curving to the right with a
radius of 65.00 feet an arc distance of 45.15 to a point of tangency
in the Northeasterly line of said Suckle Highway; thence
7. along same North 24 degrees 41 minutes 20 seconds West a distance of
197.37 feet, to the point or place of BEGINNING.
<PAGE>
3
Together with a 25 foot wide easement for ingress and egress lying between
Tracts #1 and #2 for so long as the Tracts south and north of the 25 foot
easement are in common ownership as set forth and reserved in Deed Book 2907,
Page 82.
Being described in accordance with a survey made by Edward J. Martin P.L.S.
dated September 20, 1994 except for the beginning point distances from the
Southeasterly line of National Highway (60 feet wide) which were not indicated
on the survey.
FOR INFORMATION ONLY: Being known as Lot 4A, 4AB, 4ABB Block 251 as shown
on the tax assessment map of the Township of Pennsauken.
<PAGE>
<PAGE>
S&S DRAFT
9/30/96
EXHIBIT F TO THE
CREDIT AGREEMENT
FORM OF NOTICE OF DRAWING
FROM THE ASSET SALE BLOCKED ACCOUNT
Banque Nationale de Paris,
as Administrative Agent under the
Credit Agreement referred to below
499 Park Avenue
New York, NY 10022 [Date]
Attention: Ms. Kimberly Williams
Ladies and Gentlemen:
The undersigned, MEDIQ/PRN Life Support Services, Inc., a Delaware
corporation (the "Borrower"), refers to the Credit Agreement dated as of October
1, 1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among the Borrower, MEDIQ Incorporated, a Delaware corporation, and
PRN Holdings, Inc., a Delaware corporation, as Parent Guarantors, the lender
parties party thereto (the "Lender Parties"), Banque Nationale de Paris, as
Administrative Agent and Initial Issuing Bank, and NationsBank, N.A., as
Documentation Agent, and hereby gives you notice, irrevocably, pursuant to
Section 2.16 of the Credit Agreement, that the Borrower hereby requests
permission to release funds on deposit in the Asset Sale Blocked Account, and in
that connection sets forth below the information relating to such release (the
"Proposed Release") as required by Section 2.16 of the Credit Agreement:
(i) The Business Day of the Proposed Release is _________ __, ____.
(ii) The aggregate amount of the Proposed Release is $__________.
The Borrower hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Release:
(A) no event has occurred and is continuing, or would result from
such Release or from the application of the proceeds therefrom, that
constitutes a Default;
(B) for each release from the Asset Sale Blocked Account, if such
Release is used for the purposes set forth in:
<PAGE>
F-2
(1) Section 2.16(A) of the Credit Agreement, subject to the
terms set forth in Section 2.14(b) of the Credit Agreement, provided
however, that if such release is used for the purposes set forth in:
(a) Section 2.14(b)(ii) of the Credit Agreement, subject to
the terms of Section 5.02(k)(i)(y)(B), including but not
limited to the provision that immediately after giving effect
to each release of funds from the Asset Sale Blocked Account
the Senior Leverage Ratio is less than or equal to 3.75 to 1,
as calculated on the attached Schedule I;
(b) Section 2.14(b)(iii)(x) of the Credit Agreement, from and
after the Asset Sale Threshold Date, subject to the terms set
forth in Section 5.02(f)(i) of the Credit Agreement, including
but not limited to the provisions that (x) immediately after
giving effect to each release of funds from the Asset Sale
Blocked Account, the Leverage Ratio is less than or equal to
3.5 to 1, (y) any requested Acquisition Advances plus proceeds
released from the Asset Sale Blocked Account used for
acquisitions of a Person or assets pursuant to Section
5.02(f)(i) is less than or equal to 5.5 times the EBITDA for
the prior 12 months of the Person or assets acquired pursuant
to Section 5.02(f)(i), and (z) the aggregate amount any
Acquisition Advances plus the aggregate amount of proceeds
used from the Asset Sale Blocked Account plus an amount equal
to the aggregate value of the common stock of MEDIQ used for
all such Investments made pursuant to Section 5.02(f)(i) is
less than or equal to $100,000,000, each as calculated on the
attached Schedule II;
(c) Section 2.14(b)(iii)(y) of the Credit Agreement, from and
after the Asset Sale Threshold Date and not less than twelve
months after the Initial Extension of Credit, subject to the
terms set forth in Section 5.02(g)(i) of the Credit Agreement,
including but not limited to the provisions that immediately
after giving effect to each release of funds from the Asset
Sale Blocked Account (x) the Leverage Ratio is less than or
equal to 3.0 to 1 and (y) the aggregate amount of funds
released from the Asset Sale Blocked Account plus Acquisition
Advances used for dividends paid or funds advanced directly or
indirectly by the Borrower to MEDIQ to permit MEDIQ to
repurchase the common stock of MEDIQ and to pay dividends does
not exceed $20,000,000, each as calculated on the attached
Schedule III;
(2) Section 2.16(B) of the Credit Agreement, for the purposes
set forth in and pursuant to the terms of Section 2.06(a) of the
Credit Agreement; and
<PAGE>
F-3
(3) Section 2.16(C) of the Credit Agreement, for the purposes
set forth in and pursuant to the terms of Section 2.06(b)(ix) of the
Credit Agreement.
Very truly yours,
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By_____________________________
Title:
<PAGE>
SCHEDULE I
SECTION 5.02(k)(i)(y)(B)
SENIOR LEVERAGE RATIO CALCULATION
FOR REPAYMENT OF SUBORDINATED NOTES
(1) outstanding Term Loan A Advances _____________
(2) outstanding Term Loan B Advances _____________
(3) outstanding Acquisition Advances _____________
(4) outstanding Working Capital Advances _____________
(5) outstanding Letter of Credit Advances _____________
(6) outstanding amount of other Senior Debt(1) _____________
(7) TOTAL SENIOR DEBT _____________
[sum of (1) through (6)]
(8) Consolidated EBITDA for the Rolling Period _____________
ended as of the most recent period for which
financial statements were required to be
furnished pursuant to Sections 5.03(b), (c)
or (d)
(9) SENIOR LEVERAGE RATIO _____________
[(7) divided by (8)]
- --------
(1) excluding (i) contingent obligations of the type described in clause (f)
or (h) in the definition of "Debt" and (ii) Debt permitted under Section
5.02(b)(i)(A) (Parent Guarantor Debt-A), as specified in the definition of
"Senior Leverage Ratio".
<PAGE>
SCHEDULE II
SECTION 5.02(f)(i)
CALCULATIONS
FOR INVESTMENTS BY THE BORROWER
A. CALCULATION OF LEVERAGE RATIO
(1) outstanding Term Loan A Advance _____________
(2) outstanding Term Loan B Advances _____________
(3) outstanding Acquisition Advances _____________
(4) outstanding Working Capital Advances _____________
(5) outstanding amount of Letter of Credit Advances _____________
(6) outstanding amount of other Funded Debt(1)
- -----------
(7) Total Funded Debt
[sum of (1) through (6)]
(8) Amount on deposit in the Asset Sale Blocked Account
(after the Proposed Release of funds)
(9) principal amount of the NutraMax Note
to the extent secured by the NutraMax Letter of Credit
(10) NUMERATOR TOTAL
[(7) minus (8) minus (9)] _____________
(11) Consolidated EBITDA for the Monthly Rolling Period
ended as of the most recent month for which
financial statements were required to be furnished
pursuant to Sections 5.02(b), (c) or (d) _____________
(12) LEVERAGE RATIO
[(10) divided by (11)] _____________
- --------
1 excluding (i) contingent obligations of the type described in clause (f)
or (h) in the definition of "Debt" and (ii) Debt permitted under Section
5.02(b)(i)(A) (Parent Guarantor Debt-A), as specified in the definition of
"Leverage Ratio".
<PAGE>
B. For Investments permitted under Section 5.02(f)(i), the amount of the
Proposed Release is capped at the Acquisition Facility Sublimit,
calculated as follows:
(a) Acquisition Facility Commitment _____________
(b) Acquisition Advances outstanding _____________
(c) common stock used in Investments pursuant to
Section 5.02(f)(i) _____________
(d) Subordinated Notes outstanding _____________
(e) ACQUISITION FACILITY SUBLIMIT
[(a) minus (b) minus (c) minus (d)] _____________
C. RATIO OF ANY ACQUISITION ADVANCE PLUS PROPOSED RELEASE
FROM THE ASSET SALE BLOCKED ACCOUNT TO EBITDA FOR PRIOR 12
MONTHS OF THE PERSON OR ASSETS ACQUIRED PURSUANT TO
SECTION 5.02(f)(i) WITH SUCH ADVANCE OR PROCEEDS _____________
(1) amount of any requested Acquisition Advance
made simultaneously with the Proposed
Release of funds from the Asset Sale Blocked
Account used for the acquisition of the
Person or assets acquired pursuant to
Section 5.02(f)(i) _____________
(2) amount of Proposed Release from the Asset
Sale Blocked Account for the acquisition of
the Person or assets pursuant to Section
5.02(f)(i) _____________
(3) NUMERATOR TOTAL
[sum of (1) and (2)] _____________
(4) EBITDA for the prior 12 months of the Person or assets
acquired pursuant to Section 5.02(f)(i) _____________
(5) RATIO [(3) divided by (4)] _____________
<PAGE>
D. CAP ON AGGREGATE AMOUNT OF INVESTMENTS PURSUANT TO
5.02(f)(i) _____________
(1) aggregate amount of Acquisition Advances
(including Advances drawn simultaneously with the
Proposed Release of funds) used for all
acquisitions of Persons or assets pursuant to
Section 5.02(f)(i) _____________
(2) aggregate amount of proceeds from the Asset Sale
Blocked Account used for all acquisitions of
Persons or assets pursuant to Section 5.02(f)(i) _____________
(3) aggregate amount of common stock used for all
acquisitions of Persons or assets pursuant to
Section 5.02(f)(i) _____________
(4) TOTAL
[sum of (1) through (3)] _____________
<PAGE>
SCHEDULE III
SECTION 5.02(g)(i)
CALCULATIONS
FOR PAYMENT OF DIVIDENDS OR ADVANCING OF FUNDS BY THE BORROWER
A. CALCULATION OF LEVERAGE RATIO
(1) outstanding Term Loan A Advances _____________
(2) outstanding Term Loan B Advances _____________
(3) outstanding Acquisition Advances _____________
(4) outstanding Working Capital Advances _____________
(5) outstanding Letter of Credit Advances _____________
(6) amount of outstanding other Funded Debt(1) _____________
(7) TOTAL FUNDED DEBT _____________
[sum of (1) through (6)]
(8) principal amount of the NutraMax Note
to the extent secured by the NutraMax Letter of Credit _____________
(9) Amount on deposit in the Asset Sale Blocked Account
(after the Proposed Release of funds) _____________
(10) NUMERATOR TOTAL
[(7) minus (8) minus (9)] _____________
(11) Consolidated EBITDA for the Rolling Period
ended as of the most recent period for which
financial statements were required to be
furnished pursuant to Sections 5.03(b), (c)
or (d) _____________
(12) LEVERAGE RATIO
[(10) divided by (11)] _____________
- --------
(1) excluding (i) contingent obligations of the type described in clause (f)
or (h) in the definition of "Debt" and (ii) Debt permitted under Section
5.02(b)(i)(A) (Parent Guarantor Debt-A), as specified in the definition of
"Leverage Ratio".
