<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________________TO__________________
COMMISSION FILE NUMBER: 1-3720
------
FRESENIUS MEDICAL CARE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New York 13-3461988
---------------------------------------------- ------------------------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer ID No.)
Two Ledgemont Center, 95 Hayden Avenue, Lexington, MA 02173
- ----------------------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code: 781-402-9000
- ----------------------------------------------------------------
--------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE> 2
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 90,000,000 shares of common
stock, par value $1.00 per share, all of which are held by Fresenius Medical
Care AG.
2
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
PART II: OTHER INFORMATION
ITEM 1: Legal Proceedings
ITEM 5: Other Information
ITEM 6: Exhibits and Reports on Form 8-K
3
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SUCCESSOR PREDECESSOR
------------- -------------
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
NET REVENUES
Health care services ...................... $542,884 $495,844
Medical supplies .......................... 114,043 38,406
-------- --------
656,927 534,250
-------- --------
EXPENSES
Cost of health care services .............. 328,864 305,454
Cost of medical supplies .................. 82,642 25,246
General and administrative expenses ....... 93,903 114,328
Provision for doubtful accounts ........... 28,853 37,547
Depreciation and amortization ............. 60,659 30,936
Research and development .................. 441 598
Allocation of Grace Chemicals expenses .... --- 1,536
Interest expense, net, and related
financing costs ......................... 49,182 1,862
-------- --------
644,544 517,507
-------- --------
EARNINGS BEFORE INCOME TAXES ................... 12,383 16,743
PROVISION FOR INCOME TAXES ..................... 7,254 14,225
-------- --------
NET EARNINGS ................................... $ 5,129 $ 2,518
======== ========
Earnings per share ............................. $ 0.05 $ 0.04
See accompanying Notes to Unaudited, Consolidated Financial Statements
4
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
NET REVENUES
Health care services ................................... $1,582,447 $1,495,451
Medical supplies ....................................... 344,398 119,209
---------- ----------
1,926,845 1,614,660
---------- ----------
EXPENSES
Cost of health care services ........................... 953,826 888,441
Cost of medical supplies ............................... 247,720 80,545
General and administrative expenses .................... 282,189 319,466
Provision for doubtful accounts ........................ 71,285 80,475
Depreciation and amortization .......................... 177,328 93,097
Research and development ............................... 2,311 1,906
Allocation of Grace Chemicals expenses ................. --- 5,322
Interest expense, net, and related financing costs ..... 136,373 16,325
---------- ----------
1,871,032 1,485,577
---------- ----------
EARNINGS BEFORE INCOME TAXES ................................ 55,813 129,083
PROVISION FOR INCOME TAXES .................................. 33,513 66,202
---------- ----------
NET EARNINGS ................................................ $ 22,300 $ 62,881
========== ==========
Earnings per share .......................................... $ 0.24 $ 0.66
</TABLE>
See accompanying Notes to Unaudited, Consolidated Financial Statements
5
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR
-------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents ..................................... $ 17,958 $ 50,422
Accounts receivable, less allowances of $146,678 and
$153,939 .................................................... 544,964 516,083
Inventories ................................................... 156,910 153,480
Deferred income taxes ......................................... 120,121 146,751
Other current assets .......................................... 113,335 86,907
---------- ----------
Total Current Assets ..................................... 953,288 953,643
---------- ----------
Properties and equipment, net ...................................... 635,053 525,988
---------- ----------
Other Assets:
Excess of cost over the fair value of net assets
acquired and other intangible assets, net of
accumulated amortization of $132,882 and $37,933 ............ 3,325,380 3,057,957
Other assets and deferred charges ............................. 46,778 58,491
---------- ----------
Total Other Assets ....................................... 3,372,158 3,116,448
---------- ----------
Total Assets ....................................................... $4,960,499 $4,596,079
========== ==========
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt and capitalized lease
obligations ................................................. $ 28,714 $ 56,270
Short-term borrowings from affiliates ......................... --- 12,193
Accounts payable .............................................. 136,333 131,314
Accrued liabilities ........................................... 388,272 421,240
Net payable to affiliates ..................................... 26,645 32,590
Accrued income taxes .......................................... 5,203 18,530
---------- ----------
Total Current Liabilities ................................ 585,167 672,137
Long-term debt ..................................................... 1,599,956 1,420,959
Non-current borrowings from affiliates ............................. 647,082 504,693
Capitalized lease obligations ...................................... 11,822 17,246
Deferred income taxes .............................................. 140,809 179,290
Other liabilities .................................................. 26,725 34,015
---------- ----------
Total Liabilities ........................................ 3,011,561 2,828,340
---------- ----------
Equity:
Equity ........................................................ 1,968,909 1,768,574
Cumulative translation adjustment ............................. (19,971) (835)
---------- ----------
Total Equity ............................................. 1,948,938 1,767,739
---------- ----------
Total Liabilities and Equity ....................................... $4,960,499 $4,596,079
========== ==========
</TABLE>
See accompanying Notes to Unaudited, Consolidated Financial Statements.
6
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------ -------------
<S> <C> <C>
Cash Flows Provided by Operating Activities:
Net earnings .............................................................. $ 22,300 $ 62,881
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization ........................................ 177,328 93,097
Provision for doubtful accounts ...................................... 71,285 80,475
Provision for (benefit of) deferred income taxes ..................... (11,851) 8,286
Loss on disposal of properties and equipment ......................... 739 5,816
Changes in operating assets and liabilities, net of effects of purchase
acquisitions and foreign exchange:
Increase in accounts receivable ...................................... (64,105) (82,981)
(Increase) decrease in inventories ................................... (439) 2,570
Increase in other current assets ..................................... (22,871) (20,569)
Decrease in other assets and deferred charges ........................ 6,566 987
Decrease in accounts payable ......................................... (12,559) (12,454)
Decrease in accrued income taxes ..................................... (8,774) (5,541)
Decrease in accrued liabilities ...................................... (38,332) (17,282)
(Decrease) increase in other long-term liabilities ................... (8,974) 5,320
Net changes due to/from affiliates ................................... (5,945) --
Other, net ........................................................... 1,410 2,812
---------- -----------
Net cash provided by operating activities ................................. 105,778 148,325
---------- -----------
Cash Flows from Investing Activities:
Capital expenditures ................................................. (116,840) (92,853)
Payments for acquisitions, net of cash acquired ...................... (406,747) (89,090)
---------- -----------
Net cash used in investing activities ..................................... (523,587) (181,943)
---------- -----------
Cash Flows from Financing Activities:
Increase in borrowings from affiliates ............................... 72,993 --
Cash dividends paid .................................................. (390) (2,114,396)
Proceeds on issuance of debt ......................................... 1,095,678 2,390,607
Payments on debt and capitalized leases .............................. (960,231) (338,793)
Contributed capital from Fresenius Medical Care AG ................... 178,425 ---
Advances from Grace Chemicals, net ................................... --- 279,819
---------- -----------
Net cash provided by financing activities ................................. 386,475 217,237
---------- -----------
Effects of changes in foreign exchange rates ................................... (1,130) 3,353
---------- -----------
(Decrease) increase in cash and cash equivalents ............................... (32,464) 186,972
Cash and cash equivalents at beginning of period ............................... 50,422 33,530
---------- -----------
Cash and cash equivalents at end of period ..................................... $ 17,958 $ 220,502
========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................................. $ 94,551 $ 21,328
Income taxes ......................................................... 57,695 59,308
Intercompany borrowings of investment securities for acquisitions ......... $ 57,202 --
</TABLE>
See accompanying Notes to Unaudited, Consolidated Financial Statements
7
<PAGE> 8
FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. THE COMPANY, REORGANIZATION AND BASIS OF PRESENTATION
THE COMPANY
Fresenius Medical Care Holdings, Inc., ("FMCH" or the "Company"), formerly
known as W. R. Grace & Co. ("Grace New York"), together with its wholly owned
subsidiaries, National Medical Care, Inc. and its subsidiaries ("NMC") and
Fresenius USA, Inc. and its subsidiaries ("FUSA"), was formed as a result of a
series of transactions pursuant to the Agreement and Plan of Reorganization
dated as of February 4, 1996 by and between Grace New York and Fresenius AG (the
"Reorganization") which is more fully described hereunder.
The Company is primarily engaged in (i) providing kidney dialysis services,
and clinical laboratory testing (ii) manufacturing and distributing products and
equipment for dialysis treatment and (iii) providing home infusion therapy, home
respiratory services, diagnostic services and other medical services.
THE REORGANIZATION
The Reorganization, which was effective September 30, 1996, resulted from
the culmination of the following transactions: (1) NMC, which was a subsidiary
of W. R. Grace & Co. -- Conn. ("Grace Chemicals"), a wholly-owned subsidiary of
Grace New York, borrowed $2,300,000 and paid a cash dividend of approximately
$2,100,000 to Grace Chemicals; (2) the stock of NMC was transferred to Grace
New York, so that NMC and Grace Chemicals became sibling subsidiaries of Grace
New York; (3) the stock of Grace Chemicals was transferred to a newly formed
Delaware subsidiary of Grace New York ("New Grace") and the shares of New Grace
were spun-off to the Grace New York shareholders in a pro rata distribution; (4)
Grace New York was recapitalized such that each Grace New York shareholder
received one share of Class D Preferred Stock of Grace New York (the "Class D
Preferred Stock") for each share of Grace New York common stock held; and (5)
Grace New York, with NMC as its sole business, merged with a wholly-owned
subsidiary of Fresenius Medical Care AG ("FMC"), and Fresenius AG's worldwide
dialysis business ("FWD") was contributed as separate subsidiaries of FMC with
the result that 44.8% of the ordinary shares of FMC were exchanged for the
common stock held by Grace New York common shareholders in the merger
transaction and the balance of the ordinary shares of FMC were received by
Fresenius AG and the shareholders of FUSA, in consideration of the contribution
of FWD to FMC. All of the Grace New York (now Fresenius Medical Care Holdings,
Inc. ("FMCH")) common stock is held by FMC, while the Class D Preferred Stock
(which entitles its shareholders to a contingent dividend based on the
consolidated performance of FMC in the years 1997-2001) and other previously
issued classes of FMCH preferred stock remain outstanding.
Effective October 1, 1996, FMC contributed all of the assets and liabilities
of FUSA to FMCH. The contribution of FUSA to FMCH by FMC was accounted for on
the cost basis since FUSA was a subsidiary under control of a common parent.
These consolidated financial statements include the results of FUSA's operations
and cash flows for the period January 1, 1997 through September 30, 1997.
8
<PAGE> 9
BASIS OF PRESENTATION
BASIS OF CONSOLIDATION - PREDECESSOR BASIS
The consolidated financial statements have been prepared as if the Company
had operated as an independent, stand alone entity for all periods presented.
Such financial statements have been prepared using the historical basis of
accounting prior to the Reorganization ("Predecessor") and include all of the
assets, liabilities, revenues, expenses and related taxes on income of the Grace
New York health care business operated by NMC (the "NMC Business") previously
included in the consolidated financial statements of Grace New York and its
subsidiaries prior to the Reorganization (the "Grace Consolidated Group").
Consequently, these consolidated financial statements include balances for
goodwill and other assets and liabilities related to the NMC Business that were
previously included in the financial statements of the Grace Consolidated Group,
except that there is no allocation to the NMC Business of Grace Chemicals'
borrowings and related interest expense. These consolidated financial statements
reflect only the borrowings and interest expense of NMC prior to the
Reorganization and interest expense of the Company after the Reorganization. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
55 ("SAB 55"), the financial statements have also been adjusted to include
certain expenses incurred by Grace Chemicals on the NMC Business's behalf prior
to the Reorganization.
These consolidated financial statements do not necessarily indicate the
financial position and results of operations that would have occurred if the NMC
Business were a stand-alone entity on the dates, and for the periods, indicated.
ACCOUNTING FOR THE REORGANIZATION - SUCCESSOR BASIS
The issuance of FMC ordinary shares for all of the common stock of NMC has
been recorded as an acquisition in accordance with the purchase method of
accounting. Accordingly, purchase accounting adjustments recorded by FMC have
been "pushed down" to NMC, thus establishing a new basis of accounting at NMC
("Successor"). The purchase price of the acquisition was determined as the
average of the mid-points of the ranges of valuation of NMC and FMC,
respectively, as assigned by independent financial advisors to Fresenius AG and
was approximately $1,152,000. The valuation has been increased for direct costs
incurred to consummate the transaction. The excess of the purchase price over
the cost of the net identifiable assets acquired at September 30, 1996 of
$1,696,698 has been allocated to the fair value of the assets acquired and
liabilities assumed with the remaining portion recorded as goodwill.
The Agreement and Plan for Reorganization also provides for the payment of
additional purchase price to the holders of the FMCH Class D Preferred Stock in
the form of a dividend, contingent upon the attainment of certain specific
consolidated operating results by FMC. Such future dividends, if any, will be
recorded as an increase in goodwill.
In order to properly allocate purchase price to assets acquired, the Company
obtained an independent appraisal to fair value all assets of NMC. Accordingly,
the carrying values of specifically identified intangible assets and certain
tangible assets were adjusted upward by $186,030 and $57,768, respectively, to
approximate their fair values.
The Company has also recorded adjustments to increase liabilities assumed by
approximately $123,000 for pre-acquisition contingencies primarily related to
legal settlements and the anticipated costs incurred in the defense of
litigation. These adjustments resulted from discussions with the government in
March 1997. The Company has provided an estimate of legal costs at the low end
of an expected range, but the ultimate costs could be significantly higher. The
Company is in discussions with the government regarding these matters. Any
difference between the final settlement and the Company's estimate would be
adjusted to goodwill, if determined within the allocation period, or charged to
income if determined thereafter. In addition, the Company has accrued
approximately $50,000 for certain costs related to the closing of certain renal
products manufacturing and distribution operations as well as the closing of
certain clinics of the Homecare Division. These restructuring costs primarily
relate to severance payments and lease commitments. Through the period ended
September 30, 1997 approximately $18,200 in payments have been applied against
the pre-acquisition contingencies and $36,100 against the restructuring costs.