<PAGE>
B. For Investments permitted under Section
5.02(g)(i), the amount of the Proposed Release is
capped at the Acquisition Facility Sublimit,
calculated as follows:
(a) Acquisition Facility Commitment _____________
(b) Acquisition Advances outstanding _____________
(c) common stock used in Investments pursuant to
Section 5.02(f)(i) _____________
(d) Subordinated Notes outstanding _____________
(e) ACQUISITION FACILITY SUBLIMIT
[(a) minus (b) minus (c) minus (d)] _____________
C. THE AGGREGATE AMOUNT OF PROCEEDS FROM THE ASSET SALE
BLOCKED ACCOUNT PLUS ACQUISITION ADVANCES USED BY THE
BORROWER TO PAY DIVIDENDS OR ADVANCE FUNDS DIRECTLY OR
INDIRECTLY TO MEDIQ TO PERMIT MEDIQ TO REPURCHASE THE
COMMON STOCK OF MEDIQ AND TO PAY CASH DIVIDENDS
<PAGE>
<PAGE>
EXHIBIT G TO THE
CREDIT AGREEMENT
FORM OF SUBSIDIARY GUARANTY
Dated October 1, 1996
From
THE PARTIES LISTED ON THE SIGNATURE PAGES HEREOF
as SUBSIDIARY GUARANTORS,
in favor of
THE SECURED PARTIES REFERRED TO IN
THE CREDIT AGREEMENT REFERRED TO HEREIN
<PAGE>
Section Page
T A B L E O F C O N T E N T S
Section Page
1. Subsidiary Guaranty; Limitation of Liability ............................. 1
2. Subsidiary Guaranty Absolute ............................................. 2
3. Waiver ................................................................... 3
4. Subrogation .............................................................. 4
5. Payments Free and Clear of Taxes, Etc .................................... 4
6. Representations and Warranties............................................ 5
7. Covenants ................................................................ 7
8. Amendments, Etc .......................................................... 7
9. Notices, Etc ............................................................. 8
10. No Waiver; Remedies ...................................................... 8
11. Right of Set-off ......................................................... 9
12. Indemnification .......................................................... 9
13. Continuing Subsidiary Guaranty; Assignments under the Credit Agreement ... 9
14. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. ..................10
<PAGE>
SUBSIDIARY GUARANTY
Subsidiary Guaranty dated October 1, 1996 made by the parties listed
on the signature pages hereof (each such party, a "Subsidiary Guarantor"), in
favor of the Secured Parties (as defined in the Credit Agreement referred to
below).
PRELIMINARY STATEMENT. The Lender Parties, Banque Nationale de
Paris, as Administrative Agent and as Initial Issuing Bank, and NationsBank
N.A., as Documentation Agent, are parties to a Credit Agreement dated as of
October 1, 1996 (said Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with MEDIQ/PRN Life Support Services, Inc., a Delaware corporation (the
"Borrower"), MEDIQ Incorporated, a Delaware corporation ("MEDIQ") and PRN
Holdings, Inc., a Delaware corporation ("Holdings", and, together with MEDIQ,
the "Parent Guarantors"). Each Subsidiary Guarantor may receive a portion of the
proceeds of the Advances under the Credit Agreement and will derive substantial
direct and indirect benefit from the transactions contemplated by the Credit
Agreement. It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
and the entry by the Hedge Banks into Bank Hedge Agreements with the Borrower
from time to time that each Subsidiary Guarantor shall have executed and
delivered this Subsidiary Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement, each Subsidiary Guarantor, jointly and severally with each
other Subsidiary Guarantor, hereby agrees as follows:
Section 1. Subsidiary Guaranty; Limitation of Liability. (a) Each
Subsidiary Guarantor hereby absolutely, unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of each other Loan Party now or
hereafter existing under the Loan Documents, whether for principal, interest,
fees, expenses or otherwise (such Obligations being the "Guaranteed
Obligations"), and agrees to pay any and all reasonable expenses (including
counsel fees and expenses) incurred by the Administrative Agent or any other
Secured Party in enforcing any rights under this Subsidiary Guaranty or any
other Loan Document. Without limiting the generality of the foregoing, each
Subsidiary Guarantor's liability shall extend to all amounts that constitute
part of the Guaranteed Obligations and would be owed by any other Loan Party to
the Administrative Agent or any other Secured Party under the Loan Documents but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving such Loan Party.
(b) (i) Each Subsidiary Guarantor and by its acceptance of this
Subsidiary Guaranty, the Administrative Agent and each other Secured
Party, hereby
<PAGE>
2
confirms that it is the intention of all such parties that this Subsidiary
Guaranty not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to this Subsidiary Guaranty. To effectuate the foregoing
intention, the Administrative Agent, the other Secured Parties and the
Subsidiary Guarantors hereby irrevocably agree that the Obligations of
each Subsidiary Guarantor under this Subsidiary Guaranty shall not exceed
the greater of (A) the net benefit realized by such Subsidiary Guarantor
from the proceeds of the Advances made from time to time by the Borrower
to such Subsidiary Guarantor or any subsidiary of such Subsidiary
Guarantor and (B) the maximum amount that will, after giving effect to
such maximum amount and all other contingent and fixed liabilities of such
Subsidiary Guarantor that are relevant under such laws, and after giving
effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Subsidiary Guarantor in respect
of the Obligations of such other Subsidiary Guarantor under this
Subsidiary Guaranty, result in the Obligations of such Subsidiary
Guarantor under this Subsidiary Guaranty not constituting a fraudulent
transfer or conveyance. For purposes hereof, "Bankruptcy Law" means Title
11, U.S. Code, or any similar Federal or state law for the relief of
debtors.
(ii) Each Subsidiary Guarantor agrees that in the event any payment
shall be required to be made to the Secured Parties under this Subsidiary
Guaranty or any other guaranty, such Subsidiary Guarantor will contribute,
to the maximum extent permitted by law, such amounts to each other
Subsidiary Guarantor and each other guarantor so as to maximize the
aggregate amount paid to the Secured Parties under the Loan Documents.
Section 2. Subsidiary Guaranty Absolute. Each Subsidiary Guarantor
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of the Administrative Agent or any other Secured Party with respect
thereto. The Obligations of each Subsidiary Guarantor under this Subsidiary
Guaranty are independent of the Guaranteed Obligations or any other Obligations
of any other Loan Party under the Loan Documents, and a separate action or
actions may be brought and prosecuted against such Subsidiary Guarantor to
enforce this Subsidiary Guaranty, irrespective of whether any action is brought
against the Borrower or any other Loan Party or whether the Borrower or any
other Loan Party is joined in any such action or actions. The liability of each
Subsidiary Guarantor under this Subsidiary Guaranty shall be irrevocable,
absolute and unconditional irrespective of, and each Subsidiary Guarantor hereby
irrevocably waives any defenses it may now or hereafter have in any way relating
to, any or all of the following:
<PAGE>
3
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Loan Party or any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Loan Party under the Loan Documents
or any other assets of any Loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of its Subsidiaries; or
(f) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Administrative Agent or any other Secured Party that
might otherwise constitute a defense available to, or a discharge of, the
Borrower, any Subsidiary Guarantor or any other guarantor or surety.
This Subsidiary Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Secured Party or any other Person
upon the insolvency, bankruptcy or reorganization of the Borrower or any other
Loan Party or otherwise, all as though such payment had not been made.
Section 3. Waiver. (a) Each Subsidiary Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this Subsidiary Guaranty and any
requirement that the Administrative Agent, or any other Secured Party protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against any Loan Party or any other Person or any
collateral. Each Subsidiary Guarantor acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated by the
<PAGE>
4
Loan Documents and that the waiver set forth in this Section 3 is knowingly made
in contemplation of such benefits.
Section 4. Subrogation. No Subsidiary Guarantor will exercise any
rights that it may now or hereafter acquire against the Borrower or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of such Subsidiary Guarantor's Obligations under this Subsidiary
Guaranty or any other Loan Document, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of the Administrative Agent or any
other Secured Party against the Borrower or any other insider guarantor or any
collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Obligations and all other amounts payable under this Subsidiary
Guaranty shall have been paid in full in cash and the Commitments shall have
expired or terminated. If any amount shall be paid to any Subsidiary Guarantor
in violation of the preceding sentence at any time prior to the later of the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Subsidiary Guaranty and the Termination Date, such amount
shall be held in trust for the benefit of the Administrative Agent and the other
Secured Parties and shall forthwith be paid to the Administrative Agent to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Subsidiary Guaranty, whether matured or unmatured, in accordance with
the terms of the Loan Documents, or to be held as collateral for any Guaranteed
Obligations or other amounts payable under this Subsidiary Guaranty thereafter
arising. If (i) any Subsidiary Guarantor shall make payment to the
Administrative Agent or any other Secured Party of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Subsidiary Guaranty shall be paid in full in cash and
(iii) the Termination Date shall have occurred, the Administrative Agent and the
other Secured Parties will, at such Subsidiary Guarantor's request and expense,
execute and deliver to such Subsidiary Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Subsidiary Guarantor of an interest in the
Guaranteed Obligations resulting from such payment by such Subsidiary Guarantor.
Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all
payments by any Subsidiary Guarantor hereunder shall be made, in accordance with
Section 2.11 of the Credit Agreement, free and clear of and without deduction
for any and all present or future Taxes. If any Subsidiary Guarantor shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Administrative Agent or any other Secured Party, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
<PAGE>
5
payable under this Section) the Administrative Agent or such other Secured Party
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Subsidiary Guarantor shall make such
deductions and (iii) such Subsidiary Guarantor shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, each Subsidiary Guarantor agrees to pay any present
or future Other Taxes.
(c) Each Subsidiary Guarantor shall indemnify the Administrative
Agent and each other Secured Party for and hold it harmless against the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section)
paid by the Administrative Agent or such other Secured Party (as the case may
be) and any liability (including penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date the Administrative Agent or such other
Secured Party (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, such
Subsidiary Guarantor shall furnish to the Administrative Agent, at its address
referred to in Section 9.02 of the Credit Agreement, the original or a certified
copy of a receipt evidencing such payment. If no Taxes are payable in respect of
any payment hereunder by any Subsidiary Guarantor through an account or branch
outside the United States or by or on behalf of such Subsidiary Guarantor by a
payor that is not a United States person, such Subsidiary Guarantor shall
furnish, or shall cause such payor to furnish, to the Administrative Agent, a
certificate from each appropriate taxing authority or authorities, or an opinion
of counsel acceptable to the Administrative Agent, in either case stating that
such payment is exempt from or not subject to Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Without prejudice to the survival of any other agreement of any
Subsidiary Guarantor hereunder, the agreements and obligations of each
Subsidiary Guarantor contained in this Section 5 shall survive the payment in
full of the Guaranteed Obligations and all other amounts payable under this
Subsidiary Guaranty.
Section 6. Representations and Warranties. Each Subsidiary Guarantor
hereby represents and warrants as follows:
(a) Such Subsidiary Guarantor (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation, (ii) is duly qualified and in good standing as a
foreign corporation in each other
<PAGE>
6
jurisdiction in which it owns or leases property or in which the conduct
of its business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed is not reasonably likely to have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted. All of the outstanding Capital Stock of such Subsidiary
Guarantor has been validly issued, is fully paid and non-assessable and
each Subsidiary Guarantor is owned by a Loan Party, free and clear of all
Liens, except those created under the Loan Documents.
(b) The execution, delivery and performance by such Subsidiary
Guarantor of this Subsidiary Guaranty are within such Subsidiary
Guarantor's corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene such Subsidiary Guarantor's
charter or bylaws, (ii) violate any law (including, without limitation,
the Securities Exchange Act of 1934 and the Racketeer Influences and
Corrupt Organizations Chapter of the Organized Crime Control Act of 1970),
rule, regulation (including, without limitation, Regulation X of the Board
of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or result
in the breach of, or constitute a default under, any loan agreement,
contract, indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting such Subsidiary Guarantor, any of its Subsidiaries
or any of its or their properties or (iv) except for the Liens created
under the Loan Documents, result in or require the creation or imposition
of any Lien upon or with respect to any of the properties of such
Subsidiary Guarantor or any of its Subsidiaries. Neither such Subsidiary
Guarantor nor any of its Subsidiaries is in violation of any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award or in breach of any such contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument, the violation or
breach of which is reasonably likely to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery,
recordation, filing or performance by such Subsidiary Guarantor of this
Subsidiary Guaranty or any other Loan Document to which such Subsidiary
Guarantor is a party and (ii) the exercise by the Administrative Agent or
any Secured Party of its rights under this Subsidiary Guaranty or any
other Loan Document to which such Subsidiary Guarantor is a party.
(d) There is no action, suit, investigation, litigation or
proceeding affecting such Subsidiary Guarantor, including any
Environmental Action, pending or threatened before any court, governmental
agency or arbitrator that (i) would be
<PAGE>
7
reasonably likely to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of this Subsidiary
Guaranty or any other Loan Document to which such Subsidiary Guarantor is
a party.
(e) This Subsidiary Guaranty and each other Loan Document to which
it is a party has been duly executed and delivered by such Subsidiary
Guarantor. Each of this Subsidiary Guaranty and each other Loan Document
to which it is a party is the legal, valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms.
(f) There are no conditions precedent to the effectiveness of this
Subsidiary Guaranty that have not been satisfied or waived.
(g) Such Subsidiary Guarantor has, independently and without
reliance upon the Administrative Agent or any Lender Party and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Subsidiary Guaranty, and
such Subsidiary Guarantor has established adequate means of obtaining from
any other Loan Parties on a continuing basis information pertaining to,
and is now and on a continuing basis will be completely familiar with, the
financial condition, operations, properties and prospects of such other
Loan Parties.
Section 7. Covenants. Each Subsidiary Guarantor covenants and agrees
that, so long as any part of the Guaranteed Obligations shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment, such Subsidiary Guarantor will at all times perform or observe, and
will cause each of its Subsidiaries to perform or observe, all of the terms,
covenants and agreements that the Loan Documents state that the Borrower is to
cause such Subsidiary Guarantor or such Subsidiaries to perform or observe.
Section 8. Amendments, Etc. (a) No amendment or waiver of any
provision of this Subsidiary Guaranty and no consent to any departure by any
Subsidiary Guarantor therefrom shall in any event be effective unless the same
shall be in writing and signed by the Administrative Agent and the Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all of
the Secured Parties, (i) reduce or limit the liability of such Subsidiary
Guarantor hereunder or release any Subsidiary Guarantor hereunder, (ii) postpone
any date fixed for payment hereunder or (iii) amend this Section 8.
(b) (i) With the consent of the Required Lenders or (ii) upon the
merger, consolidation, sale or liquidation of any Guarantor in accordance
with the terms of the
<PAGE>
8
Credit Agreement, the Administrative Agent will, at such Guarantor's
expense, execute and deliver to such Guarantor such documents as such
Guarantor shall reasonably request to evidence the release of such
Guarantor from its obligations under this Guaranty; provided, however, as
to clause (ii) above, that (x) at the time of such request and such
release no Default shall have occurred and be continuing, (y) such
Guarantor shall have delivered to the Administrative Agent, at least five
Business Days prior to the date of the proposed release (or such shorter
period of time as may be acceptable to the Administrative Agent), a
written request for release identifying such Guarantor and, if the
Subsidiary Guarantor is an Ongoing Subsidiary only, the terms of the sale,
liquidation, merger or consolidation in reasonable detail, including, in
the case of a sale, the price thereof and any expenses in connection
therewith, together, in all cases, with a form of release for execution by
the Administrative Agent and a certification by MEDIQ to the effect that
the sale, liquidation, merger or consolidation, as the case may be, is in
compliance with the terms of the Credit Agreement and as to such other
matters as the Administrative Agent may reasonably request and (z) in the
case of a sale, any proceeds of any such sale required to be applied to
the prepayment of Advances or reduction of Commitments in accordance with
the terms of the Credit Agreement shall be so applied; provided further as
to any merger or consolidation in which the surviving corporation thereof
is a Subsidiary of MEDIQ, such surviving corporation shall have assumed in
a form satisfactory to the Administrative Agent the Guaranteed Obligations
of such Guarantor.
Section 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to any Subsidiary Guarantor, to the address set forth below such
Subsidiary Guarantor's signature on the signature pages hereof, if to the
Administrative Agent, the Documentation Agent or any Lender Party, at its
address specified in the Credit Agreement, or as to any party at such other
address as shall be designated by such party in a written notice to each other
party. All such notices and other communications shall, when mailed,
telegraphed, telecopied, telexed or sent by courier, be effective when deposited
in the mails, delivered to the telegraph company, transmitted by telecopier,
confirmed by telex answerback or delivered to the overnight courier,
respectively. Delivery by telecopier of an executed counterpart of any amendment
or waiver of any provision of this Subsidiary Guaranty shall be effective as
delivery of a manually executed counterpart thereof.
Section 10. No Waiver; Remedies. No failure on the part of the
Administrative Agent or any other Secured Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any
<PAGE>
9
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
Section 11. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 of the Credit Agreement to
authorize the Administrative Agent to declare the Notes due and payable pursuant
to the provisions of said Section 6.01, each Lender Party and each of its
respective Affiliates is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of any Subsidiary Guarantor
against any and all of the Obligations of such Subsidiary Guarantor now or
hereafter existing under this Subsidiary Guaranty, irrespective of whether such
Lender Party shall have made any demand under this Subsidiary Guaranty and
although such Obligations may be unmatured. Each Lender Party agrees promptly to
notify such Subsidiary Guarantor after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender Party and
its respective Affiliates under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that such
Lender Party and its respective Affiliates may have.
Section 12. Indemnification. Without limitation on any other
Obligations of any Subsidiary Guarantor or remedies of the Secured Parties under
this Subsidiary Guaranty, each Subsidiary Guarantor shall, to the fullest extent
permitted by law, indemnify, defend and save and hold harmless each Secured
Party from and against, and shall pay on demand, any and all losses,
liabilities, damages, costs, expenses and charges (including the fees and
disbursements of such Secured Party's legal counsel) suffered or incurred by
such Secured Party as a result of any failure of any Guaranteed Obligations to
be the legal, valid and binding obligations of any Loan Party enforceable
against such Loan Party in accordance with their terms.
Section 13. Continuing Subsidiary Guaranty; Assignments under the
Credit Agreement. This Subsidiary Guaranty is a continuing guaranty and shall
(a) remain in full force and effect until the later of the payment in full in
cash of the Guaranteed Obligations and all other amounts payable under this
Subsidiary Guaranty and the Termination Date, (b) be binding upon each
Subsidiary Guarantor, its successors and assigns and (c) inure to the benefit of
and be enforceable by the Administrative Agent and the other Secured Parties and
their successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), any Secured Party may assign or otherwise transfer all
or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitments, the
Advances owing to it and the Note or Notes held by it) to any other Person, and
such other Person shall thereupon become vested with all the
<PAGE>
10
benefits in respect thereof granted to such Secured Party herein or otherwise,
in each case as and to the extent provided in Section 9.07 of the Credit
Agreement. No Subsidiary Guarantor shall have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Secured Parties.
Section 14. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
(a) This Subsidiary Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York.