9
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OTHER
The accompanying unaudited consolidated financial statements and related
notes should be read in conjunction with the audited consolidated financials
which are contained in the Company's annual report on Form 10-K for the year
ended December 31, 1996. In the opinion of the Company, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
have been included in the interim financial statements. The results for the nine
month period ended September 30, 1997 may not necessarily be indicative of the
results for the fiscal year ended December 31, 1997.
All intercompany transactions and balances have been eliminated in
consolidation.
NOTE 2. INVENTORIES
<TABLE>
<CAPTION>
SUCCESSOR
--------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Inventories:
<S> <C> <C>
Raw materials ................................................................ $ 29,299 $ 41,659
Manufactured goods in process ................................................ 6,910 11,837
Manufactured and purchased inventory available for sale ...................... 89,387 64,156
-------- --------
125,596 117,652
Health care supplies ........................................................ 31,314 35,828
-------- --------
Total ................................................................... $156,910 $153,480
======== ========
</TABLE>
NOTE 3. DEBT
Long-term debt to outside parties consists of:
<TABLE>
<CAPTION>
SUCCESSOR
--------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Credit Agreement ............................................................... $1,598,500 1,411,000
Third-party debt, primarily bank borrowings at variable
interest rates (3% - 14%) with various maturities ............................ 20,473 57,101
---------- ---------
1,618,973 1,468,101
Less amounts classified as current ............................................. 19,017 47,142
---------- ---------
$1,599,956 1,420,959
========== =========
</TABLE>
INTEREST RATE SWAP AGREEMENTS
NMC has entered into interest rate swap agreements with various commercial banks
for notational amounts totaling $1,600,000. These agreements effectively change
NMC interest rate exposure on the majority of its revolving loans to fixed rates
of interest between 5.76% and 6.60%. The first set of swap agreements became
effective on April 3, 1997. The second set of swap agreements were entered into
on June 17, 1997 and become effective on December 19, 1997 and April 3, 1998,
respectively. These swap agreements expire at various dates between December 15,
1997 and December 19, 2003. NMC had agreed under its Credit Agreement to have at
least $500,000 of interest rate protection.
FINANCING AGREEMENT
On August 28, 1997, FMCH established a new $204,000 receivables financing
facility with NationsBank to replace its former financing facility with
Citicorp. The agreement has an effective interest rate of 5.66% and matures on
August 27, 1998. Proceeds of $200,000 have been drawn down under the
NationsBank agreement.
SALE-LEASEBACK AGREEMENTS
On September 30, 1997 FUSA entered into an amendment to its existing
sale-leaseback agreements with Deutsche Bank. Pursuant to such amendment, FUSA
sold to Deutsche Bank certain equipment that it had recently acquired to expand
the capacity of its Ogden, Utah manufacturing facility. The purchase price of
the equipment was $13,109.
10
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NOTE 4. EQUITY
At September 30, 1997, and December 31, 1996, respectively, the components of
FMCH's Equity, excluding Cumulative Translation Adjustment, as presented in the
Consolidated Balance Sheet are as follows:
<TABLE>
<CAPTION>
SUCCESSOR
------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C> <C>
Preferred Stocks, $100 par value
- 6% Cumulative (1); 40,000
shares authorized; 36,460 outstanding ................................... $ 3,646 3,646
- 8% Cumulative Class A (2); 50,000 shares authorized;
16,176 outstanding ...................................................... 1,618 1,618
- 8% Non-cumulative Class B (2); 40,000 shares
authorized; 21,483 outstanding .......................................... 2,148 2,148
---------- ---------
7,412 7,412
Preferred Stocks, $.10 par value - Non-cumulative Class D (3),
100,000,000 shares authorized; 89,061,590 outstanding .......................... 8,906 8,906
---------- ---------
Total Preferred ........................................................ 16,318 16,318
Common Stock, $1 par value: 300,000,000 shares authorized,
90,000,000 outstanding ......................................................... 90,000 90,000
Paid in Capital .................................................................. 1,901,770 1,723,345
Retained Earnings (Deficit) ...................................................... (39,179) (61,089)
---------- ---------
Total Equity ........................................................... $1,968,909 1,768,574
========== =========
</TABLE>
(1) 160 votes per share
(2) 16 votes per share
(3) 1/10 vote per share
11
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NOTE 5. COMMITMENTS AND CONTINGENCIES
CONTINGENT NON-NMC LIABILITIES OF GRACE NEW YORK (NOW KNOWN AS FRESENIUS MEDICAL
CARE HOLDINGS, INC.)
In connection with the Reorganization, Grace Chemicals agreed to indemnify
Grace New York and NMC against all liabilities of Grace New York, whether
relating to events occurring before or after the Reorganization, other than
liabilities arising from or relating to NMC operations. Grace New York is
contingently liable for certain liabilities with respect to pre-Reorganization
matters that are not related to NMC operations. Grace New York believes that in
view of the nature of the non-NMC liabilities and Grace Chemicals' financial
position, the risk of significant loss from non-NMC liabilities is remote.
Were events to violate the tax free nature of the Reorganization, the
resulting tax liability would be the obligation of FMCH. Subject to
representations by Grace Chemicals, FMCH and Fresenius AG, Grace Chemicals has
agreed to indemnify FMCH for such a tax liability. Were FMCH not able to collect
on the indemnity, the tax liability would have a material adverse effect on the
financial position of FMCH and the results of its operations.
OIG INVESTIGATIVE SUBPOENAS
In October 1995, NMC received five investigative subpoenas from the Office
of Inspector General of the U.S. Department of Health and Human Services (the
"OIG"). The subpoenas were issued in connection with an investigation being
conducted by the OIG, the U.S. Attorney for the District of Massachusetts and
others concerning possible violations of federal laws, including the
Anti-kickback Statute and the False Claims Act. The subpoenas call for extensive
document production relating to various aspects of NMC's business. A sixth
subpoena, clarifying the scope of one originally served, was received in May
1996.
The five subpoenas cover the following areas: (a) NMC's corporate
management, personnel and employees, organizational structure, financial
information and internal communications; (b) NMC's dialysis services business,
principally medical director contracts and compensation; (c) NMC's treatment of
credit balances resulting from overpayments received under the Medicare end
stage renal disease (ESRD) program, NMC's billing for home dialysis services and
payment of supplemental medical insurance premiums on behalf of indigent
patients; (d) NMC's LifeChem laboratory business ("LifeChem"), including
documents relating to testing procedures, marketing, customers, competition and
certain overpayments totaling approximately $4.9 million that were received by
LifeChem from the Medicare program with respect to laboratory services rendered
between 1989 and 1993; and (e) NMC's Homecare Division and, in particular,
information concerning the intradialytic parenteral nutrition ("IDPN") business
described below, including billing practices related to various services,
equipment and supplies and payments made by third parties as compensation for
administering IDPN therapy.
On July 15, 1997, NMC received an investigatory subpoena duces tecum
requesting production of a number of patient records, in connection with the
government's review of billing practices related to various services, equipment
and supplies and payments made by third parties as compensation for
administering IDPN therapy, described above.
Each of the patients whose records were subpoenaed is, or was, a Medicare
beneficiary. The subpoena calls for production of the records by August 15,
1997. The Company has discussed an extended schedule for production with the
government. The result of the government's review of these records, its
duration, and its effect, if any, on NMC cannot be predicted at this time.
In the event that a U.S. government agency believes that any wrongdoing has
occurred, civil and/or criminal proceedings could be instituted, and if any such
proceedings were to be instituted and the outcome were unfavorable, NMC could be
subject to substantial fines, penalties and damages or could become excluded
from government reimbursement programs. Any such result could have a material
adverse effect on NMC's financial position or the results of operations of the
Company.
FMC and NMC have provided the United States government with a joint and
several guarantee of payment of the obligations, if any, arising out of the
investigation by the OIG. In support of this guarantee, NMC has delivered to the
government an irrevocable standby letter of credit in the amount of $150
million.
12
<PAGE> 13
DIAGNOSTICS SUBPOENA
On October 31, 1996, Biotrax International Inc. ("Biotrax") and NMC
Diagnostic Services, Inc. ("DSI"), both of which are subsidiaries of FMCH,
received an investigatory subpoena from the OIG. The subpoena calls for the
production of extensive documents and was issued in connection with an
investigation being conducted by the OIG in conjunction with the U.S. Attorney
for the Eastern District of Pennsylvania concerning the possible submission of
false or improper claims to, and their payment by, the Medicare program. The
subpoena calls for the production of documents on corporate organization,
business plans, document retention, personnel files, sales and marketing and
Medicare billing issues relating to certain procedures offered by the prior
owner of the Biotrax business before its assets were acquired by NMC in March
1994 and by DSI following the acquisition. The Company has reviewed the subpoena
with its legal counsel and made extensive document production in response to the
subpoena. The outcome of this investigation, its duration, and its effect, if
any, on NMC cannot be predicted at this time. If, however, the results of this
investigation are adverse to the Company, the Company could face the same types
of potential consequences of the OIG investigation.
QUI TAM ACTIONS
SOUTH FLORIDA
The Company and NMC have become aware that a qui tam action has been filed
in the United States District Court for the Southern District of Florida,
Southern Division (the "South Florida Action"). The original complaint in the
South Florida Action was filed under seal in 1996. The Relator filed an Amended
Complaint under seal on July 8, 1996. The seal with respect to the Amended
Complaint was partially lifted pursuant to court order to permit the government
to provide FMCH and NMC with a copy of the Amended Complaint. The Company and
NMC received copies of the Amended Complaint on July 10, 1996. Pursuant to a
court order dated July 26, 1996, the seal was further modified to permit the
Company to provide copies of the Amended Complaint to Fresenius AG, lenders
involved in the NMC credit facility and their respective counsel and to permit
the Company and NMC to describe the allegations of the Amended Complaint in
their securities filings with respect to the Reorganization.
The Amended Complaint alleges, among other things, that the Company, Grace
Chemicals and NMC violated the False Claims Act in connection with certain
billing practices regarding IDPN and the administration of EPO. The Amended
Complaint alleges that as a result of this allegedly wrongful conduct, the
United States suffered actual damages in excess of $200 million and alleges that
the defendants are liable to the United States for three times the amount of the
alleged damages plus fines of up to $10,000 per false claim. The Amended
Complaint also seeks the imposition of a constructive trust on the proceeds of
the NMC dividend to Grace Chemicals for the benefit of the United States on the
ground that the Reorganization constitutes a fraudulent conveyance that will
render NMC unable to satisfy the claims asserted in the Amended Complaint.
TAMPA
The Company and NMC have become aware that a qui tam action has been filed
in the United States District Court for the Middle District of Florida, Tampa
Division (the "Tampa Action"). The original complaint in the Tampa Action was
filed under seal in 1995. The seal with respect to the complaint was partially
lifted pursuant to court order to permit the government to provide the Company
and NMC with a copy of the complaint. Pursuant to a court order dated November
7, 1996, the seal was further modified to permit the Company and NMC to disclose
the complaint to the underwriters involved in two public securities offerings by
FMC (the "Offerings") and their counsel, to Fresenius AG, and to lending
institutions to whom NMC has contractual obligations, their successors and
assigns and their respective counsel and to disclose allegations in the
complaint in FMC's filings under the Securities Act of 1933, as amended, with
respect to the Offerings and in FMC's and FMCH's periodic filings under the
Securities Exchange Act of 1934, as amended.
The complaint in the Tampa Action alleges, among other things, that the
Company, NMC and certain NMC subsidiaries violated the False Claims Act in
connection with the retention of overpayments made under the Medicare program,
the alleged submission of claims in violation of applicable cost caps and the
payment of supplemental Medicare insurance premiums as an inducement to patients
to obtain dialysis products and services from NMC. The complaint alleges that as
a result of this allegedly wrongful conduct, the United States suffered damages
in excess of $10 million including applicable fines, and alleges that the
defendants are liable to the United States for three times the amount of the
alleged damages plus fines of up to $10,000 per false claim.
13
<PAGE> 14
PENNSYLVANIA, DELAWARE AND NEW JERSEY
The Company and NMC have become aware that a qui tam action has been filed
in the United States District Court for the Eastern District of Pennsylvania
(the "Pennsylvania Action"). The original complaint in the Pennsylvania Action
was filed under seal in February of 1996. The seal with respect to the complaint
was partially lifted pursuant to court order to permit the government to provide
NMC with a copy of the complaint. Pursuant to a court order dated November 15,
1996, the seal was further modified to permit the Company and NMC to disclose
the complaint to the underwriters involved in the Offerings and their counsel,
to Fresenius AG, and to lending institutions to whom NMC has contractual
obligations, their successors and assigns and their respective counsel and to
disclose allegations in the complaint in the Company's filings under the
Securities Act with respect to the Offerings and in the Company's periodic
filings under the Exchange Act.
The complaint in the Pennsylvania Action alleges, among other things, that a
pharmaceutical manufacturer, an unaffiliated dialysis provider and NMC violated
the False Claims Act in connection with the submission of claims to the Medicare
program for a non-sterile intravenous drug and for intravenous drugs which were
allegedly billed in excess of permissible Medicare reimbursement rates. The
complaint also claims that the defendants violated the Medicare and Medicaid
anti-kickback statutes in connection with the receipt of discounts an other in
kind payments as alleged inducements to purchase intravenous drugs. The
complaint is focused on the business relationship between the pharmaceutical
manufacturer and several providers, one of which is NMC. The complaint claims
that as a result of the allegedly wrongful conduct, the United States suffered
damages and that the defendants are liable to the United States for three times
the amount of the alleged damages plus civil penalties of up to $10,000 per
false claim. An adverse result in the Pennsylvania Action or an adverse result
in any other qui tam action could have a material adverse affect on the
Company's business, financial condition or results of operations.
The Company and NMC have become aware that three additional qui tam
actions were filed in the Eastern District of Pennsylvania on May 26, 1995,
August 23, 1996 and November 4, 1996 (the "Additional Pennsylvania Actions").