(b) Each Subsidiary Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Subsidiary Guaranty or any of the
other Loan Documents to which it is or is to be a party, or for recognition or
enforcement of any judgment, and each Subsidiary Guarantor hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the extent permitted by law, in such federal court. Each Subsidiary Guarantor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Subsidiary Guaranty shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Subsidiary Guaranty or any of the other Loan
Documents to which it is or is to be a party in the courts of any jurisdiction.
(c) Each Subsidiary Guarantor irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Subsidiary Guaranty or
any of the other Loan Documents to which it is or is to be a party in any New
York State or federal court. Each Subsidiary Guarantor hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each Subsidiary Guarantor hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the transactions contemplated thereby or the actions of the
Administrative Agent or any other Secured Party in the negotiation,
administration, performance or enforcement thereof.
<PAGE>
11
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Subsidiary Guaranty to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.
MEDIQ INVESTMENT SERVICES, INC.
By ________________________
Name:
Title:
MEDIQ MANAGEMENT SERVICES, INC.
By _________________________
Name:
Title:
MEDIQ SURGICAL EQUIPMENT
SERVICES, INC.
By _________________________
Name:
Title:
VALUE-MED PRODUCTS, INC.
By _________________________
Name:
Title:
MEDIQ MOBILE X-RAY SERVICES, INC.
By _________________________
Name:
Title:
<PAGE>
12
HEALTH EXAMINETICS, INC.
By _________________________
Name:
Title:
THERA-KINETICS ACQUISITION
CORPORATION
By _________________________
Name:
Title:
MDTC HADDON, INC.
By _________________________
Name:
Title:
MEDIQ DIAGNOSTIC CENTERS INC.
By _________________________
Name:
Title:
MEDIQ DIAGNOSTIC CENTERS-I INC.
By _________________________
Name:
Title:
MEDIQ IMAGING SERVICES, INC.
By _________________________
Name:
Title:
<PAGE>
13
AMERICAN CARDIOVASCULAR
IMAGING LABS, INC.
By _________________________
Name:
Title:
ALPHA HEALTH CONSULTANTS, INC.
By _________________________
Name:
Title:
P. I. CORPORATION
By _________________________
Name:
Title:
MEDIQ SERVICES, INC.
By _________________________
Name:
Title:
MEDIQ HOME THERAPY SERVICES OF
ARIZONA, INC.
By __________________________
Name:
Title:
<PAGE>
EXHIBIT H TO THE
CREDIT AGREEMENT
BORROWING BASE CERTIFICATE
To: Banque Nationale de Paris
499 Park Avenue
New York, New York 10022
Attn: Mr. Alan Mustacchi
Telecopy: (212) 418-8269
MEDIQ/PRN Life Support Services, Inc.
Date: ___________________
(1) Inventory Net Availability
[Total from Schedule I] $__________
(2) Accounts Receivable Net Availability
[Total from Schedule II] $__________
(3) Total Borrowing Base Availability
[1 plus 2] $__________
(4) Working Capital Facility $__________
(5) The lesser of (3) and (4) $__________
(6) Working Capital Advances Outstanding $__________
(7) Aggregate Principal Amount of
Letter of Credit Advances Outstanding $__________
(8) Total Available Amount of all
Letters of Credit Outstanding
a. Standby Letters of Credit $__________
b. Trade Letters of Credit $__________
c. Total Letters of Credit [(a) + (b)] $__________
<PAGE>
2
(9) Total Working Capital Availability
[(5) less (6) less (7) less (8)] $__________
This report is submitted pursuant to the Credit Agreement dated as
of September 30, 1996 among MEDIQ/PRN Life Support Services, Inc., a Delaware
corporation (the "Borrower"), MEDIQ Incorporated, a Delaware corporation, PRN
Holdings, Inc., a Delaware corporation, the lender parties (the "Lender
Parties") that are, or may from time to time become, party thereto, Banque
Nationale de Paris, as administrative agent (the "Administrative Agent") and as
initial issuing bank, and NationsBank, N.A., as documentation agent. All of the
current accounts referred to in this report (the "Accounts") have been assigned
to the Administrative Agent and the Administrative Agent has been granted a
security interest in the Accounts pursuant to the Loan Documents. Unless
otherwise indicated, capitalized terms used herein have the meanings ascribed to
them in the Credit Agreement.
The undersigned hereby certifies that (i) the amounts and the
representations set forth above are true and correct in all material respects,
(ii) the calculations determined herein are determined in accordance with the
Credit Agreement and (iii) except as noted, none of the Accounts referred to in
this report falls within the ineligible or prohibited categories as noted in the
Credit Agreement. We further confirm the above mentioned assignment and grant of
security interest in the Accounts to the Administrative Agent.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
Date: ___________________ By:__________________________
Name:
Title:
<PAGE>
SCHEDULE I
MEDIQ/PRN Life Support Services, Inc.
Inventory Net Availability
(a) Gross Inventory _______________
Less: Ineligible Inventory
(b) Inventory consisting of "perishable agricultural
commodities" within the meaning of the
Perishable Agricultural Commodities Act of 1930,
as amended, and the regulations thereunder, or
on which a Lien has arisen or may arise in favor
of agricultural producers under comparable state
or local laws _______________
(c) Inventory located on leaseholds as to which the
lessor has not entered into a consent and
agreement providing the Administrative Agent
with the right to receive notice of default, the
right to repossess such Inventory at any reasonable
time pursuant to such consent and agreement
and such other rights as may be reasonably acceptable
to the Administrative Agent _______________
(d) Inventory that is obsolete, unusable or
otherwise unavailable for sale _______________
(e) Inventory with respect to which the
representations and warranties set forth in
Section 8 of the Security Agreement applicable
to Inventory are not true and correct _______________
(f) Inventory consisting of promotional, marketing,
packaging or shipping materials and supplies _______________
(g) Inventory that fails to meet all standards
imposed by any governmental agency, or
department or division thereof, having
regulatory authority over such Inventory or its
use or sale _______________
(h) Inventory that is subject to any licensing,
patent, royalty, trademark, trade name or
copyright agreement with any third party from
whom the
<PAGE>
4
Borrower has received written notice of a dispute
in respect of any such agreement _______________
(i) Inventory located outside the United States _______________
(j) Inventory that is not in the possession of or
under the sole control of the Borrower or not in
a Leased facility in respect of which the owner
has entered into a consent and agreement
providing the Administrative Agent with the
right to receive notice of default, the right to
repossess such Inventory at any reasonable time
pursuant to such consent and agreement and such
other rights as may be reasonably acceptable to
the Administrative Agent _______________
(k) Inventory consisting of work in progress _______________
(l) Inventory in respect of which the Security
Agreement, after giving effect to the related
filings of financing statements that have then
been made, if any, does not or has ceased to
create a valid and perfected first priority lien
or security interest in favor of the Secured
Parties securing the Secured Obligations and as
to which no other Liens exist, other than
Permitted Liens _______________
(m) Inventory not recorded under a perpetual
inventory system reasonably acceptable to the
Administrative Agent _______________
(n) Total Ineligible Inventory
[sum of (b) through (m)] _______________
(o) Total Eligible Inventory
[(a) less (n)] _______________
Net Inventory Availability at 50% of
Eligible Inventory [(o) multiplied by 50%] ===============
<PAGE>
5
SCHEDULE II
MEDIQ/PRN Life Support Services, Inc.
Accounts Receivable Net Availability
(a) Gross Receivables _______________
Less: Ineligible Receivables
(b) Receivables that do not arise out of sales of
goods or rendering of services in the ordinary
course of business _______________
(c) Receivables on terms other than those normal or
customary in the Borrower's business _______________
(d) Receivables owing from Affiliates of the
Borrower _______________
(e) Receivables more than 120 days past the invoice
date _______________
(f) Receivables owing from any Person for whom an
aggregate amount of more than 50% of Receivables
owing from such Person are more than 120 days
past the original invoice date _______________
(g) Receivables owing from any Person that has
asserted any claim, demand or liability, by
action, suit, counterclaim or other judicial or
arbitral proceeding _______________
(h) Receivables owing from any Person that shall
take or is the subject of any action or
proceeding of a type described in Section
6.01(f) _______________
(i) Receivables (i) owing from any supplier to or
creditor of the Borrower (to the extent such
Person has any right of setoff but only to the
extent of such setoff) unless such Person has
waived any right of setoff in a manner
acceptable to the Administrative Agent or (ii)
representing any manufacturer's or supplier's
credits, discounts, incentive plans or similar
arrangements entitling the
<PAGE>
Borrower or its Subsidiaries to discounts on
future purchases therefrom _______________
(j) Receivables arising out of sales to account
debtors outside of the United States _______________
(k) Receivables arising out of sales on a
bill-and-hold, guaranteed sale, sale-or-return,
sale on approval or consignment basis or subject
to any right of return, set-off or charge-back _______________
(l) Receivables owing from an account debtor that is
an agency, department or instrumentality of the
United States or any State thereof _______________
(m) Receivables in respect of which the Security
Agreement, after giving effect to the related
filings of financing statements that have then
been made, if any, does not or has ceased to
create a valid and perfected first priority lien
or security interest in favor of the Agent for
the benefit of the Secured Parties securing the
Secured Obligations as to which no other Liens
exist, other than Permitted Liens _______________
(n) Total Ineligible Receivables
[(sum of (b) through (m)] _______________
(o) Eligible Receivables [(a) less (n)] _______________
Net Availability at 80% of
Eligible Receivables [(o) multiplied by 80%] _______________
<PAGE>
EXHIBIT J TO THE
CREDIT AGREEMENT
FORM OF SOLVENCY CERTIFICATE
OF MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
I, Jay M. Kaplan, Senior Vice President and Chief Financial Officer
of MEDIQ/PRN Life Support Services, Inc., a Delaware corporation (the
"Borrower"), hereby certify that I am the Senior Vice President and Chief
Financial Officer of the Borrower, that I am familiar with its properties,
businesses, assets, finances and operations and that I am duly authorized to
execute this Solvency Certificate on behalf of the Borrower, which is being
delivered pursuant to Section 3.01(g)(xiii) of the Credit Agreement dated as of
October 1, 1996 (as it may be hereafter amended, supplemented or otherwise
modified from time to time in accordance with its terms, the "Credit Agreement")
among the Borrower, MEDIQ Incorporated, a Delaware corporation, and PRN
Holdings, Inc., a Delaware corporation, as Parent Guarantors, the lender parties
from time to time party thereto (the "Lender Parties"), Banque Nationale de
Paris, as administrative agent (the "Administrative Agent") for the Lender
Parties and as initial issuing bank, and NationsBank, N.A. as documentation
agent (the "Documentation Agent" and, together with the Administrative Agent,
the "Agents") for the Lender Parties. Unless otherwise defined herein,
capitalized terms defined in the Credit Agreement are used herein as therein
defined.