The seal with respect to each of the complaints was partially lifted pursuant
to court order to permit the government to provide the Company, NMC and other
affiliated defendants with a copy of the complaint. Pursuant to three separate
court orders dated August 26, 1997, the seal was further modified to permit the
Company, NMC and other affiliated defendants to disclose the complaint to any
relevant investors, financial institutions and/or underwriters, their
successors and assigns and their respective counsel and to disclose allegations
in the complaints in their respective SEC and NYSE periodic required filings.
The first qui tam alleges, among other things, that Biotrax International,
Inc. ("Biotrax"), a subsidiary of NMC, violated the False Claims Act in
connection with its submission of claims to the Medicare program for diagnostic
tests and induced overutilization of such tests in the medical community through
improper marketing practices also in violation of the Act.
The second qui tam alleges, among other things, that Biotrax and NMC
Diagnostic Services ("DSI") induced overutilization of diagnostic tests by
several named and unnamed physician defendants in the local medical community,
through improper marketing practices and fee arrangements, in violation of the
False Claims Act.
The third qui tam alleges, among other things, that NMC, DSI and Biotrax
violated the False Claims Act in connection with the submission of claims to
the Medicare program by improperly upcoding and otherwise billing for various
diagnostic tests.
Each of the complaints in the Additional Pennsylvania Actions claims that as
a result of the allegedly wrongful conduct, the United States suffered damages
and that the defendants are liable to the United States for three times the
amount of the alleged damages plus civil penalties of up to US-$10,000 per false
claim. An adverse result in any of the Additional Pennsylvania Actions could
have a material adverse affect on the Company's business, financial conditions
or results of operations.
The Company, and NMC also have become aware of two additional qui tam
actions -- one filed in the District of Delaware on January 29, 1997 (the
"Delaware Action") and the second filed in the District of New Jersey on
February 26, 1997 (the "New Jersey Action").
The Delaware Action alleges, among other things, that NMC and Biotrax a
subsidiary of NMC, violated the False Claims Act in connection with its
submission of claims to the Medicare program for diagnostic tests, and induced
overutilization of such tests through improper marketing practices which
provided impermissible incentives to health care providers to order these tests.
The New Jersey Action alleges, among other things, that DSI and NMC violated
the False Claims Act in connection with the submission of claims to the Medicare
program for reimbursement for diagnostic tests, by causing unnamed physicians to
overutilize these tests through a variety of fee arrangements and other
impermissible inducements.
Each of the qui tam complaint in the Delaware and New Jersey Actions claims
that as a result of the allegedly wrongful conduct, the United States suffered
damages and that the defendants are liable to the United States for three times
the amount of the alleged damages plus civil penalties of up to US-$10,000 per
false claim. An adverse result in either of the Delaware or New Jersey Actions
could have a material adverse affect on the Company's business, financial
conditions or result of operations.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
The Omnibus Budget Reconciliation Act of 1993 ("OBRA 93") affected the
payment of benefits under Medicare and employer health plans for certain
eligible ESRD patients. In July 1994, the Health Care Financing Administration
("HCFA") issued an instruction to Medicare claims processors to the effect that
Medicare benefits for the patients affected by OBRA 93 would be subject to a new
18- month "coordination of benefits" period. This instruction had a positive
impact on NMC's dialysis revenues because, during the 18-month coordination of
benefits period, the patient's employer health plan was responsible for payment,
which was generally at a rate higher than that provided under Medicare.
In April 1995, HCFA issued a new instruction, reversing its original
instruction in a manner that would substantially diminish the positive effect of
the original instruction on NMC's dialysis business. Under the new instruction,
no 18-month coordination of benefits period would arise and Medicare would
remain the primary payor for the patients affected by OBRA93. HCFA further
proposed that its new instruction be effective retroactive to August 1993, the
effective date of OBRA 93. Consequently, FMCH may be required to refund payments
received from employer health plans for services provided after August 1993
under HCFA's original instruction and to re-bill Medicare for the same services,
which would result in a cumulative reduction of net revenues to NMC totaling
approximately $120,000 as of September 30, 1997. NMC believes that the April
1995 instruction letter issued by HCFA does not constitute a proper notice of
final rulemaking and, accordingly, NMC continued to recognize revenues through
the end of June 1995. If HCFA's instruction letter is adjudged by the courts to
be the equivalent of a notice of proposed rulemaking, then NMC believes that a
60-day comment period would be required before the rule could become effective.
Therefore, NMC believes that it would be allowed to recognize the higher
reimbursement rate on dual eligible ESRD patients for 60 days subsequent to the
HCFA instruction letter, or approximately through July 1, 1995. Effective July
1, 1995, NMC ceased to recognize the incremental revenue realized under the
original instruction, which has resulted in a material reduction in NMC's
operating earnings in comparison to prior periods in which NMC recognized such
incremental revenue. However, NMC continued to bill the employer health plans as
primary payors through December 31, 1995, at which time NMC commenced billing
Medicare for the patients affected by OBRA 93.
In May 1995, NMC filed suit in the U.S. District Court for the District of
Columbia seeking a declaratory judgment with respect to HCFA's instructions
relating to OBRA 93. In June 1995, the court granted NMC's motion for a
preliminary injunction to preclude HCFA from retroactively enforcing its new
instruction. The litigation is continuing with respect to NMC's request to
permanently enjoin HCFA's new instruction, both retroactively and prospectively.
While there can be no assurance that a permanent injunction will be issued, NMC
believes that it will ultimately prevail in its claim that the retroactive
reversal by HCFA of its original instruction relating to OBRA 93 was
impermissible under applicable law. If HCFA's revised instruction is upheld and
applied retroactively, NMC's business, financial position and results of
operations would be materially adversely affected.
14
<PAGE> 15
INTRADIALYTIC PARENTERAL NUTRITION
NMC administers IDPN therapy to chronic dialysis patients who suffer from
severe gastrointestinal malfunctions. Since late 1993, Medicare claims
processors have sharply reduced the number of IDPN claims approved for payment
as compared to prior periods. NMC believes that the reduction in IDPN claims
currently being paid by Medicare represents an unauthorized policy coverage
change. Accordingly, NMC and other IDPN providers are pursuing various
administrative and legal remedies, including administrative appeals, to address
this reduction. In November 1995, NMC filed a complaint in the U.S. District
Court for the Middle District of Pennsylvania seeking a declaratory judgment and
injunctive relief to prevent the implementation of this policy coverage change.
Subsequently, the Court affirmed a prior report of the magistrate judge
dismissing NMC's complaint without considering any substantive claims, on the
grounds that the underlying cause of action should be submitted fully to the
administrative review processes available under the Medicare Act. The Company
decided not to appeal the Court's decision, but rather, to pursue the claims
through the available administrative processes.
NMC management believes that its IDPN claims were consistent with published
Medicare coverage guidelines and ultimately will be approved for payment. Such
claims represent substantial accounts receivable of NMC, amounting to
approximately $153 million (net of a reserve of $55 million) and $140 million
(net of a reserve of $41 million) as of September 30, 1997 and December 31,
1996, respectively, and currently increasing at the rate of approximately $2,000
per month. When the coverage guidelines were revised effective July 1996, as
described below, some of NMC's claims continued to meet the more stringent
coverage criteria established in the new guidelines and will probably be
approved for payment by Medicare. NMC has reviewed the claims it has submitted
for patients who started on IDPN therapy before July 1996 and continued on
therapy after July 1996, but do not meet the new, more stringent coverage
criteria, and believes that these claims were consistent with published Medicare
coverage guidelines. NMC recognizes, however, that the regulations and coverage
guidelines are ambiguous as to whether these patients therapy continues to be
covered by Medicare after the effective date of the new coverage criteria. NMC
has continued to provide therapy to these patients and to pursue its appeals of
these claims through the administrative process. If the government determines
that continued coverage for these patients is inappropriate, such claims
ultimately will not be paid. Amounts in receivable for these patients are
approximately $12 million. If NMC is unable to collect its IDPN receivable, or
if IDPN coverage is reduced or eliminated, depending on the amount of the
receivable that is not collected and/or the nature of the coverage change, NMC's
business, financial position and results of operations could be materially
adversely affected.
In May 1995 the Medicare claims processors circulated a draft coverage
policy which, if implemented in the form proposed, would have limited or
precluded continued coverage of parenteral and enteral nutrition ("PEN")
therapies, including IDPN therapy. In April 1996, NMC received a copy of a
revised final version of the new coverage policy, which became effective for
services billed on and after July 1, 1996. While the new policy permits
continued coverage of IDPN and other PEN therapies, and while the potential
impact of the new policy is subject to further analysis, NMC believes that the
new policy has made it substantially more difficult to qualify patients for
future coverage by, among other things, requiring certain patients to undergo
onerous and/or invasive tests in order to qualify for coverage. NMC, together
with other interested parties, is seeking to effect certain changes in the new
policy and NMC has made changes to its patient qualification procedures in order
to comply with the policy. However, if NMC is unable to achieve changes in the
new policy, if physicians and patients fail to accept the new qualification
procedures and/or if patients fail to qualify under such procedures, the policy
could significantly reduce the number of patients eligible for Medicare coverage
of IDPN and other PEN therapies, which would have a material adverse effect on
NMC's financial position and its results of operations.
OTHER LEGAL PROCEEDINGS
NMC has received multiple subpoenas from a federal grand jury in the
District of New Jersey investigating, among other things, NMC's efforts to
persuade the U.S. Food and Drug Administration to lift a January 1991 import
hold issued with respect to NMC's Dublin, Ireland facility, whether NMC sold
defective products, the manner in which NMC handled customer complaints and the
development of a new dialyzer product line. Grace has also received two
subpoenas relating to this investigation. In February 1996, the U.S. Attorney
for the District of New Jersey notified NMC that it is a target of the New
Jersey grand jury investigation, insofar as it relates to possible violations of
federal criminal law in connection with efforts to affect the January 1991
import hold referred to above; the material element of the import hold was
lifted in 1992. In June 1996, NMC received a letter from the U.S. Attorney for
the District of New Jersey indicating that the U.S. Attorney had declined to
prosecute NMC with respect to a submission related to NMC's effort to lift the
import ban. The letter added that NMC remains a subject of a federal grand
jury's investigation into other matters. NMC also received a subpoena in June
1996 requesting certain documents in connection NMC's imports of the FoCus
[Registered Trademark] dialyzer from January 1991 to November 1995. The outcome
of these investigations and their impact, if any, on NMC's business, financial
condition and results of operations cannot be predicted at this time. However,
the Company believes that neither the Company nor any of its employees committed
any violations of law. Accordingly, the Company does not believe that the
results of these investigations will have a material adverse effect on the
Company's financial position and results of operations.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For purposes of the following discussion, Fresenius Medical Care Holdings,
Inc., ("FMCH" or the "Company") formerly known as W. R. Grace & Co. ("Grace New
York"), together with the wholly owned subsidiaries, National Medical Care, Inc.
and its subsidiaries ("NMC") and Fresenius USA, Inc. and its subsidiaries
("FUSA") was formed as a result of a series of transactions pursuant to the
Agreement and Plan of Reorganization dated as of February 4, 1996 by and between
Grace New York and Fresenius AG ("the Reorganization"). The following is a
discussion of the financial condition and results of operations of FMCH. The
discussion should be read in conjunction with the financial statements included
elsewhere in this document.
This section contains certain forward-looking statements. These
forward-looking statements are made based on management's expectations and
beliefs concerning future events impacting FMCH, but no assurance can be given
that such events will occur or that the results will be as anticipated. Such
statements include, without limitation, discussions concerning the outlook of
FMCH, government reimbursement, future plans and management's expectations
regarding future performance.
OVERVIEW
FMCH is primarily engaged in (a) providing kidney dialysis services and
clinical laboratory testing, (b) manufacturing and distributing products and
equipment for dialysis treatment, and (c) providing home infusion therapy, home
respiratory services, diagnostic services and other medical services. Throughout
FMCH's history, a significant portion of FMCH's growth has resulted from the
development of new dialysis centers and the acquisition of existing dialysis
centers, as well as from the acquisition and development of complementary
businesses in the health care field.
FMCH derives a significant portion of its net revenues from Medicare,
Medicaid and other government health care programs (approximately 62% in 1996).
The reimbursement rates under these programs, including the Composite Rate, the
reimbursement rate for EPO (which accounted for approximately 22% of dialysis
service's domestic net revenues in 1996), and the reimbursement rate for other
dialysis and non-dialysis related services and products, as well as other
material aspects of these programs, have in the past and may in the future be
changed as a result of deficit reduction and health care reform measures.
FMCH's business, financial position and results of operations also could be
materially adversely effected by an adverse outcome in the OIG investigations,
any whistleblower action, the pending challenge by FMCH of changes effected by
Medicare in approving reimbursement claims relating to the administration of
IDPN or by the recent adoption of a new coverage policy that will change IDPN
coverage prospectively. FMCH's business, financial position and results of
operations would also be materially adversely affected by an adverse outcome in
the pending litigation concerning the implementation of certain provisions of
OBRA 93 relating to the coordination of benefits between Medicare and employer
health plans in the case of certain dual eligible ESRD patients.
FMCH also derives a significant portion of its net revenues from
reimbursement by non-government payors. Historically, reimbursement rates paid
by these payors generally have been higher than Medicare and other government
program rates in all areas except for certain services provided by NMC Homecare.
However, non-government payors are imposing cost containment measures that are
creating significant downward pressure on reimbursement levels that FMCH
receives for its services and products.
Dialysis Services operated or managed dialysis centers in 14 foreign
countries at September 30, 1997. In certain countries, FMCH experiences lower
reimbursement rates per treatment for dialysis services than are generally
realized in the U.S. FMCH's international dialysis services operations currently
generate less operating profit per treatment than domestic dialysis operations
due to both the lower reimbursement rates in some countries and the start-up
nature of many of the centers in foreign countries.