I further certify that I am familiar with the properties, businesses
and assets of the Borrower and have carefully reviewed the Loan Documents, the
Related Documents and the contents of this Solvency Certificate and, in
connection herewith, have made such investigation and inquiries as I deem
necessary and prudent therefor. I further certify, as the Senior Vice President
and Chief Financial Officer of the Borrower, that the financial information and
assumptions which underlie and form the basis for the representations made in
this Solvency Certificate were reasonable when made and were made in good faith
and continue to be reasonable as of the date hereof.
To secure, among other things, the payment of the Borrower's
Obligations under the Loan Documents, the Borrower has granted a security
interest in certain Collateral, now owned or hereafter acquired by it, pursuant
to the Collateral Documents.
The Borrower understands that the Agents and the Lender Parties are
relying on the truth and accuracy of this Solvency Certificate in connection
with the transactions contemplated by the Loan Documents.
I do hereby further certify, as the Senior Vice President and Chief
Financial Officer of the Borrower, that:
<PAGE>
2
1. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the fair value of any and all property
of the Borrower is greater than the total amount of liabilities (including
contingent, subordinated, absolute, fixed, matured or unmatured and liquidated
or unliquidated liabilities) of the Borrower.
2. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the present fair saleable value of the
assets of the Borrower exceeds the amount that will be required to pay the
probable liabilities of the Borrower on its debts as they become absolute and
matured.
3. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the Borrower is not engaged in
business or in a transaction, and is not about to engage in business or in a
transaction, for which its capital would constitute unreasonably small capital
(after giving due consideration to the prevailing practice in the industry in
which it is engaged).
4. The Borrower does not intend or believe that it will incur debts
and liabilities that will be beyond its ability to pay as such debts or
liabilities mature.
5. The Borrower does not intend, in consummating the transactions
contemplated by the Credit Agreement, the other Loan Documents, or the Related
Documents, to hinder, delay or defraud either present or future creditors or any
other Person to which the Borrower is or will become, on or after the date
hereof, indebted.
6. In reaching the conclusions set forth in this Solvency
Certificate, I have considered, on behalf of the Borrower, among other things:
(a) the cash and other assets of the Borrower reflected in the
Financial Statements of the Borrower;
(b) all contingent liabilities of the Borrower including, without
limitation, any claims arising out of pending or threatened litigation
against the Borrower, and in so doing, the Borrower has computed the
amount of such liabilities as the amount that, in light of all the facts
and circumstances existing on the date hereof, represents the amount that
can reasonably be expected to become an actual or matured liability (the
"Contingent Liabilities");
<PAGE>
3
(c) all obligations and liabilities of the Borrower, whether matured
or unmatured, liquidated or unliquidated, disputed or undisputed, secured
or unsecured, subordinated, absolute, fixed or contingent (other than
Contingent Liabilities);
(d) historical and anticipated growth in sales volume of the
Borrower and income stream generated by the Borrower as reflected in,
among other things, the cash flow statements delivered as part of the
Financial Statements;
(e) the customary terms and trade payables of the Borrower;
(f) the amount of the credit extended by and to customers of the
Borrower;
(g) the amortization requirements of the Credit Agreement and the
Related Documents, the anticipated interest payable on the Advances and
fees payable under the Credit Agreement;
(h) the level of capital customarily maintained by the Borrower and
other entities engaged in the same or similar business as the business of
the Borrower; and
(i) the environmental assessment reports delivered pursuant to
Section 3.01(g)(xiv) of the Credit Agreement.
Delivery of an executed counterpart of a signature page to this
Solvency Certificate by telecopier shall be effective as delivery of a manually
executed counterpart of this Solvency Certificate.
I have given this Solvency Certificate (a) solely in my capacity as
an officer of the Borrower and not individually and (b) on the understanding,
and subject to the condition, that I will have no personal liability on account
of having given this Solvency Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
behalf of the Borrower this 1st day of October, 1996.
By __________________________________
Name: Jay M. Kaplan
Title: Senior Vice Presient and
Chief Financial Officer
<PAGE>
EXHIBIT K-1 TO THE
CREDIT AGREEMENT
FORM OF SOLVENCY CERTIFICATE
OF MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
I, Jay M. Kaplan, Senior Vice President and Chief Financial Officer
of MEDIQ/PRN Life Support Services, Inc., a Delaware corporation (the
"Borrower"), hereby certify that I am the Senior Vice President and Chief
Financial Officer of the Borrower, that I am familiar with its properties,
businesses, assets, finances and operations and that I am duly authorized to
execute this Solvency Certificate on behalf of the Borrower, which is being
delivered pursuant to Section 3.01(g)(xiii) of the Credit Agreement dated as of
October 1, 1996 (as it may be hereafter amended, supplemented or otherwise
modified from time to time in accordance with its terms, the "Credit Agreement")
among the Borrower, MEDIQ Incorporated, a Delaware corporation, and PRN
Holdings, Inc., a Delaware corporation, as Parent Guarantors, the lender parties
from time to time party thereto (the "Lender Parties"), Banque Nationale de
Paris, as administrative agent (the "Administrative Agent") for the Lender
Parties and as initial issuing bank, and NationsBank, N.A. as documentation
agent (the "Documentation Agent" and, together with the Administrative Agent,
the "Agents") for the Lender Parties. Unless otherwise defined herein,
capitalized terms defined in the Credit Agreement are used herein as therein
defined.
I further certify that I am familiar with the properties, businesses
and assets of the Borrower and have carefully reviewed the Loan Documents, the
Related Documents and the contents of this Solvency Certificate and, in
connection herewith, have made such investigation and inquiries as I deem
necessary and prudent therefor. I further certify, as the Senior Vice President
and Chief Financial Officer of the Borrower, that the financial information and
assumptions which underlie and form the basis for the representations made in
this Solvency Certificate were reasonable when made and were made in good faith
and continue to be reasonable as of the date hereof.
To secure, among other things, the payment of the Borrower's
Obligations under the Loan Documents, the Borrower has granted a security
interest in certain Collateral, now owned or hereafter acquired by it, pursuant
to the Collateral Documents.
The Borrower understands that the Agents and the Lender Parties are
relying on the truth and accuracy of this Solvency Certificate in connection
with the transactions contemplated by the Loan Documents.
I do hereby further certify, as the Senior Vice President and Chief
Financial Officer of the Borrower, that:
<PAGE>
2
1. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the fair value of any and all property
of the Borrower is greater than the total amount of liabilities (including
contingent, subordinated, absolute, fixed, matured or unmatured and liquidated
or unliquidated liabilities) of the Borrower.
2. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the present fair saleable value of the
assets of the Borrower exceeds the amount that will be required to pay the
probable liabilities of the Borrower on its debts as they become absolute and
matured.
3. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the Borrower is not engaged in
business or in a transaction, and is not about to engage in business or in a
transaction, for which its capital would constitute unreasonably small capital
(after giving due consideration to the prevailing practice in the industry in
which it is engaged).
4. The Borrower does not intend or believe that it will incur debts
and liabilities that will be beyond its ability to pay as such debts or
liabilities mature.
5. The Borrower does not intend, in consummating the transactions
contemplated by the Credit Agreement, the other Loan Documents, or the Related
Documents, to hinder, delay or defraud either present or future creditors or any
other Person to which the Borrower is or will become, on or after the date
hereof, indebted.
6. In reaching the conclusions set forth in this Solvency
Certificate, I have considered, on behalf of the Borrower, among other things:
(a) the cash and other assets of the Borrower reflected in the
Financial Statements of the Borrower;
(b) all contingent liabilities of the Borrower including, without
limitation, any claims arising out of pending or threatened litigation
against the Borrower, and in so doing, the Borrower has computed the
amount of such liabilities as the amount that, in light of all the facts
and circumstances existing on the date hereof, represents the amount that
can reasonably be expected to become an actual or matured liability (the
"Contingent Liabilities");
<PAGE>
3
(c) all obligations and liabilities of the Borrower, whether matured
or unmatured, liquidated or unliquidated, disputed or undisputed, secured
or unsecured, subordinated, absolute, fixed or contingent (other than
Contingent Liabilities);
(d) historical and anticipated growth in sales volume of the
Borrower and income stream generated by the Borrower as reflected in,
among other things, the cash flow statements delivered as part of the
Financial Statements;
(e) the customary terms and trade payables of the Borrower;
(f) the amount of the credit extended by and to customers of the
Borrower;
(g) the amortization requirements of the Credit Agreement and the
Related Documents, the anticipated interest payable on the Advances and
fees payable under the Credit Agreement;
(h) the level of capital customarily maintained by the Borrower and
other entities engaged in the same or similar business as the business of
the Borrower; and
(i) the environmental assessment reports delivered pursuant to
Section 3.01(g)(xiv) of the Credit Agreement.
Delivery of an executed counterpart of a signature page to this
Solvency Certificate by telecopier shall be effective as delivery of a manually
executed counterpart of this Solvency Certificate.
I have given this Solvency Certificate (a) solely in my capacity as
an officer of the Borrower and not individually and (b) on the understanding,
and subject to the condition, that I will have no personal liability on account
of having given this Solvency Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
behalf of the Borrower this 1st day of October, 1996.
By:_____________________________________
Name: Jay M. Kaplan
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT K-2 TO
THE CREDIT
AGREEMENT
FORM OF SOLVENCY CERTIFICATE
OF MEDIQ INCORPORATED
I, Michael F. Sandler, Chief Financial Officer of MEDIQ
Incorporated, a Delaware corporation ("MEDIQ"), hereby certify that I am the
Chief Financial Officer of MEDIQ, that I am familiar with the properties,
businesses, assets, finances and operations of MEDIQ and its Subsidiaries
(collectively, the "Company"), and that I am duly authorized to execute this
Solvency Certificate on behalf of MEDIQ, which is being delivered pursuant to
Section 3.01(g)(xiii) of the Credit Agreement dated as of October 1, 1996 (as it
may be hereafter amended, supplemented or otherwise modified from time to time
in accordance with its terms, the "Credit Agreement") among MEDIQ/PRN Life
Support Services, Inc., a Delaware corporation (the "Borrower"), MEDIQ and PRN
Holdings, Inc., a Delaware corporation, as Parent Guarantors, the lender parties
from time to time party thereto (the "Lender Parties"), Banque Nationale de
Paris, as administrative agent (the "Administrative Agent") for the Lender
Parties and as initial issuing bank, and NationsBank, N.A. as documentation
agent (the "Documentation Agent" and, together with the Administrative Agent,
the "Agents") for the Lender Parties. Unless otherwise defined herein,
capitalized terms defined in the Credit Agreement are used herein as therein
defined.