16
<PAGE> 17
RESULTS OF OPERATIONS
The following table summarizes certain unaudited operating results of FMCH
by principal business unit for the periods indicated. Intercompany eliminations
primarily reflect sales of medical supplies by Renal Products to DSD. This
information has been reorganized and prior periods have been reclassified to
conform with the business unit report of FMC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------------
1997 1996 1997 1996
---- ---- ------ ------
(DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net Revenues:
Dialysis Services ...................................... $487 $415 $1,390 $1,230
Dialysis Products ...................................... 170 80 497 240
Homecare/Diagnostics ................................... 69 91 229 293
Intercompany Eliminations .............................. (69) (51) (189) (148)
---- ---- ------ ------
Total Net Revenues ......................................... $657 $535 $1,927 $1,615
==== ==== ====== ======
Operating Earnings:
Dialysis Services ...................................... $ 75 $ 35 $ 199 $ 169
Dialysis Products ...................................... 18 12 60 33
Homecare/Diagnostics ................................... (12) (14) (8) 1
---- ---- ------ ------
Total Operating Earnings ................................... $ 81 $ 33 $ 251 $ 203
==== ==== ====== ======
Other Expenses:
General Corporate ...................................... $ 19 $ 13 $ 57 $ 56
Research & Development ................................. 0 1 2 2
Interest Expense, Net .................................. 49 2 136 16
---- ---- ------ ------
Total Other Expenses ....................................... $ 68 $ 16 $ 195 $ 74
---- ---- ------ ------
Earnings Before Income Taxes ............................... 13 17 56 129
Provision for Income Taxes ................................. 8 14 34 66
---- ---- ------ ------
Net Earnings ............................................... $ 5 $ 3 $ 22 $ 63
==== ==== ====== ======
</TABLE>
PROFORMA RESULTS OF OPERATIONS
The following table represents the unaudited pro forma statements of
operations of the Company for the three months ended and nine months ended
September 1996, assuming the Reorganization occurred on January 1, 1996, and the
actual statements of operations for the three months ended and nine months ended
September 1996.
<TABLE>
<CAPTION>
ACTUAL PROFORMA ACTUAL PROFORMA
------ -------- ------ --------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------------
1996 1996 1996 1996
---- ---- ------ ------
(DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net Revenues:
Dialysis Services ................................... $415 $415 $1,230 $1,230
Dialysis Products ................................... 80 153 240 451
Homecare/Diagnostics ................................ 91 91 293 293
Intercompany Eliminations ........................... (51) (51) (148) (148)
---- ---- ------ ------
Total Net Revenues ...................................... $535 $608 $1,615 $1,826
==== ==== ====== ======
Operating Earnings:
Dialysis Services ................................... $ 35 $ 35 $ 169 $ 169
Dialysis Products ................................... 12 3 33 24
Homecare/Diagnostics ................................ (14) (14) 1 1
---- ---- ------ ------
Total Operating Earnings ................................ $ 33 $ 24 $ 203 $ 194
==== ==== ====== ======
Other Expenses:
General Corporate ................................... $ 13 $ 22 $ 56 93
Research & Development .............................. 1 1 2 4
Interest Expense, Net ............................... 2 35 16 111
---- ---- ------ ------
Total Other Expenses .................................... $ 16 $ 58 $ 74 $ 208
---- ---- ------ ------
Earnings Before Income Taxes ............................ 17 (34) 129 (14)
Provision for Income Taxes .............................. 14 (7) 66 13
---- ---- ------ ------
Net Earnings (Loss) ................................... $ 3 $(27) $ 63 $ (27)
==== ==== ====== ======
</TABLE>
17
<PAGE> 18
EFFECT OF REORGANIZATION ON RESULTS OF OPERATIONS
In accordance with U.S. GAAP relating to purchase accounting rules, the Company
adjusted to fair value its assets and liabilities which, on a pro forma basis,
would have resulted in increased amortization of approximately $15 million and
$45 million for the third quarter 1996 and first nine months of 1996,
respectively, as shown in the pro forma statement of operations as part of
General Corporate expenses. In addition, as part of the Reorganization, the
Company incurred additional debt, which would have resulted in a net increase in
interest expense, including amortization of debt issuance costs and other fees,
in the amounts of $33 million and $95 million for the third quarter 1996 and the
first nine months of 1996, respectively, on a pro forma basis. In connection
with the Reorganization, the addition of FUSA for the first nine months of 1996
would have resulted in increased revenues for Dialysis Products of $73 million
and $211 million and decreased operating earnings for Dialysis Products of $9
million and $9 million for the third quarter 1996 and first nine months of 1996,
respectively, on a pro forma basis. The Reorganization would have resulted in a
decrease in the Company's provision for income taxes of $21 million and $53
million for the third quarter 1996 and the first nine months of 1996,
respectively, on a pro forma basis. As a result of the above adjustments, on a
pro forma basis, the Company would have reported a net loss of $27 million for
both the third quarter 1996 and first nine months of 1996. Actual results show
profit of $3 million for the third quarter 1996 and $63 million the first nine
months of 1996.
18
<PAGE> 19
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net revenues for the third quarter of 1997 increased by 23% ($122 million)
over the comparable period of 1996, with Dialysis Services and Dialysis Products
accounting for most of the increase. Net earnings for the third quarter of 1997
increased 67% ($2 million) over the comparable period of 1996 as a result of
unfavorable one time adjustments made during the third quarter of 1996,
partially offset by interest expenses and depreciation and amortization expense
in 1997
DIALYSIS SERVICES.
Dialysis Services net revenues for the third quarter of 1997 increased by
17% ($72 million) over the comparable period of 1996, primarily as a result of a
17% increase in the number of treatments provided worldwide, partially offset by
a decline in the domestic ancillary revenue rate ($13 million). Laboratory
testing revenues for the third quarter of 1997 increased by $8 million over the
comparable period of 1996. This was primarily due to the third quarter results
of Spectra Laboratories ($12 million), acquired by FMCH in June 1997, partially
offset by decreases in LifeChem testing volume ($4 million).
Dialysis Services operating earnings for the third quarter of 1997 increased
by 114% ($40 million) over the comparable period of 1996. This was primarily due
to three unfavorable one time adjustments made during the third quarter of 1996;
(writedowns in Portugal related to fraudulent activities ($10 million),
increased reserves for certain Portuguese uncollectible accounts and tax matters
($10 million), and write-offs of Brazil franchise fees ($9 million)). The effect
of these adjustments and the increase in treatment volume was partially offset
by decreases in volume of LifeChem laboratory testing. Spectra Laboratories
operating earnings for the third quarter was $2 million.
DIALYSIS PRODUCTS.
Dialysis Products net revenues for the third quarter of 1997 increased by
113% ($90 million) over the comparable period of 1996, primarily due to $76
million of third quarter revenues of FUSA, which was contributed to FMCH by
Fresenius Medical Care AG effective October 1, 1996. During the third quarter
1997, approximately $14 million of product sales were made between FUSA and the
former Renal Products Division of NMC which have been eliminated for financial
reporting. There were no such eliminations recorded in 1996 as the two companies
were separate reporting entities.
Dialysis Products operating earnings for the third quarter of 1997 increased
by 50% ($6 million) over the comparable period of 1996 primarily due to the
third quarter operating earnings of FUSA ($4 million). NMC's Renal Products
Division's operating earnings increased by approximately $2 million during the
quarter, primarily due to a reduction in operating expenses and distribution
costs ($1 million) as well as one-time charges recorded in the third quarter of
1996 for legal expenses ($1 million).
HOMECARE/DIAGNOSTICS.
Homecare/Diagnostics net revenues for the third quarter of 1997 decreased by
24% ($22 million) as compared to the third quarter of 1996. This is primarily
due to decreased volume related to changes in Medicare qualification procedures
for IDPN patients ($9 million), decreases in infusion therapy revenues mainly
due to continued price compression from managed care ($6 million), the effect of
the sale of Home Health business ($4 million), and decreases in the number of
diagnostics services primary care tests ($5 million). These decreases were
partially offset by increases in respiratory therapy revenues ($2 million).
Homecare/Diagnostics operating earnings for the third quarter of 1997
increased by $2 million as compared to the third quarter of 1996, primarily due
to increased bad debt provisions in the third quarter of 1996; approximately
$12 million, partially offset by continued pricing pressure resulting from
managed care, decline in the number of Medicare patients who receive IDPN
treatments, and decreases in the volume of diagnostics services tests
OTHER EXPENSES.
FMCH's other expenses for the third quarter of 1997 increased by 325% ($52
million) over the comparable period of 1996. General corporate expenses
increased by $6 million due primarily to a $16 million increase to depreciation
and amortization expense associated with the revaluation of intangible assets at
the time of the Reorganization. This was partially offset by favorable savings
in foreign exchange ($8 million) and other cost reductions ($2 million).
Research and development expenses for the third quarter of 1997
19
<PAGE> 20
decreased by $1 million over the comparable period of 1996. Interest expense for
the third quarter of 1997 increased by $47 million over the comparable period of
1996 mainly due to the large amount of bank debt incurred to finance the
Reorganization and the interest expense associated with FUSA in the third
quarter of 1997 ($3 million).
INCOME TAX RATE.
The effective tax rate for the third quarter 1997 (58.6%) is significantly
lower than the rate for the comparable period of 1996 (85.0%) due primarily to
non-deductible losses and asset writedowns in certain foreign countries in the
third quarter of 1996, offset in part by non-deductible goodwill incurred as a
result of the reorganization.
20
<PAGE> 21
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net revenues for the first nine months of 1997 increased by 19% ($312
million) over the comparable period of 1996, with Dialysis Services and Dialysis
Products accounting for more than all of the entire increase. Net earnings for
the first nine months of 1997 decreased 65% ($41 million) over the comparable
period of 1996 as a result of increased interest expense partially offset by
increased operating earnings of dialysis products and dialysis services.
DIALYSIS SERVICES.
Dialysis Services net revenues for the first nine months of 1997 increased
by 13% ($160 million) over the comparable period of 1996, which included a
favorable OBRA 93 adjustment ($10 million), primarily due to the result of a 15%
increase in the number of treatments provided worldwide. This increase was
partially offset by a decline in the ancillary revenue rate ($13 million).
Laboratory testing revenues for the first nine months of 1997 increased by $7
million over the comparable period of 1996. This was primarily due to year to
date September revenues of Spectra Laboratories ($17 million), acquired by FINCH
in June 1997, partially offset by decreases in Lifetime testing volume ($10
million).
Dialysis Services operating earnings for the first nine months of 1997
increased by 18% ($30 million) over the comparable period of 1996. This was
primarily due to three unfavorable one time adjustments made during the third
quarter of 1996; (write-down in Portugal related to fraudulent activities ($10
million), increased reserves for certain Portuguese uncollectible accounts and
tax matters ($10 million), and write-offs of Brazil franchise fees ($9
million)). The effect of these adjustments and the increase in treatment volume
was partially offset by the aforementioned OBRA 93 adjustment in 1996 and
decreases in volume of LifeChem laboratory testing. Spectra Laboratories year to
date September operating earnings was $2 million.
DIALYSIS PRODUCTS.
Dialysis Products net revenues for the first nine months of 1997
increased by 107% ($257 million) over the comparable period of 1996, primarily
due to $228 million of revenues for FUSS, which was contributed to FINCH by
Fresenius Medical Care AG effective October 1, 1996. During 1997, approximately
$32 million of product sales were made between FUSA and the former Renal
Products Division of NMC which have been eliminated for financial reporting.
There were no such eliminations recorded in 1996 as the two companies were
separate reporting entities.
Dialysis Products operating earnings for the first nine months of 1997 increased
by 82% ($27 million) over the comparable period of 1996 primarily due to the
operating earnings of FUSA ($20 million). NMC's Renal Products Division's
operating earnings increased by approximately $7 million during the first nine
months primarily due to a reduction in operating expenses and distribution costs
($4 million) as well as one-time charges recorded during 1996 for legal expenses
($3 million).
HOMECARE/DIAGNOSTICS.
Homecare/Diagnostics net revenues for the first nine months of 1997
decreased by 22% ($64 million) as compared to the first nine months of 1996.
This is primarily due to decreased volume related to changes in Medicare
qualification procedures for IDPN patients ($34 million), decreases in infusion
therapy revenues mainly due to continued price compression from managed care
($18 million), the effect of the sale of Home Health business ($6 million), and
decreases in the number of diagnostic services primary care tests
($10 million). These decreases were partially offset by increases in respiratory
therapy revenues ($4 million).
Homecare/Diagnostics operating earnings for the first nine months of 1997
decreased by $9 million as compared to the first nine months of 1996, primarily
due to continued pricing pressure resulting from managed care, the decline in
the number of Medicare patients who receive IDPN treatments, and decreases in
the volume of diagnostic services tests, partially offset by increased bad debt
provisions in 1996, approximately $16 million.
OTHER EXPENSES.
FMCH's other expenses for the first nine months of 1997 increased by 164%
($121 million) over the comparable period of 1996. General corporate expense
increased by 2% ($1 million) primarily due to increased depreciation and
amortization expenses associated with the revaluation of intangible assets at
the time of the Reorganization ($46 million), offset by reduced legal expenses
($9 million), favorable savings in foreign exchange ($18 million), and other
cost reductions ($18 million). Research and development expenses for
21
<PAGE> 22
the first nine months of 1997 were virtually the same as they were for the
comparable period of 1996. Interest expense for the first nine months of 1997
increased by ($120 million) over the comparable period of 1996 mainly due to the
large amount of bank debt incurred to finance the reorganization and the
interest expense associated with FUSA in the first nine months of 1997 ($7
million).
INCOME TAX RATE.
The effective tax rate for the first nine months of 1997 (60.0%) is
significantly higher than the rate for the first nine months of 1996 (51.3%) due
primarily to the large amount of non-deductible goodwill incurred as a result of
the reorganization, offset in part by non deductible losses and asset-
writedowns in certain foreign countries in 1996.
LIQUIDITY AND CAPITAL RESOURCES
FMCH made acquisitions totaling $464 million (including $57 million
issuance of investment securities) and $89 million, during the first nine months
of 1997 and 1996, respectively. FMCH made capital expenditures for internal
expansion, improvements, new furnishings and equipment of $117 million and $93
million during the first nine months of 1997 and 1996, respectively. The Company
intends to capitalize on the continuing shift in the U.S. from physician-owned
and hospital-based dialysis clinics to multi-center providers by acquiring
existing dialysis centers and the establishment of new or expanded centers and,
accordingly, will require significant capital resources to pursue its growth
strategy in the dialysis marketplace. FMCH may also make other strategic
acquisitions in the future.