I further certify that I am familiar with the properties, businesses
and assets of the Company and have carefully reviewed the Loan Documents, the
Related Documents and the contents of this Solvency Certificate and, in
connection herewith, have made such investigation and inquiries as I deem
necessary and prudent therefor. I further certify, as the Senior Vice President
and Chief Financial Officer of MEDIQ, that the financial information and
assumptions which underlie and form the basis for the representations made in
this Solvency Certificate were reasonable when made and were made in good faith
and continue to be reasonable as of the date hereof.
To secure, among other things, the payment of the Company's
Obligations under the Loan Documents, the Company has granted a security
interest in certain Collateral, now owned or hereafter acquired by it, pursuant
to the Collateral Documents.
The Company understands that the Agents and the Lender Parties are
relying on the truth and accuracy of this Solvency Certificate in connection
with the transactions contemplated by the Loan Documents.
I do hereby further certify, as the Senior Vice President and Chief
Financial Officer of MEDIQ, that:
<PAGE>
2
1. Attached hereto as Annex A are the projected consolidated
financial statements of the Company on a monthly basis for the first two years
following the day of the Initial Extension of Credit and on an annual basis for
each year thereafter until the Final Maturity Date (the "Projected Financial
Statements") prepared by management in good faith. The Projected Financial
Statements fairly present the best estimate of the future financial performance
of the Company and are reasonable in light of the business conditions existing
on the date hereof, although actual results during the periods covered by the
Projected Financial Statements may differ materially from the projected results
stated therein.
2. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the fair value of any and all property
of the Company is greater than the total amount of liabilities (including
contingent, subordinated, absolute, fixed, matured or unmatured and liquidated
or unliquidated liabilities) of the Company.
3. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the present fair saleable value of the
assets of the Company exceeds the amount that will be required to pay the
probable liabilities of the Company on debts as they become absolute and
matured.
4. On the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement, the other
Loan Documents and the Related Documents, the Company is not engaged in any
business or transaction, and is not about to engage in any business or
transaction, for which the capital of the Company would constitute unreasonably
small capital (after giving due consideration to the prevailing practice in the
industry in which the Company is engaged).
5. The Company does not intend or believe that it will incur debts
and liabilities that will be beyond its ability to pay as such debts or
liabilities mature.
6. The Company does not intend, in consummating the transactions
contemplated by the Credit Agreement, the other Loan Documents, or the Related
Documents, to hinder, delay or defraud either present or future creditors or any
other Person to which the Company is or will become, on or after the date
hereof, indebted.
7. In reaching the conclusions set forth in this Solvency
Certificate, I have considered, on behalf of the Company, among other things:
(a) the cash and other assets of the Company;
<PAGE>
3
(b) all contingent liabilities of the Company including, without
limitation, any claims arising out of pending or threatened litigation
against the Company, and in so doing, the Company has computed the amount
of such liabilities as the amount that, in light of all the facts and
circumstances existing on the date hereof, represents the amount that can
reasonably be expected to become an actual or matured liability (the
"Contingent Liabilities");
(c) all obligations and liabilities of the Company, whether matured
or unmatured, liquidated or unliquidated, disputed or undisputed, secured
or unsecured, subordinated, absolute, fixed or contingent (other than
Contingent Liabilities);
(d) historical and anticipated growth in sales volume of the Company
and income stream generated by the Company as reflected in, among other
things, the cash flow statements delivered as part of the Projected
Financial Statements;
(e) the customary terms and trade payables of the Company;
(f) the amount of the credit extended by and to customers of the
Company;
(g) the amortization requirements of the Credit Agreement and the
Related Documents, the anticipated interest payable on the Advances and
fees payable under the Credit Agreement;
(h) the level of capital customarily maintained by the Company and
other entities engaged in the same or similar business as the business of
the Company;
(i) the environmental assessment reports delivered pursuant to
Section 3.01(g)(xiv) of the Credit Agreement; and
(j) the Projected Financial Statements.
Delivery of an executed counterpart of a signature page to this
Solvency Certificate by telecopier shall be effective as delivery of a manually
executed counterpart of this Solvency Certificate.
I have given this Solvency Certificate (a) solely in my capacity as
an officer of MEDIQ and not individually and (b) on the understanding, and
subject to the condition, that I will have no personal liability on account of
having given this Solvency Certificate.
<PAGE>
4
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
behalf of the Company this 30th day of September, 1996.
By ____________________________________
Name: Michael F. Sandler
Title: Chief Financial Officer
SECOND SUPPLEMENTAL INDENTURE, dated as of October 1, 1996 between
MEDIQ/PRN Life Support Services, Inc., a Delaware corporation (the "Company"),
and Summit Bank f/k/a United Jersey Bank, as Trustee (the "Trustee") under that
certain Indenture dated as of July 6, 1992 as supplemented by Supplemental
Indenture dated as of September 30, 1994 (as so supplemented, the "Indenture").
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the Trustee
the Indenture providing for the issuance of the Company's 11-1/8% Senior Secured
Notes Due 1999 (the "Senior Secured Notes"); and
WHEREAS, Section 9.02 of the Indenture authorizes the Company and the
Trustee, with the consent of at least a majority in aggregate principal amount
of the Senior Secured Notes then Outstanding, to amend the Indenture, the
Security Documents or the Senior Secured Notes and to execute a Supplemental
Indenture in connection therewith, to make certain changes; and
WHEREAS, all acts and proceedings required by law and by the Indenture to
constitute this Supplemental Indenture a valid and binding agreement for the
uses and purposes herein as set forth, in accordance with its terms, have been
done and taken, and the execution and delivery of this Second Supplemental
Indenture have been in all respects duly authorized by the Company.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, each party
hereto covenants and agrees with the other party, for the equal and
proportionate benefit of all present and future Noteholders, as follows:
1. The Indenture is hereby amended by deleting the following
Sections in their entirety:
(a) 4.03
(b) 4.04
(c) 4.05
(d) 4.09
(e) 4.10
(f) 4.14
<PAGE>
(g) 4.15
(h) 4.18
2. The definition of "Permitted Liens" is hereby amended by adding
two new clauses (xii) and (xiii) at the end of such definition as follows:
"and (xii) Liens on any assets which are not subject to the Liens of
the Trustee for the benefit of the Noteholders, and (xiii) Liens on assets
subject to the Liens of the Trustee for the benefit of Noteholders, but
which are expressly subordinate in priority to such Liens in favor of the
Trustee created under this Indenture."
3. Section 2.09 of the Indenture is hereby amended by
deleting such Section in its entirety and replacing it with the
following:
"Section 2.09. Outstanding Senior Secured Notes.
Senior Secured Notes outstanding at any time are all Senior Secured
Notes that have been authenticated by the Trustee, except for those
cancelled or deemed cancelled pursuant to Section 2.12(b) hereof by the
Trustee, those delivered to it for cancellation and those described in
this Section as not outstanding. A Senior Secured Note does not cease to
be outstanding because the Company or one of its Affiliates holds the
Senior Secured Note.
If a Senior Secured Note is replaced pursuant to Section 2.08, it
ceases to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Senior Secured Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company or a Subsidiary of the
Company) holds, on a redemption date or the Maturity Date, money
sufficient to pay all accrued interest and principal with respect to such
Senior Secured Notes payable on that date and is not prohibited from
paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Senior Secured Notes cease to
be outstanding and interest on them cease to accrue."
4. Section 2.12 of the Indenture is hereby amended by
designating the existing text as subsection "(a)" and adding a
new subsection (b) as follows:
"(b) In the event that the Company deposits trust monies with the
Trustee pursuant to Section 8.01(a)(ii) hereof and the Company or an
Affiliate of the Company
-2-
<PAGE>
holds Senior Secured Notes for which no such deposit is being made,
all such Senior Secured Notes held by the Company or its Affiliate
shall be deemed cancelled by the Trustee pursuant to this Section
2.12 effective immediately prior to the Trustee's receipt of such
deposit, regardless of whether such Senior Secured Notes have been
delivered to the Trustee in accordance with Section 2.12(a)."
5. Section 4.13(b) is hereby amended by deleting such
Section and replacing it with the following:
"(b) requires, prior to the payment in full or defeasance of the
Senior Secured Notes, that the proceeds received from the sale of any
Collateral be applied to repay, redeem or otherwise retire any
Indebtedness of any Person other than the Indebtedness represented by the
Senior Secured Notes."
6. Section 4.17 is hereby amended by adding the following sentence
to the end of such Section:
"Notwithstanding anything to the contrary contained herein, the
Company and its subsidiaries and Affiliates may grant Liens on any assets
which are not subject to the Liens of the Trustee for the benefit of the
Noteholders."
7. Section 5.01 of the Indenture is hereby amended by deleting
Subsection 5.01(ii) in its entirety and renumbering existing Subsection
5.01(iii) as 5.01(ii).
8. Section 8.01 of the Indenture is hereby amended by deleting such
Section in its entirety and by replacing such Section with the following:
"SECTION 8.01. Termination of Obligations.