FMCH also requires capital resources for working capital purposes. FMCH used
cash to fund increases in accounts receivable of $64 million and $83 million
during the first nine months of 1997 and 1996, respectively. The increases in
accounts receivable reflect growth in NMC's business operations and, beginning
in 1994, the sharp reduction in IDPN claims approved for payment.
FMCH during the first nine months of 1997 funded its acquisitions and
capital expenditures primarily through increased borrowings under its credit
facility ($187 million) and increased borrowings from affiliates ($73 million).
In addition, FMCH received capital contributions of $178 million from Fresenius
Medical Care, AG, which were used primarily in connection with repayment of
external debt and acquisitions. In addition, acquisitions were also funded
through issuance of investment securities by a Luxemborg subsidiary ("FMC
Finance), of Fresenius Medical Care AG ("FMC"). An intercompany payable
($57 million) has been established between FMC Finance and FMCH. FMCH received
net cash advances from Grace of $280 million during the first nine months of
1996.
Effective July 1, 1995, FMCH ceased to recognize the incremental revenue
provided under HCFA's initial instruction under OBRA 93, although it continued
to bill private third-party payors for these amounts through December 31, 1995.
If FMCH's position with respect to the retroactive application of OBRA 93 is not
sustained, it may be required to refund amounts previously collected from
private third-party payors (approximately $190 million through June 30, 1995)
and rebill Medicare for these services, which would result in an estimated net
cash and operating earnings loss of approximately $120 million as of September
30, 1997. FMCH began billing Medicare as the primary payor for the dual eligible
ESRD patients affected by OBRA 93 effective January 1, 1996. If HCFA's revised
instruction under OBRA 93 is permanently enjoined on a prospective basis, or if
such revised instruction is sustained but given an effective date of later than
June 30, 1995, FMCH may be able to rebill such services to third-party payors
and, as a result, FMCH's future results of operations and financial position
would be favorably affected by the incremental revenue that FMCH would
recognize.
NMC entered into a $2.5 billion Credit Agreement on September 27, 1996 with
a group of financial institutions. The Credit Agreement was used to fund a cash
dividend to Grace Chemicals of approximately $2.1 billion, finance existing
letters of credit and for general corporate purposes. In November 1996,
Fresenius Medical Care implemented two financings which raised a total of $731
million, the proceeds of which were invested in FMCH through a $249 million
equity infusion and a total of $482 million of loans to FMCH. The funds were
used to repay certain borrowings under the Credit Agreement. Also in November
1996, Fresenius Medical Care became a guarantor under the NMC Credit Agreement.
The Credit Agreement will be utilized to fund future capital requirements and
acquisitions and, to the extent necessary, General Corporate requirements,
including future letters of credit, and any claims on the Company which may
result from adverse settlements with the government on the OIG or other
investigations.
On August 28, 1997, FMCH established a new $204,000 receivables financing
facility with NationsBank to replace its former financing facility with
CitiCorp. The agreement has an effective interest rate of 5.66% and matures on
August 27, 1998. Proceeds of $200 million have been drawn down under the
NationsBank agreement, an increase of $52 million from December 31, 1996.
22
<PAGE> 23
The liquidity of FMCH is contingent upon a number of factors, principally
FMCH's future operating results and the contingencies referred to below. FMCH
believes that its current levels of liquidity, including availability under the
NMC Credit Agreement, are sufficient to meet its foreseeable needs. If existing
sources of funds are not sufficient to provide liquidity, FMCH may need to sell
assets or obtain debt or equity financing from additional external sources.
There can be no assurance that FMCH will be able to do so on satisfactory terms,
if at all.
IMPACT OF INFLATION
A substantial portion of FMCH's net revenue is subject to reimbursement
rates which are regulated by the federal government and do not automatically
adjust for inflation. Non-governmental payors also are exerting downward
pressure on reimbursement levels. Increased operating costs that are subject to
inflation, such as labor and supply costs, without a compensating increase in
reimbursement rates, may adversely affect FMCH's business and results of
operations, possibly materially.
CONTINGENCIES
FMCH is the subject of investigations by several federal agencies and
authorities, is a plaintiff in litigation against the federal government with
respect to the implementation of OBRA 93 and coverage for IDPN therapy, and is
seeking to change a proposed revision to IDPN coverage policies. An adverse
outcome in any of these matters, beyond the reserves which have established,
could have a material adverse effect on FMCH's business, financial condition and
results of operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128"),
which requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS") by all entities that have publicly
traded common stock or potential common stock (options warrants, convertible
securities or contingent stock arrangements). SFAS 128 also requires a
presentation of earnings per share by an entity that has made a filing or is in
the process of filing with a regulatory agency in preparation for the sale of
those securities in a public market. Basic EPS is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings. SFAS 128 is
effective for both interim and annual periods ending after December 15, 1997.
The Company does not believe that the effect on the Company's earnings per share
resulting from the adoption of SFAS 128 will be material.
23
<PAGE> 24
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
INTRADIALYTIC PARENTERAL NUTRITION
NMC administers IDPN therapy to chronic dialysis patients who suffer from
severe gastrointestinal malfunctions. Since late 1993, Medicare claims
processors have sharply reduced the number of IDPN claims approved for payment
as compared to prior periods. NMC believes that the reduction in IDPN claims
currently being paid by Medicare represents an unauthorized policy coverage
change. Accordingly, NMC and other IDPN providers are pursuing various
administrative and legal remedies, including administrative appeals, to address
this reduction. In November 1995, NMC filed a complaint in the U.S. District
Court for the Middle District of Pennsylvania seeking a declaratory judgment and
injunctive relief to prevent the implementation of this policy coverage change.
Subsequently, the Court affirmed a prior report of the magistrate judge
dismissing NMC's complaint without considering any substantive claims, on the
grounds that the underlying cause of action should be submitted fully to the
administrative review processes available under the Medicare Act. The Company
decided not to appeal the Court's decision, but rather, to pursue the claims
through the available administrative processes.
NMC management believes that its IDPN claims were consistent with published
Medicare coverage guidelines and ultimately will be approved for payment. Such
claims represent substantial accounts receivable of NMC, amounting to
approximately $153 million (net of a reserve of $55 million) and $140 million
(net of a reserve of $41 million) as of September 30, 1997 and December 31,
1996, respectively and currently increasing at the rate of approximately $2,000
per month. When the coverage guidelines were revised effective July 1996, as
described below, some of NMC's claims continued to meet the more stringent
coverage criteria established in the new guidelines and will probably be
approved for payment by Medicare. NMC has reviewed the claims it has submitted
for patients who started on IDPN therapy before July 1996 and continued on
therapy after July 1996, but do not meet the new, more stringent coverage
criteria, and believes that these claims were consistent with published Medicare
coverage guidelines. NMC recognizes, however, that the regulations and coverage
guidelines are ambiguous as to whether these patients' therapy continues to be
covered by Medicare after the effective date of the new coverage criteria. NMC
has continued to provide therapy to these patients and to pursue its appeals of
these claims through the administrative process. If the government determines
that continued coverage for these patients is inappropriate, such claims
ultimately will not be paid. Amounts in receivable for these patients are
approximately $12,000. If NMC is unable to collect its IDPN receivable, or if
IDPN coverage is reduced or eliminated, depending on the amount of the
receivable that is not collected and/or the nature of the coverage change, NMC's
business, financial position and results of operations could be materially
adversely affected.
In May 1995 the Medicare claims processors circulated a draft coverage
policy which, if implemented in the form proposed, would have limited or
precluded continued coverage of parenteral and enteral nutrition ("PEN")
therapies, including IDPN therapy. In April 1996, NMC received a copy of a
revised final version of the new coverage policy, which became effective for
services billed on and after July 1, 1996. While the new policy permits
continued coverage of IDPN and other PEN therapies, and while the potential
impact of the new policy is subject to further analysis, NMC believes that the
new policy has made it substantially more difficult to qualify patients for
future coverage by, among other things, requiring certain patients to undergo
onerous and/or invasive tests in order to qualify for coverage. NMC, together
with other interested parties, is seeking to effect certain changes in the new
policy and NMC has made changes to its patient qualification procedures in order
to comply with the policy. However, if NMC is unable to achieve changes in the
new policy, if physicians and patients fail to accept the new qualification
procedures and/or if patients fail to qualify under such procedures, the policy
could significantly reduce the number of patients eligible for Medicare coverage
of IDPN and other PEN therapies, which would have a material adverse effect on
NMC's financial position and its results of operations.
OIG INVESTIGATIVE SUBPOENAS
In October 1995, NMC received five investigative subpoenas from the Office
of Inspector General of the U.S. Department of Health and Human Services (the
"OIG"). The subpoenas were issued in connection with an investigation being
conducted by the OIG, the U.S. Attorney for the District of Massachusetts and
others concerning possible violations of federal laws, including the
Anti-kickback Statute and the False Claims Act. The subpoenas call for extensive
document production relating to various aspects of NMC's business. A sixth
subpoena, clarifying the scope of one originally served, was received in May
1996.
24
<PAGE> 25
The five subpoenas cover the following areas: (a) NMC's corporate
management, personnel and employees, organizational structure, financial
information and internal communications; (b) NMC's dialysis services business,
principally medical director contracts and compensation; (c) NMC's treatment of
credit balances resulting from overpayments received under the Medicare end
stage renal disease (ESRD) program, NMC's billing for home dialysis services and
payment of supplemental medical insurance premiums on behalf of indigent
patients; (d) NMC's LifeChem laboratory business ("LifeChem"), including
documents relating to testing procedures, marketing, customers, competition and
certain overpayments totaling approximately $4.9 million that were received by
LifeChem from the Medicare program with respect to laboratory services rendered
between 1989 and 1993; and (e) NMC's Homecare Division and, in particular,
information concerning the intradialytic parenteral nutrition ("IDPN") business
described below, including billing practices related to various services,
equipment and supplies and payments made by third parties as compensation for
administering IDPN therapy.
On July 15, 1997, National Medical Care, Inc. received an investigatory
subpoena duces tecum requesting production of a number of patient records, in
connection with the government's review of billing practices related to various
services, equipment and supplies and payments made by third parties as
compensation for administering IDPN therapy, described above.
Each of the patients whose records were subpoenaed is, or was, a Medicare
beneficiary. The subpoena calls for production of the records by August 15,
1997. The Company has discussed an extended schedule for production with the
government. The result of the government's review of these records, its
duration, and its effect, if any, on NMC cannot be predicted at this time.
In the event that a U.S. government agency believes that any wrongdoing has
occurred, civil and/or criminal proceedings could be instituted, and if any such
proceedings were to be instituted and the outcome were unfavorable, NMC could be
subject to substantial fines, penalties and damages or could become excluded
from government reimbursement programs. Any such result could have a material
adverse effect on NMC's financial position or the results of operations of the
Company.
FMC and NMC have provided the United States government with a joint and
several guarantee of payment of the obligations, if any, arising out of the
investigation by the OIG. In support of this guarantee, NMC has delivered to the
government an irrevocable standby letter of credit in the amount of $150
million.
25
<PAGE> 26
ITEM 5. OTHER INFORMATION
On June 12, 1997, the Company amended its Certificate of Incorporation
to change Company's name to "Fresenius Medical Care Holdings, Inc."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Certificate of Incorporation of Fresenius Medical Care
Holdings, Inc. (f/k/a W. R. Grace & Co.) under Section
402 of the New York Business Corporation Law dated
March 23, 1988 (incorporated herein by reference to the
Form 8-K of the Company filed on May 9, 1988).
Exhibit 3.2 Certificate of Amendment of the Certificate of
Incorporation of Fresenius Medical Care Holdings, Inc.
(f/k/a W. R. Grace & Co.) under Section 805 of the New
York Business Corporation Law dated May 25, 1988
(changing the name to W. R. Grace & Co., incorporated
herein by reference to the Form 8-K of the Company
filed on May 9, 1988).
Exhibit 3.3 Certificate of Amendment of the Certificate of
Incorporation of Fresenius Medical Care Holdings, Inc.
(f/k/a W. R. Grace & Co.) under Section 805 of the New
York Business Corporation Law dated September 27, 1996
(incorporated herein by reference to the Form 8-K of
the Company filed with the Commission on October 15,
1996).
Exhibit 3.4 Certificate of Amendment of the Certificate of
Incorporation of Fresenius Medical Care Holdings, Inc.
(f/k/a W. R. Grace & Co.) under Section 805 of the New
York Business Corporation Law dated September 27, 1996
(changing the name to Fresenius National Medical Care
Holdings, Inc., incorporated herein by reference to the
Form 8-K of the Company filed with the Commission on
October 15, 1996).
Exhibit 3.5 Certificate of Amendment of the Certificate of
Incorporation of Fresenius Medical Care Holdings, Inc.
under Section 805 of the New York Business Corporation
Law dated June 12, 1997 (changing name to Fresenius
Medical Care Holdings, Inc., incorporated herein by
reference to the Form 10-Q of the Company filed with
the Commission on August 14, 1997).
Exhibit 3.6 Amended and Restated By-laws of Fresenius Medical Care
Holdings, Inc. (incorporated herein by reference to the
Form 10-Q of the Company filed with the Commission on
August 14, 1997.
Exhibit 10.1 Amendment No. 3 dated June 13, 1997 to the Credit
Agreement dated as of September 27, 1996 , among
National Medical Care, Inc. and Certain Subsidiaries
and Affiliates , as Borrowers, Certain Subsidiaries and
Affiliates, as Guarantors, the Lenders named therein,
NationsBank, N.A., as paying agent and the Bank of Nova
Scotia, the Chase Manhattan Bank, N.A., Dresdner Bank
AG and NationsBank, N.A. as Managing Agents, as
previously amended.
Exhibit 10.2 Amendment No. 4, dated August 26, 1997 to the Credit
Agreement dated as of September 27, 1996, among
National Medical Care, Inc. and Certain Subsidiaries
and Affiliates, as Borrowers, Certain Subsidiaries and
Affiliates, as Guarantors, the Lenders named therein,
NationsBank, N.A., as paying agent and the Bank of Nova
Scotia, the Chase Manhattan Bank, N.A. , Dresdner Bank
AG and NationsBank, N.A. as Managing Agents, as
previously amended.
Exhibit 10.3 Receivables Purchase Agreement dated August 28, 1997
between National Medical Care, Inc. and NMC Funding
Corporation.
Exhibit 10.4 Transfer and Administration Agreement dated August 28,
1997 among NMC Funding Corporation, National Medical
Care, Inc., Enterprise Funding Corporation, the Bank
Investors listed therein and NationsBank, N.A., as
agent.
26
<PAGE> 27
Exhibit 11 Statement re. Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirement 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.
Fresenius Medical Care Holdings, Inc.
DATE: November 14, 1997 /s/ Ben J. Lipps
----------------- ------------------------------------------
NAME: Ben J. Lipps
TITLE: President (Chief Executive Officer)
DATE: November 14, 1997 /s/ Jerry A. Schneider
----------------- ------------------------------------------
NAME: Jerry A. Schneider
TITLE: Chief Financial Officer
28
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 3
THIS AMENDMENT NO. 3, dated as of June 13, 1997 (the "AMENDMENT")
relating to the Credit Agreement referenced below, by and among NATIONAL MEDICAL
CARE, INC., a Delaware corporation, certain subsidiaries and affiliates party to
the Credit Agreement and identified on the signature pages hereto, and
NATIONSBANK, N.A., as Paying Agent for and on behalf of the Lenders. Terms used
but not otherwise defined shall have the meanings provided in the Credit
Agreement.
W I T N E S S E T H
WHEREAS, a $2.5 billion credit facility has been extended to National
Medical Care, Inc. and certain subsidiaries and affiliates pursuant to the terms
of that Credit Agreement dated as of September 27, 1996 (as amended and
modified, the "CREDIT AGREEMENT") among National Medical Care, Inc., the other
Borrowers, Guarantors and the Lenders identified therein, and NationsBank, N.A.,
as Paying Agent;
. WHEREAS, the Company has requested certain modifications described
herein which require the consent of the Required Lenders; and
WHEREAS, the Required Lenders have consented to the requested
modifications on the terms and conditions set forth herein and have authorized
the Paying Agent to enter into this Amendment on their behalf to give effect to
this Amendment;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended and modified in the following
respects:
1. The definition of "Consolidated Net Worth" in Section 1.1
is amended to read as follows:
"CONSOLIDATED NET WORTH" means total stockholders' equity of
the Consolidated Group, in each case on a consolidated basis as
determined in accordance with GAAP applied on a consistent basis, BUT
EXCLUDING for purposes hereof foreign currency translation adjustments
of up to $80,000,000 at any time.
2. Clause (C) of Section 3.3(b)(ii) is amended to read as
follows:
(C) fifty percent (50%) of the excess of (1) the Net Proceeds
of any Equity Transaction over (2) the portion of such Net Proceeds
used to finance an acquisition or Capital Expenditure permitted under
Section 8.4(d) or to repay Indebtedness existing under Section 8.1(i);
3. Clause (iii) of Section 7.1(b)(iii) is deleted in its
entirety and replaced with the following:
(iii) [Intentionally Omitted]
4. Subsection (i) of Section 8.1 is amended to read as
follows:
(i) in addition to other Indebtedness permitted by this
Section 8.1, Indebtedness of the Company and its Subsidiaries of up to
(i) until December 31, 1998, $200,000,000 in the aggregate principal
amount at any time outstanding, (ii) from January 1, 1999 to December
31, 1999, $175,000,000 in the aggregate principal amount at any time
outstanding and (iii) from January 1, 2000 and thereafter, $150,000,000
in the aggregate principal amount at any time outstanding, PROVIDED
THAT amounts in excess of $50,000,000 must be specifically subordinated
in right of payment to the Obligations during the continuance of a
Default or Event of Default hereunder on terms reasonably acceptable to
the Paying Agent.
5. Clauses (A) and (B) of Section 8.4(d) concerning
Consolidation, Merger, Sale or Purchase of Assets and Capital Expenditures are
amended to read as follows:
30
<PAGE> 2
(A) the aggregate cost of any individual acquisition referred
to in subsection (d)(i) or (d)(ii) or Capital Expenditures referenced
in subsection (d)(iii) shall not exceed the sum of (i) $100,000,000
PLUS (ii) any portion of the Net Proceeds of an Equity Transaction used
therefore occurring no more than three (3) months prior to or three (3)
months after the respective individual acquisition or respective
Capital Expenditure;
(B) the aggregate cost of all such acquisitions referred to in
subsection (d)(i) or (d)(ii) and Capital Expenditures referred to in
subsection (d)(iii) shall not in any calendar year exceed an amount
equal to the sum of (i) $400,000,000 PLUS (ii) the amount of Net
Proceeds from Asset Dispositions retained by the Credit Parties in
accordance with the provisions of Section 3.3(b) PLUS (iii) any portion
of Net Proceeds of an Equity Transaction used therefor occurring no
more than three (3) months prior to or three (3) months after the
respective acquisition or capital expenditure, PROVIDED that all
acquisitions and capital expenditures made with a portion of the Net
Proceeds from the Equity Transaction in November, 1996 (FMC Preference
Shares) retained in accordance with the provisions of Section 3.3(b)
(constituting approximately $80 million in the fourth quarter of 1996,
and approximately $171 million in the first quarter of 1997) shall not
be subject to the foregoing limitation;
6. Clause (B) of Section 8.10(b)(ii) is amended to read as
follows:
(B) with respect to the Company, not more than 37.5% of the
Consolidated Net Income of the Company for the prior fiscal year.
7. Schedule 7.2(b) is hereby amended in its entirety to read
as Schedule 7.2(b) attached hereto.
B. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits and Schedules) remain in full force and effect.
C. The Company agrees to pay all reasonable costs and expenses of the
Paying Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
D. This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and its
shall not be necessary in making proof of this Amendment to produce or account
for more than one such counterpart.
E. This Amendment, and the Credit Agreement as amended hereby, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New York.
[Remainder of Page Intentionally Left Blank]
31
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
BORROWERS: NATIONAL MEDICAL CARE, INC.,
a Delaware corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
FRESENIUS MEDICAL CARE AG
By /s/ Gerd Krick
------------------------------------------
Name: Gerd Krick
Title: Management Board Member
By /s/ Udo Werle
------------------------------------------
Name: Udo Werle
Title: Management Board Member
NMC DO BRASIL LTDA.,
a Brazil corporation
By /s/ Joao Pedrinelli
------------------------------------------
Name: Joao Pedrinelli
Title: General Manager
NATIONAL MEDICAL CARE OF SPAIN, S.A.,
a Spanish corporation
By /s/ Dwight Morgan
------------------------------------------
Name: Dwight Morgan
Title: Managing Director
NATIONAL MEDICAL CARE OF TAIWAN, INC.,
a Delaware corporation
By /s/ Dwight Morgan
------------------------------------------
Name: Dwight Morgan
Title: Manager Director
32
<PAGE> 4
NMC CENTRO MEDICO NACIONAL, LDA.,
a Portuguese corporation
By /s/ Dwight Morgan
------------------------------------------
Name: Dwight Morgan
Title: Managing Director
NMC DE ARGENTINA, S.A.,
an Argentine corporation
By /s/ Joao Pedrinelli
------------------------------------------
Name: Joao Pedrinelli
Title: General Manager
FRESENIUS USA, INC.,
a Massachusetts corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH,
a German corporation
<TABLE>
<S> <C>
By /s/ Gerd Krick By: /s/ Dietmar Blumenhagen
------------------------------------------ ----------------------------------
Name: Gerd Krick Name: Dietmar Blumenhagen
Title: Chief Executive Officer Title: Treasurer
</TABLE>
FRESENIUS MEDICAL CARE GROUPE FRANCE
(formerly known as Fresenius Groupe
France S.A.), a French corporation
By /s/ Udo Werle
------------------------------------------
Name: Udo Werle
Title: Board Member
FRESENIUS MEDICAL CARE HOLDING, S.p.A.,
an Italian corporation
By /s/ E. Gatti
------------------------------------------
Name: E. Gatti
Title: Board Member
33
<PAGE> 5
FRESENIUS MEDICAL CARE ESPANA S.A.,
a Spanish corporation
By /s/ E. Gatti
------------------------------------------
Name: E. Gatti
Title: Board Member
FRESENIUS MEDICAL CARE MAGYAROSZA KfG,
a Hungarian corporation
By /s/ N. Erhard
------------------------------------------
Name: N. Erhard
Title: Board Member
PAYING AGENT: NATIONSBANK, N.A.,
as Paying Agent for and on behalf of the
Lenders
By /s/ Ashley M. Crabtree
------------------------------------------
Ashley M. Crabtree
Senior Vice President
GUARANTORS: FRESENIUS NATIONAL MEDICAL CARE
HOLDINGS, INC., a New York corporation
formerly known as WRG-NY
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
NATIONAL MEDICAL CARE, INC.,
a Delaware corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
BIO-MEDICAL APPLICATIONS MANAGEMENT CO.,
INC., a Delaware corporation
By /s/ Geoffrey W. Swett
------------------------------------------
Name: Geoffrey W. Swett
Title: President
34
<PAGE> 6
NMC HOMECARE, INC.,
a Delaware corporation
By /s/ Michael J. Sicilian
------------------------------------------
Name: Michael J. Sicilian
Title: Vice President
LIFECHEM, INC.,
a Delaware corporation
By /s/ Geoffrey W. Swett
------------------------------------------
Name: Geoffrey W. Swett
Title: President
FRESENIUS MEDICAL CARE AG,
a German corporation
<TABLE>
<S> <C>
By /s/ Gerd Krick By:/s/ Dietmar Blumenhagen
------------------------------------------ -------------------------------------
Name: Gerd Krick Name: Dietmar Blumenhagen
Title: Chief Executive Officer Title: Treasurer
</TABLE>
FRESENIUS USA, INC.,
a Massachusetts corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
FRESENIUS MEDICAL CARE DEUTSCHLAND
GmbH, a German corporation
<TABLE>
<S> <C>
By /s/ Gerd Krick By:/s/ Dietmar Blumenhagen
------------------------------------------ -------------------------------------
Name: Gerd Krick Name: Dietmar Blumenhagen
Title: Chief Executive Officer Title: Treasurer
</TABLE>
FRESENIUS MEDICAL CARE GROUPE
FRANCE, a French corporation
(formerly known as Fresenius Groupe
France S.A.)
By /s/ Udo Werle
------------------------------------------
Name: Udo Werle
Title: Board Member
35
<PAGE> 7
FRESENIUS SECURITIES, INC.,
a California corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
36
<PAGE> 8
CONSENT TO AMENDMENT NO. 3
NationsBank, N.A., as Paying Agent
101 N. Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Carol Lindsay, Agency Services
Re: Credit Agreement dated as of September 27, 1996 (as amended
and modified, the "CREDIT AGREEMENT") among National Medical
Care, Inc., the other Borrowers, Guarantors and Lenders
identified therein and NationsBank, N.A., as Paying Agent.
Terms used but not otherwise defined shall have the meanings
provided in the Credit Agreement.
Amendment No. 3 dated June __, 1997 (the "SUBJECT AMENDMENT")
relating to the Credit Agreement
Ladies and Gentlemen:
This should serve to confirm our receipt of, and consent to, the
Subject Amendment. We hereby authorize and direct you, as Paying Agent for the
Lenders, to enter into the Subject Amendment on our behalf in accordance with
the terms of the Credit Agreement upon your receipt of such consent and
direction from the Required Lenders, and agree that Company and the other Credit
Parties may rely on such authorization.
Sincerely,
-----------------------------
[Name of Lender]
By:
--------------------------
Name:
Title:
37
<PAGE> 9
SCHEDULE 7.2(b)
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
This Certificate is delivered in accordance with the provisions of
Section 7.2(b) of that Credit Agreement dated as of September 27, 1996 (as
amended, modified and supplemented, the "CREDIT AGREEMENT") among NATIONAL
MEDICAL CARE, INC., a Delaware corporation, and certain subsidiaries and
affiliates (the "BORROWERS"), the Guarantors identified therein, the Lenders and
NationsBank, N.A., as Paying Agent. Terms used but not otherwise defined herein
shall have the meanings provided in the Credit Agreement.
The undersigned, being a Responsible Officer of NATIONAL MEDICAL CARE,
INC., a Delaware corporation, hereby certifies, in my official capacity and not
in my individual capacity, that to the best of my knowledge and belief:
(a) the financial statements accompanying this Certificate
fairly present the financial condition of the parties covered by such
financial statements in all material respects;
(b) during the period the Borrowers have observed or performed
all of their covenants and other agreements in all material respects,
and satisfied in all material respects every material condition,
contained in this Credit Agreement to be observed, performed or
satisfied by them;
(c) the undersigned has no actual knowledge of any Default or
Event of Default;
(d) detailed calculations demonstrating compliance with the
financial covenants set out in Section 7.9 of the Credit Agreement
accompany this Certificate; and
(e) a description of transactions and activity under
Section 8.4 of the Credit Agreement is attached.
This the __________ day of __________________, 19___.
--------------------------------
Title:
38
<PAGE> 10
1. Description of transactions of dissolution, liquidation or winding up.
Sec. 8.4(a).
2. Description of transactions of merger or consolidation. Sec. 8.4(b).
3. Description of transactions of sale, lease, transfer or other
disposition. Sec. 8.4(c).
4. Description of Acquisitions (including by way of merger and
consolidation) and Capital Expenditures. Sec. 8.4(d).
a. Description of each transaction:
b. Description of Asset Dispositions, Equity
Transactions and Subordinated Debt Transactions.
c. Demonstration of Pro Forma Compliance.