The Company may terminate its obligations under the Senior Secured
Notes and this Indenture, except those obligations referred to in the
immediately succeeding paragraph, if:
(a) (i) all Senior Secured Notes previously authenticated and
delivered (other than destroyed, lost or stolen Senior Secured Notes which
have been replaced or paid) have been delivered to the Trustee for
cancellation or have been deemed cancelled pursuant to Section 2.12(b)
hereof or monies sufficient for the payment of Senior Secured Notes which
are due and payable but have not been surrendered for payment shall have
been deposited with the Trustee or Paying Agent and the Company has paid
all sums payable by it hereunder; or
-3-
<PAGE>
(ii) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or the Paying Agent, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Holders
(other than the Company or any Affiliates of the Company) for that
purpose, money or direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of American for the payment
of which guarantee or obligation the full faith and credit of the United
States is pledged ("U.S. Government Obligations"), maturing as to
principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such interest, to
pay principal of and interest on the outstanding Senior Secured Notes held
by Holders other than the Company or any Affiliate to maturity or
redemption, as the case may be, as certified by the Company in an
Officers' Certificate; provided that the Trustee shall have been
irrevocably instructed pursuant to such Officers' Certificate to apply
such money or the proceeds of such U.S. Government Obligations to the
payment of said principal and interest with respect to the Senior Secured
Notes held by Holders other than the Company or any Affiliate of the
Company; and provided, further, that the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that, after the passage of
124 days following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and
(b) the Company pays or causes to be paid all other sums then
payable by the Company hereunder; or
(c) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided
for herein relating to this satisfaction and discharge of this Indenture
have been complied with;
provided, however, that no deposit under 8.01(a)(ii) shall be effective to
terminate the obligations of the Company under the Senior Secured Notes or
this Indenture prior to 124 days following such deposit.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.13, 4.02, 7.07, 7.08, 8.03 and
8.04 shall survive until the Senior Secured Notes are no longer
outstanding. Thereafter, the Company's obligations in Sections 7.07, 8.03
and 8.04 shall survive.
-4-
<PAGE>
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations
under the Senior Secured Notes and this Indenture except for those
surviving obligations specified above.
The Company will pay any taxes or other expenses incurred by any
trust created pursuant to this Article 8."
9. Section 8.02 of the Indenture is hereby amended by deleting such
Section in its entirety and replacing such Section with the following:
"SECTION 8.02. Application of Trust Money
"The Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited money and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal
of and interest on the Senior Secured Notes; provided, however, that
notwithstanding to anything the contrary contained herein the Trustee
shall have no obligation to make payments of principal and interest under
this Indenture for Senior Secured Notes held by the Company or its
Affiliates for which no deposit was made under Section 8.01 hereof. The
Trustee shall be under no obligation to invest said money or U.S.
Government Obligations except as it may agree with the Company."
10. Except as expressly amended, the Indenture and the Senior
Secured Notes issued thereunder are in all respects ratified and confirmed and
all the terms, conditions and provisions shall remain in full force and effect.
Capitalized terms used herein but not defined shall have the meanings given to
such terms in the Indenture.
11. This Second Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Note heretofore or hereafter authenticated
and delivered shall be bound hereby.
12. This Second Supplemental Indenture may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original, and all of such counterparts together constitute one and the same
instrument. All capitalized terms used and not otherwise defined herein shall
have the meanings given to them in the Original Indenture, the Senior Secured
Notes or the Security Documents as applicable.
13. This Second Supplemental Indenture shall be construed in
accordance with and governed by the laws of the State of New Jersey.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective seals to be
hereunto affixed and attested, all as of the day and year first above written.
[Corporate Seal] MEDIQ/PRN Life Support Services, Inc.
By /s/ Jay M. Kaplan
-------------------------------
Attest: /s/ Alan Einhorn
--------------------------
[Corporate Seal] Summit Bank f/k/a United Jersey Bank,
as Trustee
By /s/ Donna J. Flanagan
-------------------------------
Attest:__________________________
-6-
This AMENDMENT TO SECURITY AGREEMENT is made this 1st day of
October, 1996 by and between MEDIQ/PRN Life Support Services, Inc. (the
"Pledgor"), and Summit Bank f/k/a United Jersey Bank as collateral agent (the
"Collateral Agent") and as trustee for the noteholders (and defined in the
Indenture) under the Indenture (as defined herein).
BACKGROUND
A. The Pledgor and the Trustee are parties to that certain Indenture
dated July 6, 1992, as amended by Supplemental Indentures dated September 30,
1994 and October 1, 1996 (collectively, the "Indenture").
B. Under the terms of the Indenture, the Pledgor and the Collateral
Agent are parties to a Security Agreement dated as of July 6, 1992.
C. The Pledgor and the Trustee have executed today the Second
Supplemental Indenture. Pursuant to the Second Supplemental Indenture, certain
amendments need to be made to the Security Agreement so that it conforms to the
Indenture as modified. Accordingly, the Pledgor and the Collateral Agent agree
to amend the Security Agreement as set forth herein.
D. Capitalized terms used herein, but not defined herein, shall have
the meanings given to such terms in the Indenture or the Security Agreement, as
appropriate.
NOW THEREFORE, the foregoing Background being incorporated herein by
reference, the parties hereto agree as follows:
AMENDMENT
1. Section 5(b) of the Security Agreement is hereby amended by
adding the following clause (3) to the end of such Section as follows:
"; and (3) liens expressly subordinate to the Liens in favor
of the Collateral Agent created under this Agreement and otherwise
permitted under the Indenture."
2. Section 5(c) of the Security Agreement is hereby amended by
deleting the last sentence of such Section and replacing it with the following:
<PAGE>
"So long as the Secured Obligations remain unpaid, Pledgor shall not
execute or authorize to be filed in any public office any financing
statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Pledged
Collateral, except financing statements filed or to be filed in
respect of and covering the security interests granted hereby by
Pledgor or granted and filed in connection with of a Permitted
Encumbrance."
3. Except as expressly amended hereby, the Security Agreement shall
remain in full force and effect according to its terms.
4. This Amendment to Security Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, and all of such counterparts together constitute one and the same
instrument.
5. This Amendment to Security Agreement shall be construed in
accordance with and governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
Security Agreement to be duly executed, and their respective seals to be
hereunto affixed and attested, all as of the day and year first above written.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By: /s/ Jay M. Kaplan
----------------------------------
Its: Chief Financial Officer
SUMMIT BANK f/k/a UNITED
JERSEY BANK, as COLLATERAL AGENT
By: /s/ Donna J. Flanagan
----------------------------------
Its:
DEFEASANCE TRUST AGREEMENT
DEFEASANCE TRUST AGREEMENT dated as of October 1, 1996 (the
"Agreement") among SUMMIT BANK, f/k/a United Jersey Bank (the "Trustee"), a
banking corporation organized and existing under the laws of the State of New
Jersey and MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
("MEDIQ/PRN").
WITNESSETH:
WHEREAS, MEDIQ/PRN has heretofore issued its 11-1/8% Senior Secured
Notes due 1999 (the "Senior Secured Notes"); and
WHEREAS, the Senior Secured Notes were issued under and pursuant to
an Indenture dated as of July 6, 1992, as amended by supplemental indentures
dated as of September 30, 1994 and October 1, 1996, as amended (the
"Indenture"), between MEDIQ/PRN and the Trustee; and
WHEREAS, the Senior Secured Notes are secured by, among other
things, a security interest in the Collateral (as defined in the Indenture)
granted pursuant to a Security Agreement by and between MEDIQ/PRN and the
Trustee in its capacity as Collateral Agent dated as of July 6, 1992, as amended
by Amendment of even date herewith; and
WHEREAS, MEDIQ/PRN has determined that it is desirable to defease
the Senior Secured Notes and for such purpose, among other things, MEDIQ/PRN has
entered into a Credit Agreement with Banque Nationale de Paris, NationsBank and
certain other parties, (the "BNP Credit Agreement"); and
WHEREAS, concurrently with the execution and delivery hereof, a
portion of the proceeds borrowed under the BNP Credit Agreement, will be used to
acquire securities to be deposited with the Trustee pursuant to Section 8.01(a)
of the Indenture and applied for and toward the redemption on July 1, 1997, of
all Senior Secured Notes outstanding on such date at a redemption price of
103.5% of the principal amount thereof plus all outstanding interest thereon;
and
WHEREAS, upon the deposit with the Trustee of the Defeasance Deposit
(as defined herein), which deposit is sufficient without consideration of the
reinvestment of interest to pay the principal of and interest on, the Senior
Secured Notes upon the redemption of such Senior Secured Notes on July 1, 1997,
the Trustee will terminate its rights, title and interest in the Indenture; and
WHEREAS, MEDIQ/PRN and the Trustee desire to enter into this
Agreement to set forth their respective rights and duties hereunder and to
provide for the payment of the Senior Secured Notes in accordance with the terms
hereof and the Indenture;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending to be legally bound hereby, covenant
and agree as follows:
SECTION 1. Defeasance Fund.
(a) The Trustee hereby acknowledges receipt of the securities
described on Exhibit A hereto which shall constitute the Defeasance Fund.
(b) The Trustee shall hold the securities in the Defeasance Fund and
all money received by it from the collection of interest on the securities in
the Defeasance Fund, in special funds and separate trust accounts for the
benefit of the holders of the Senior Secured Notes, wholly segregated from all
other funds and investments deposited with the Trustee, and shall never
commingle such investments with other moneys or investments. Amounts in the
Defeasance Fund shall be applied only as hereinafter provided.
SECTION 2. Instructions for Payment of Bonds and Notice of
Defeasance. The Trustee shall, out of the moneys available in the Defeasance
Fund after the securities in the Defeasance Fund have matured, redeem all of the
Senior Secured Notes on July 1, 1997 at a redemption price of 103.5% of the
principal amount thereof as provided in the Indenture. Notice of Redemption of
the Senior Secured Notes to be redeemed on such date, meeting the requirements
of Section 3.03 of the Indenture and substantially in the form attached hereto
as Exhibit B, shall be sent by first class mail, postage prepaid to the
registered owners of the Senior Secured Notes at their addresses set forth on
the bond registry books kept by the Trustee (in its capacity as Trustee) not
less than 30 days nor more than 60 days prior to July 1, 1997. The Trustee
shall, as soon as practicable following deposit of the securities into the
Defeasance Fund, also cause a notice of defeasance, substantially in the form
attached hereto as Exhibit C to be mailed by first class mail, postage prepaid,
to the registered owners of the Senior Secured Notes as shown on the
registration books of the Trustee. Copies of the notices described in this
Section shall also be sent by the Trustee to each other person entitled to
receive notices of redemption in accordance with the Indenture.
SECTION 3. No Revocation or Amendment of Agreement.
(a) Irrevocable Trust. The Trustee and MEDIQ/PRN recognize that the
holders from time to time of the outstanding Senior Secured Notes have a
beneficial and vested interest in the Defeasance Fund. It is therefore recited,
understood and agreed that this Agreement shall not be subject to revocation or
amendment if such revocation or amendment would impair the rights of such
holders.