39
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 4
THIS AMENDMENT NO. 4, dated as of August 26, 1997 (the "AMENDMENT")
relating to the Credit Agreement referenced below, by and among NATIONAL MEDICAL
CARE, INC., a Delaware corporation, certain subsidiaries and affiliates party to
the Credit Agreement and identified on the signature pages hereto, and
NATIONSBANK, N.A., as Paying Agent for and on behalf of the Lenders. Terms used
but not otherwise defined shall have the meanings provided in the Credit
Agreement.
W I T N E S S E T H
WHEREAS, a $2.5 billion credit facility has been extended to National
Medical Care, Inc. and certain subsidiaries and affiliates pursuant to the terms
of that Credit Agreement dated as of September 27, 1996 (as amended and
modified, the "CREDIT AGREEMENT") among National Medical Care, Inc., the other
Borrowers, Guarantors and the Lenders identified therein, and NationsBank, N.A.,
as Paying Agent;
WHEREAS, the Company has made plans to refinance and replace its
existing $200 million receivables securitization program with a $204 million
receivables securitization program;
WHEREAS, the Company has requested certain modifications described
herein in connection therewith which require the consent of the Required
Lenders; and
WHEREAS, the Required Lenders have consented to the requested
modifications on the terms and conditions set forth herein and have authorized
the Paying Agent to enter into this Amendment on their behalf to give effect to
this Amendment;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended and modified in the following
respects:
1. The Managing Agents and the Required Lenders hereby consent
to the structure, terms and tenor of the proposed securitization transaction as
structured by NationsBanc Capital Markets, Inc. on the terms attached as
SCHEDULE 1.
2. The following definitions in Section 1.1 are amended or
added to read as follows:
"EXCLUDED SECURITIZATION TRANSACTION" means the accounts
receivable financing facility of the Company contemplated by the Trade
Receivables Purchase and Sale Agreement dated as of December 30, 1991
among Bio-Medical Applications Management Co., Inc., as seller, and
Ciesco, L.P., as investor, and Citicorp North America, Inc., as agent,
as amended and supplemented, and any Permitted Receivables Financing
entered into in replacement thereof, but only to the extent of
$204,000,000 in aggregate Attributed Principal Amount (any greater
amount being subject to the mandatory prepayment provisions of Section
3.3(b)(iii) hereof).
"SECURITIZATION SUBSIDIARY" means a special purpose subsidiary
or affiliate established in connection with a Permitted Receivables
Financing.
3. The lead-in language in Section 7.11(a) is amended to read
as follows:
"If a Domestic Subsidiary of NMC (and, if Holdings is a Guarantor, of
Holdings), other than a Securitization Subsidiary, which is a Material
Subsidiary is not a Credit Party hereunder, then the Company will
promptly notify the Paying Agent thereof and cause such Material
Subsidiary to become a Credit party hereunder by"
4. The reference in section 8.1(e) to "$200,000,000" is
increased and amended to read "$204,000,000".
40
<PAGE> 2
B. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits and Schedules) remain in full force and effect.
C. The Company agrees to pay all reasonable costs and expenses of the
Paying Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
D. This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and its
shall not be necessary in making proof of this Amendment to produce or account
for more than one such counterpart.
E. This Amendment, and the Credit Agreement as amended hereby, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New York.
[Remainder of Page Intentionally Left Blank]
41
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
BORROWERS: NATIONAL MEDICAL CARE, INC.,
a Delaware corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
FRESENIUS MEDICAL CARE AG
By /s/ Gerd Krick
------------------------------------------
Name: Gerd Krick
Title: Management Board Member
By /s/ Udo Werle
------------------------------------------
Name: Udo Werle
Title: Management Board Member
NMC DO BRASIL LTDA.,
a Brazil corporation
By /s/ Joao Pedrinelli
------------------------------------------
Name: Joao Pedrinelli
Title: General Manager
NATIONAL MEDICAL CARE OF SPAIN, S.A.,
a Spanish corporation
By /s/ Dwight Morgan
------------------------------------------
Name: Dwight Morgan
Title: Managing Director
NATIONAL MEDICAL CARE OF TAIWAN, INC.,
a Delaware corporation
By /s/ Dwight Morgan
------------------------------------------
Name: Dwight Morgan
Title: Managing Director
42
<PAGE> 4
NMC CENTRO MEDICO NACIONAL, LDA.,
a Portuguese corporation
By /s/ Dwight Morgan
------------------------------------------
Name: Dwight Morgan
Title: Managing Director
NMC DE ARGENTINA, S.A.,
an Argentine corporation
By /s/ Joao Pedrinelli
------------------------------------------
Name: Joao Pedrinelli
Title: General Manager
FRESENIUS USA, INC.,
a Massachusetts corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH,
a German corporation
<TABLE>
<S> <C>
By /s/ Gerd Krick By: /s/ Dietmar Blumenhagen
------------------------------------------ -----------------------------------
Name: Gerd Krick Name: Dietmar Blumenhagen
Title: Chief Executive Officer Title: Treasurer
</TABLE>
FRESENIUS MEDICAL CARE GROUPE FRANCE
(formerly known as Fresenius Groupe
France S.A.), a French corporation
By /s/ Udo Werle
------------------------------------------
Name: Udo Werle
Title: Board Member
FRESENIUS MEDICAL CARE HOLDING, S.p.A.,
an Italian corporation
By /s/ E. Gatti
------------------------------------------
Name: E. Gatti
Title: Board Member
43
<PAGE> 5
FRESENIUS MEDICAL CARE ESPANA S.A.,
a Spanish corporation
By /s/ E. Gatti
------------------------------------------
Name: E. Gatti
Title: Board Member
FRESENIUS MEDICAL CARE MAGYAROSZA KfG,
a Hungarian corporation
By /s/ N. Erhard
------------------------------------------
Name: N. Erhard
Title: Board Member
PAYING AGENT: NATIONSBANK, N.A.,
as Paying Agent for and on behalf of the
Lenders
By /s/ Ashley M. Crabtree
------------------------------------------
Ashley M. Crabtree
Senior Vice President
GUARANTORS: FRESENIUS NATIONAL MEDICAL CARE
HOLDINGS, INC., a New York corporation
formerly known as WRG-NY
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
NATIONAL MEDICAL CARE, INC.,
a Delaware corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
BIO-MEDICAL APPLICATIONS MANAGEMENT CO.,
INC., a Delaware corporation
By /s/ Geoffrey W. Swett
------------------------------------------
Name: Geoffrey W. Swett
Title: President
44
<PAGE> 6
NMC HOMECARE, INC.,
a Delaware corporation
By /s/ Michael J. Sicilian
------------------------------------------
Name: Michael J. Sicilian
Title: Vice President
LIFECHEM, INC.,
a Delaware corporation
By /s/ Geoffrey W. Swett
------------------------------------------
Name: Geoffrey W. Swett
Title: President
FRESENIUS MEDICAL CARE AG,
a German corporation
<TABLE>
<S> <C>
By /s/ Gerd Krick By: /s/ Dietmar Blumenhagen
------------------------------------------ ------------------------------------
Name: Gerd Krick Name: Dietmar Blumenhagen
Title: Chief Executive Officer Title: Treasurer
</TABLE>
FRESENIUS USA, INC.,
a Massachusetts corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
FRESENIUS MEDICAL CARE DEUTSCHLAND
GmbH, a German corporation
<TABLE>
<S> <C>
By /s/ Gerd Krick By: /s/ Dietmar Blumenhagen
------------------------------------------ ------------------------------------
Name: Gerd Krick Name: Dietmar Blumenhagen
Title: Chief Executive Officer Title: Treasurer
</TABLE>
FRESENIUS MEDICAL CARE GROUPE
FRANCE, a French corporation
(formerly known as Fresenius Groupe
France S.A.)
By /s/ Udo Werle
------------------------------------------
Name: Udo Werle
Title: Board Member
45
<PAGE> 7
FRESENIUS SECURITIES, INC.,
a California corporation
By /s/ Ben Lipps
------------------------------------------
Name: Ben Lipps
Title: President
46
<PAGE> 8
CONSENT TO AMENDMENT NO. 4
NationsBank, N.A., as Paying Agent
101 N. Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Carol Lindsay, Agency Services
Re: Credit Agreement dated as of September 27, 1996 (as amended
and modified, the "CREDIT AGREEMENT") among National Medical
Care, Inc., the other Borrowers, Guarantors and Lenders
identified therein and NationsBank, N.A., as Paying Agent.
Terms used but not otherwise defined shall have the meanings
provided in the Credit Agreement.
Amendment No. 4 dated August 26, 1997 (the "SUBJECT
AMENDMENT") relating to the Credit Agreement
Ladies and Gentlemen:
This should serve to confirm our receipt of, and consent to, the
Subject Amendment. We hereby authorize and direct you, as Paying Agent for the
Lenders, to enter into the Subject Amendment on our behalf in accordance with
the terms of the Credit Agreement upon your receipt of such consent and
direction from the Required Lenders, and agree that Company and the other Credit
Parties may rely on such authorization.
Sincerely,
-----------------------------
[Name of Lender]
By:
--------------------------
Name:
Title:
47
<PAGE> 9
SCHEDULE 1
Description of Securitization Transaction
48
<PAGE> 1
Exhibit 10.3
RECEIVABLES PURCHASE AGREEMENT
between
NATIONAL MEDICAL CARE, INC.
as Seller
and
NMC FUNDING CORPORATION
as Purchaser
Dated as of August 28, 1997
<PAGE> 2
TABLE OF CONTENTS
PRELIMINARY STATEMENTS -1-
ARTICLE I DEFINITIONS -1-
SECTION 1.1. Certain Defined Terms -1-
SECTION 1.2. Other Terms -13-
SECTION 1.3. Computation of Time Periods -13-
ARTICLE II PURCHASE AND SETTLEMENTS -13-
2.1. Purchases of Receivables; Agreement to Purchase -13-
2.2. Payment for the Purchases -15-
2.3. Purchase Price Credit Adjustments -16-
2.4. Payments and Computations, Etc. -17-
2.5. Transfer of Records to Purchaser -17-
SECTION 2.6. Protection of Ownership Interest of the
Purchaser -18-
ARTICLE III REPRESENTATIONS AND WARRANTIES -20-
SECTION 3.1. Representations and Warranties of the Seller -20-
SECTION 3.2. Reaffirmation of Representations and
Warranties by the Seller -24-
ARTICLE IV CONDITIONS PRECEDENT -25-
4.1. Conditions Precedent to Closing. -25-
4.2. Conditions Precedent to Ongoing Purchases. -25-
ARTICLE V COVENANTS -26-
SECTION 5.1. Affirmative Covenants of Seller -26-
SECTION 5.2. Negative Covenants of the Seller -32-
SECTION 5.3. Financial Covenants -35-
ARTICLE VI ADMINISTRATION AND COLLECTION -35-
SECTION 6.1. Collection of Receivables -35-
SECTION 6.2. Right After Designation of New Collection Agent -35-
SECTION 6.4. Responsibilities of the Seller -36-
ARTICLE VII SELLER DEFAULTS -37-
SECTION 7.1. Seller Defaults -37-
SECTION 7.2. Remedies -39-
ARTICLE VIII INDEMNIFICATION; EXPENSES -40-
SECTION 8.1. Indemnities by the Seller -40-
<PAGE> 3
SECTION 8.2. Other Costs and Expenses -43-
ARTICLE IX MISCELLANEOUS -44-
SECTION 9.1. Term of Agreement -44-
SECTION 9.2. Waivers; Amendments -44-
SECTION 9.3. Notices -44-
SECTION 9.4. Governing Law; Submission to Jurisdiction;
Integration -45-
SECTION 9.5. Severability; Counterparts -46-
SECTION 9.6. Successors and Assigns -46-
SECTION 9.7. Waiver of Confidentiality -47-
SECTION 9.8. Confidentiality Agreement -47-
SECTION 9.9. Bankruptcy Petitions -47-
SECTION 9.10. Purchase Termination -48-
SECTION 9.11. Subordination -48-
<PAGE> 4
EXHIBITS
EXHIBIT A Forms of Contracts
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Special Account Banks and Designated
Account Agents
EXHIBIT D Form of Special Account Letter
EXHIBIT E Form of Subordinated Note
EXHIBIT F List of Actions and Suits
EXHIBIT G Location of Records
EXHIBIT H List of Seller's Subsidiaries, Divisions and
Tradenames
EXHIBIT I Form of Transferring Affiliate Letter
EXHIBIT J List of Transferring Affiliates, Chief
Executive Offices of Transferring Affiliates and
Tradenames
EXHIBIT K Form of Account Agent Agreement
<PAGE> 5
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT (this "AGREEMENT") dated as of
August 28, 1997, is entered into by and between NATIONAL MEDICAL CARE, INC., a
Delaware corporation, as seller (the "SELLER"), and NMC FUNDING CORPORATION, a
Delaware corporation, as purchaser (the "PURCHASER").
PRELIMINARY STATEMENTS
WHEREAS, on the terms and conditions hereinafter set forth, the Seller
desires to sell, and the Purchaser has agreed to purchase, all of the Seller's
right, title and interest in and to the Receivables now and hereafter arising;
WHEREAS, the Seller and the Purchaser believe that it is in their
mutual interest for the Seller to sell such Receivables to the Purchaser and for
the Purchaser to purchase such Receivables;
WHEREAS, the Seller and the Purchaser intend each sale of Receivables
hereunder to be a true sale of such Receivables from the Seller to the Purchaser
providing the Purchaser with the full benefits of ownership of such Receivables,
and the Seller and the Purchaser do not intend any such transaction hereunder to
be, or for any purpose to be characterized as, a loan from the Purchaser to the
Seller; and
WHEREAS, the Purchaser has entered into the TAA, pursuant to which the
Purchaser may from time to time convey, transfer and assign undivided percentage
interests in the Receivables purchased from the Seller hereunder;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
<PAGE> 6
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ACCOUNT AGENT AGREEMENT" means an agreement in substantially the form
of Exhibit K hereto.
"ADVERSE CLAIM" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person (including any UCC financing statement
or any similar instrument filed against such Person's assets or properties).
"AFFECTED ASSETS" means, collectively, the Receivables and the Related
Security, Collections and Proceeds relating thereto.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of voting stock, by contract or otherwise.