-2-
<PAGE>
SECTION 4. Duties of Trustee: Indemnification. The Trustee agrees to
service and manage the Defeasance Fund in accordance with the terms of this
Agreement. The Trustee takes no responsibility for any acts or omissions of
MEDIQ/PRN or any other party. The Trustee shall have no obligation with respect
to this Agreement other than those duties specifically mentioned herein and
shall have the right to act upon any document or written request believed by it
to be genuine and shall have no duty to inquire into the authenticity of any
signature. The Trustee shall not be liable for the accuracy of the calculations
as to the sufficiency of the principal amount of the securities and earnings
thereon, to redeem all of the Senior Secured Notes. So long as the Trustee
applies any moneys, securities, and earnings therefrom to redeem the Senior
Secured Notes as provided herein, the Trustee shall not be liable for any
deficiencies in the amounts necessary to purchase the Senior Secured Notes
caused by such calculations. The Trustee shall also be entitled to consult and
rely upon the advice of counsel if either deems such consultations to be
necessary in the performance of its duties. Neither the Trustee nor its
officers, directors, employees or agents shall be liable to any party herein
mentioned for any action or omission taken in connection herewith unless due to
willful misconduct or gross negligence. MEDIQ/PRN hereby agrees to indemnify and
hold harmless the Trustee, its officers, directors, employees or agents from and
against any and all claims or demands, suits, liabilities, losses, court costs
and out-of-pocket expenses (including reasonable attorneys' fees) by persons or
parties, whether or not party to this Agreement, which may arise or be caused by
any act of omission of Trustee in connection with its duties hereunder, except
where due to Trustee's willful misconduct or gross negligence. The provisions of
this Section shall survive termination of this Agreement.
SECTION 5. Termination of this Agreement. This Agreement shall be
irrevocable and shall not terminate until such time as the principal of and
interest on all Senior Secured Notes have been paid to the registered owners
thereof in accordance with the terms of the Indenture or this Agreement;
provided that moneys held by the Trustee in the Defeasance Fund shall be paid to
MEDIQ/PRN as provided in Section 8.03 of the Indenture.
SECTION 6. Satisfaction and Discharge of the Indenture. On February 3,
1997 (the "Termination Date"), MEDIQ/PRN's obligations under the Senior Secured
Notes and the Indenture shall terminate, other than MEDIQ/PRN's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.13, 4.02, 7.07, 7.08, 8.03 and 8.04 of
the Indenture, which shall survive until the Senior Secured Notes are no longer
outstanding, and thereafter MEDIQ/PRN's obligations in Sections 7.07, 8.03 and
8.04 of the Indenture shall survive. Except as provided above, MEDIQ/PRN's
obligations under the Senior Secured Notes and the Indenture shall be finally
and completely discharged and released. Effective as of the Termination Date,
all liens in the Collateral and all other property of MEDIQ/PRN in
-3-
<PAGE>
favor of the Trustee for the benefit of the holders of the Senior Secured Notes,
including without limitation all liens created by or arising under the
Indenture, the Security Agreement or the Collateral Account Agreement, shall be
terminated and released without need for further action by the Trustee or any
other Person. The Collateral Agent hereby agrees to execute and deliver such
instruments as MEDIQ/PRN may reasonably request to evidence the release of the
liens under the Indenture and the Security Agreement, including without
limitation (i) UCC-3 termination statements, and (ii) the return of any pledged
collateral. The Trustee hereby authorizes the filing and recording of the
release documents and termination statements.
SECTION 7. No Rights Conferred on Others. This Agreement is made for the
sole and exclusive benefit of the parties hereto and the holders of the Senior
Secured Notes. Nothing contained in this Agreement expressed or implied is
intended or shall be construed to confer upon any person, or to give any person
other than the parties hereto and such holders of the Senior Secured Notes any
right, remedy or claim under or by reason of this Agreement.
SECTION 8. Severability. If any provision of this Agreement shall be held
or deemed to be invalid or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any
extent whatsoever.
SECTION 9. Governing Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
SECTION 10. Descriptive Headings. Section headings contained herein have
been inserted for convenience only and shall not affect the interpretation of
this Agreement.
SECTION 11. Amendment. This Agreement may, without the consent or notice
to the holders of the Senior Secured Notes, be amended from time to time to cure
any ambiguity or formal defect or omission in this Agreement or in any
supplement hereto, and to grant to or confer upon the Trustee for the benefit of
such holders any additional rights, remedies, powers, authority or security that
may lawfully be granted to or conferred upon the Trustee.
SECTION 12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which together shall
constitute one and the same instrument. Delivery of an executed counterpart or
signature page by telecopier shall be effective as delivery of a manually
executed counterpart.
-4-
<PAGE>
SECTION 13. Further Assurances. The Collateral Agent shall cause, at the
expense of MEDIQ/PRN, any stock certificates and other instruments which
represent collateral released hereunder to be delivered to such party as
MEDIQ/PRN may designate and shall execute such further documents as MEDIQ/PRN
may request to terminate the security interests of the Collateral Agent in such
Collateral.
IN WITNESS WHEREOF, the parties hereto have each caused this Defeasance
Agreement to be executed by their duly authorized officers as of the date first
above written.
MEDIQ/PRN LIFE SUPPORT SYSTEMS, INC.
By /s/ Jay M. Kaplan
-----------------------------------
SUMMIT BANK,
f/k/a United Jersey Bank
By /s/ Donna J. Flanagan
-----------------------------------
Authorized Officer
-5-
AMENDMENT TO THE
1987 STOCK OPTION PLAN
Section 6A of the Company's 1987 Stock Option Plan will be amended
to read in full as follows:
6. Options
A. Subject to adjustment as provided in paragraph 13 hereof, Options
may be issued pursuant to the Plan for the purchase of not more than 2,000,000
Shares; provided, however, that if prior to the termination of the Plan, an
Option shall expire or terminate for any reason without having been exercised in
full, the unpurchased Shares subject thereto shall again be available for the
purposes of the Plan.
EXHIBIT 11
MEDIQ INCORPORATED AND SUBSIDIARIES
Computation of Net Income Per Common Share
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computation of Primary Earnings Per Share:
Net Loss $(15,704) $ (4,947) $ (7,318)
======== ======== ========
Weighted Average Number of Primary Shares:
Beginning Balance 24,578 24,174 24,034
Assumed Conversion of Options 389 431 371
-------- -------- --------
Total 24,967 24,605 24,405
======== ======== ========
Primary Loss Per Share $ (.63) $ (.20) $ (.30)
======== ======== ========
Computation of Fully Diluted Earnings Per Share:
Net Loss $(15,704) $ (4,947) $ (7,318)
Interest and Amortization on Convertible
Subordinated Debentures - Net of Tax 1,697 2,317 2,317
-------- -------- --------
Total $(14,007) $ (2,630) $ (5,001)
======== ======== ========
Weighted Average Number of Fully Diluted Shares:
Beginning Balance 24,578 24,174 24,034
Assumed Conversion of Options 426 445 371
Assumed Conversion of Debentures 3,897 6,897 6,897
-------- -------- --------
Total 28,901 31,516 31,302
======== ======== ========
Fully Diluted Loss Per Share $ (.48) $ (.08) $ (.16)
======== ======== ========
</TABLE>
EXHIBIT 21
Set forth below is a list of MEDIQ's subsidiaries, as of
December 20, 1996, with their respective states of incorporation, names
under which they do business and the percentage of their voting securities owned
by the Company as of such date.
<TABLE>
<CAPTION>
=============================================================================================================
Name State of Percentage of
Incorporation Ownership
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alpha Health Consultants, Inc. (1) DE 100
- -------------------------------------------------------------------------------------------------------------
American Cardiovascular Imaging Labs, Inc. (2) PA 100
- -------------------------------------------------------------------------------------------------------------
Health Examinetics, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
MDTC Haddon, Inc. (3) DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Diagnostic Centers Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Diagnostic Centers-I Inc. (3) DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Imaging Services, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Investment Services, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Management Services, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Mobile X-Ray Services, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ/PRN Life Support Services, Inc. (4) DE 100
- -------------------------------------------------------------------------------------------------------------
MEDIQ Services, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
P.I. Corporation (5) DE 100
- -------------------------------------------------------------------------------------------------------------
PRN Holdings, Inc. DE 100
- -------------------------------------------------------------------------------------------------------------
Thera-Kinetics Acquisition Corporation NJ 100
=============================================================================================================
</TABLE>
- --------------------------------
(1) Subsidiary of MEDIQ Management Services, Inc.
(2) Subsidiary of MEDIQ Imaging Services, Inc.
(3) Subsidiary of MEDIQ Diagnostics Inc.
(4) Subsidiary of PRN Holdings, Inc.
(5) Subsidiary of MEDIQ Investment Services, Inc.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference, in the Registration
Statements listed below of our report, dated December 26, 1996 appearing in this
Annual Report on Form 10-K of MEDIQ Incorporated and subsidiaries for the year
ended September 30, 1996.
Registration Statement No. 33-13122 on Form S-8
Registration Statement No. 33-11042 on Form S-8
Registration Statement No. 33-59126 on Form S-3
Registration Statement No. 33-61724 on Form S-2
Registration Statement No. 33-16802 on Form S-8
Registration Statement No. 33-5089 on Form S-2
Registration Statement No. 33-47416 on Form S-8
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
December 30, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,219
<SECURITIES> 0
<RECEIVABLES> 32,616
<ALLOWANCES> 2,383
<INVENTORY> 6,614
<CURRENT-ASSETS> 44,793
<PP&E> 231,043
<DEPRECIATION> 108,337
<TOTAL-ASSETS> 297,863
<CURRENT-LIABILITIES> 35,054
<BONDS> 233,690
0
3,344
<COMMON> 19,191
<OTHER-SE> (5,090)
<TOTAL-LIABILITY-AND-EQUITY> 297,863
<SALES> 0
<TOTAL-REVENUES> 136,066
<CGS> 0
<TOTAL-COSTS> 110,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,307
<INCOME-PRETAX> (6,556)
<INCOME-TAX> (378)
<INCOME-CONTINUING> (6,178)
<DISCONTINUED> (10,669)
<EXTRAORDINARY> 1,143
<CHANGES> 0
<NET-INCOME> (15,704)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.48)
</TABLE>