"AGENT" means NationsBank, N.A., in its capacity as agent for the
Company and the Bank Investors under the TAA, and any successor thereto
appointed pursuant to Article IX of the TAA.
"AGGREGATE UNPAIDS" has the meaning specified in the TAA.
"AGREEMENT" has the meaning specified in the Preamble hereto.
"BANK INVESTORS" shall mean NationsBank, N.A. and each other financial
institution identified as such on the signature pages of the TAA and their
respective successors and assigns.
"BANK REVOLVER" means that certain Credit Agreement dated as of
September 27, 1996, among the Seller
<PAGE> 7
and certain subsidiaries and affiliates as borrowers, certain subsidiaries and
affiliates as guarantors, the lenders named therein, NationsBank, N.A., as
paying agent, and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner
Bank AG, New York and Grand Cayman Branches, and NationsBank, N.A. as managing
agents.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
ss.101 et seq., as amended.
"BASE RATE" has the meaning specified in the TAA.
"BENEFIT PLAN" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Seller or any ERISA Affiliate of
the Seller is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"BMA" means Bio-Medical Applications Management Company, Inc., a
Delaware corporation, and its successors and permitted assigns.
"BMA TRANSFER AGREEMENT" means that certain Receivables Purchase
Agreement of even date herewith by and between BMA, as seller, and NMC, as
purchaser, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day on
which banks in New York, New York or Charlotte, North Carolina are authorized or
required by law to close.
"CAPITALIZED LEASE" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"CHAMPUS/VA" means, collectively, (i) the Civilian Health and Medical
Program of the Uniformed Service, a program of medical benefits covering
retirees and dependents of a member or a former member of a uniformed service,
provided, financed and supervised by the United States Department of Defense and
established by 10 USC ss.1071 ET SEQ. and (ii) the Civilian Health and Medical
Program of
<PAGE> 8
Veterans Affairs, a program of medical benefits covering dependents of veterans,
administered by the United States Veterans' Administration and Department of
Defense and established by 38 USC ss.1713 ET SEQ.
"CHAMPUS/VA REGULATIONS" means collectively, all regulations of the
Civilian Health and Medical Program of the Uniformed Services and the Civilian
Health and Medical Program of Veterans Affairs, including (a) all federal
statutes (whether set forth in 10 USC 1071, 38 USC 1713 or elsewhere) affecting
CHAMPUS/VA; and (b) all applicable provisions of all rules, regulations
(including 32 CFR 199 and 38 CFR 17.54), manuals, orders, and administrative,
reimbursement and other guidelines of all Governmental Authorities (including,
without limitation, HHS, the Department of Defense, the Veterans'
Administration, the Department of Transportation, the Assistant Secretary of
Defense (Health Affairs), and the Office of CHAMPUS, or any Person or entity
succeeding to the functions of any of the foregoing) promulgated pursuant to or
in connection with any of the foregoing (whether or not having the force of
law), in each case as may be amended, supplemented or otherwise modified from
time to time.
"CLOSING DATE" means August 28, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION ACCOUNT" has the meaning specified in the TAA.
"COLLECTION AGENT" means at any time the Person then authorized
pursuant to Section 6.1 of the TAA to service, administer and collect
Receivables.
"COLLECTION DATE" means the date on which the TAA shall be terminated
in accordance with its terms and all of the Aggregate Unpaids thereunder paid in
full.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, and cash proceeds of Related Security
with respect to such Receivable.
<PAGE> 9
"COMMERCIAL OBLIGOR" means any Obligor referred to in clause (C) or
(E) of the definition of "Obligor".
"COMMERCIAL PAPER" means the promissory notes issued by the Company in
the commercial paper market.
"COMPANY" means Enterprise Funding Corporation, and its successors and
assigns.
"CONCENTRATION ACCOUNT" has the meaning specified in the TAA.
"CONCENTRATION ACCOUNT AGREEMENT" has the meaning specified in the
TAA.
"CONCENTRATION ACCOUNT BANK" has the meaning specified in the TAA.
"CONCENTRATION ACCOUNT NOTICE" has the meaning specified in the TAA.
"CONFIDENTIAL INFORMATION" has the meaning specified in
Section 5.1(d).
"CONTRACT" means an agreement between an Originating Entity and an
Obligor which (i) if in writing, is in substantially the form of one of the
forms of written contract set forth in Exhibit A hereto or otherwise approved by
the Purchaser, and (ii) if an open account agreement, is evidenced by one of the
forms of invoices set forth in Exhibit A hereto or otherwise approved by the
Purchaser, in each case pursuant to or under which such Obligor shall be
obligated to pay for services or merchandise from time to time.
"CONTRACTUAL ADJUSTMENT" means, with respect to any Receivable, an
amount by which the Outstanding Balance of such Receivable is reduced as a
result of (i) Medicare or Medicaid program funding and fee requirements or (ii)
any other reasonable and customary insurance company or other charge or
reimbursement policies or procedures.
"CREDIT AND COLLECTION POLICY" shall mean the Seller's credit and
collection policy or policies and
<PAGE> 10
practices, relating to Contracts and Receivables existing on the date hereof and
referred to in Exhibit B attached hereto, as modified from time to time in
compliance with Section 5.2(c).
"CREDIT SUPPORT PROVIDER" means the Person or Persons who provides
credit support to the Company in connection with the issuance by the Company of
Commercial Paper.
"DESIGNATED ACCOUNT AGENT" means, in the case of any Originating
Entity, an Affiliate thereof that (i) is, directly or indirectly, a wholly-owned
Subsidiary of FMCH, (ii) has agreed to maintain a deposit account for the
benefit of such Originating Entity to which Obligors in respect of such
Originating Entity have been directed to remit payments on Receivables, and
(iii) shall have executed and delivered to the Purchaser an Account Agent
Agreement.
"ELIGIBLE RECEIVABLE" has the meaning set forth in the TAA, except
that, for purposes of this Agreement (a) the criteria listed in clause (ii) of
the definition of Eligible Receivable in the TAA shall not be applicable and (b)
references in clauses (iii), (iv) and (v) of such definition in the TAA to "the
time of the initial creation of an interest therein hereunder" shall instead be
deemed to mean and refer to "the time such Receivable was sold or transferred by
the Seller to the Purchaser hereunder."
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" means, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code (as in effect from time to
time, the "Code")) as such Person; (ii) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with such Person; or (iii) a member of the same affiliated service group
(within the meaning of Section 414(n) of the Code) as such Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above.
<PAGE> 11
"EVENT OF BANKRUPTCY" means, with respect to any Person, (i) that such
Person (a) shall generally not pay its debts as such debts become due or (b)
shall admit in writing its inability to pay its debts generally or (c) shall
make a general assignment for the benefit of creditors; (ii) any proceeding
shall be instituted by or against such Person seeking to adjudicate it as
bankruptcy or insolvent, or seeking liquidation, winding up, reorganization,
arrangements, 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 any substantial part of
its property or (iii) if such Person is a corporation (or other business
entity), such Person or any Subsidiary shall take any corporate (or analogous)
action to authorize any of the actions set forth in the preceding clauses (i) or
(ii).
"FINANCE CHARGES" means, with respect to a Contract, any finance,
interest, late or similar charges owing by an Obligor pursuant to such Contract.
"FMC" means Fresenius Medical Care AG, a corporation organized and
existing under the laws of the Federal Republic of Germany.
"FMCH" means Fresenius National Medical Care Holdings, Inc., a New
York corporation, and its successors and permitted assigns.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
accounting profession, which are in effect as of the date of this Agreement.
"GUARANTY" means, with respect to any Person any agreement by which
such Person assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes liable upon, the
obligation of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of
<PAGE> 12
any other Person or otherwise assures any other creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract and shall include, without limitation, the
contingent liability of such Person in connection with any application for a
letter of credit.
"HCFA" means the Health Care Financing Administration, an agency of
the HHS charged with administering and regulating, among other things, certain
aspects of Medicaid and Medicare.
"HHS" means the Department of Health and Human Services, an agency of
the Federal Government of the United States.
"HOSPITAL OBLIGOR" means any Obligor referred to in clause (D) of the
definition of "Obligor" contained in this Section 1.1 hereof.
"INDEBTEDNESS" means, with respect to any Person and without
duplication, such Person's (i) obligations for borrowed money, (ii) obligations
representing the deferred purchase price of property other than accounts payable
arising in the ordinary course of such Person's business on terms customary in
the trade, (iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease obligations and (vi)
obligations for which such Person is obligated pursuant to a Guaranty.
"INDEMNIFIED AMOUNTS" has the meaning specified in Section 8.1 hereof.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1 hereof.
"INVESTOR REPORT" has the meaning specified in the TAA.
"LAW" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance,
<PAGE> 13
order, injunction, writ, decree or award of any Official Body.
"LIQUIDITY PROVIDER" means the Person or Persons who will provide
liquidity support to the Company in connection with the issuance by the Company
of Commercial Paper.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on any of
(i) the collectibility or enforceability of a material portion of the
Receivables or Related Security, (ii) the ability of the Seller or any other
Originating Entity to charge or collect a material portion of the Receivables or
Related Security, (iii) the ability of (A) the Seller or any other Originating
Entity to perform or observe in any material respect any provision of this
Agreement or any other Transaction Document to which it is a party or (B) of FMC
or FMCH to cause the due and punctual performance and observation by the Seller
of any such provision or, if the Seller shall fail to do so, to perform or
observe any such provision required to be performed or observed by the Seller
under this Agreement or any other Transaction Document to which the Seller is
party, in each case pursuant to the Parent Agreement, (iv) the ability of (A)
any Transferring Affiliate to perform or observe in any material respect any
provision of the Transferring Affiliate Letter or, in the case of BMA, the BMA
Transfer Agreement, or, in the case of any Designated Account Agent, the
applicable Account Agent Agreement or (B) of FMC or FMCH to cause the due and
punctual performance and observation by such Transferring Affiliate, BMA or such
Designated Account Agent of any such provision or, if such Transferring
Affiliate, BMA or such Designated Account Agent shall fail to do so, to perform
or observe any such provision, in each case, pursuant to the Parent Agreement,
(v) the financial condition, operations, businesses or properties of FMC, FMCH,
the Seller or the Transferor or (vi) the interests of the Purchaser and/or its
assignees under the Transaction Documents.
"MEDICAID" means the medical assistance program established by Title
XIX of the Social Security Act (42 USC ss.ss.1396 ET SEQ.) and any statutes
succeeding thereto.
<PAGE> 14
"MEDICAID REGULATIONS" means, collectively, (a) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting Medicaid; (b) all state statutes and plans for medical assistance
enacted in connection with such statutes and federal rules and regulations
promulgated pursuant to or in connection with such statutes; and (c) all
applicable provisions of all rules, regulations manuals, orders and
administrative, reimbursement and other guidelines of all Governmental
Authorities (including, without limitation, HHS, HCFA, the office of the
Inspector General for HHS, or any Person succeeding to the functions of any of
the foregoing) promulgated pursuant to or in connection with any of the
foregoing (whether or not having the force of law), in each case as may be
amended, supplemented or otherwise modified from time to time.
"MEDICARE" means the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 USC
ss.ss.1395 et seq.) and any statutes succeeding thereto.
"MEDICARE REGULATIONS" means, collectively, (a) all federal statutes
(whether set forth in Title XVIII of the Social Security Act or elsewhere)
affecting Medicare; and (b) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Authorities (including, without limitation, HHS, HCFA, the Office
of the Inspector General for HHS, or any Person succeeding to the functions of
any of the foregoing) promulgated pursuant to or in connection with the
foregoing (whether or not having the force of law), as each may be amended,
supplemented or otherwise modified from time to time.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by the Seller or any
ERISA Affiliate of the Seller on behalf of its employees.
"NET INVESTMENT" has the meaning specified in the TAA.
<PAGE> 15
"OBLIGOR" of any Receivable means (i) any Person obligated to make
payments of such Receivable pursuant to a Contract and/or (ii) any Person owing
any amount in respect of such Receivable, or in respect of any Related Security
with respect to such Receivable, all such Persons referred to in any of clauses
(A), (B), (E), (F) and (G) below, and each Person referred to in any of clauses
(C) and (D) below, to be deemed for purposes of this Agreement to be one
Obligor:
(A): all Persons owing Receivables or Related Security under the
Medicare program.
(B): all Persons owing Receivables or Related Security under the
Medicaid program.
(C): each Person which is an insurance company.
(D): each Person which is a hospital or other health care
provider.
(E): all Persons, other than health care providers or Persons
referred to in clause (A), (B), (C) or (D) above or clause (F) or (G)
below, owing Receivables arising from the sale by NMC Medical
Products, Inc. of services or merchandise.
(F): all Persons owing Receivables or Related Security under the
CHAMPUS/VA Program.
(G): all Persons who receive the services or merchandise the sale
of which results in Receivables that are not insured, guaranteed or
otherwise supported in respect thereof by any of the Persons referred
to in clauses (A) through (F) above, including any Person owing any
amount in respect of Receivables by reason of insurance policy
deductibles or co-insurance agreements or arrangements.
"OFFICIAL BODY" means any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of any such
<PAGE> 16
government or political subdivision, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"ORIGINATING ENTITY" means any of the Seller and any Transferring
Affiliate.
"OTHER TRANSFEROR" means any Person other than the Purchaser that has
entered into a receivables purchase agreement or transfer and administration
agreement with the Company.
"OUTSTANDING BALANCE" means, with respect to any Receivable at any
time, the then outstanding principal amount thereof excluding any accrued and
outstanding Finance Charges related thereto.
"PARENT AGREEMENT" has the meaning specified in the TAA.
"PARENT GROUP" means, collectively, FMC, FMCH, the Seller, the
Originating Entities and their Subsidiaries and Affiliates (other than the
Purchaser), and "PARENT GROUP MEMBER" means any such Person individually.
"PERSON" means any corporation, limited liability company, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
enterprise, government or any department or agency or any government.
"POTENTIAL SELLER DEFAULT" means an event which but for the lapse of
time or the giving of notice, or both, would constitute a Seller Default.
"PRIMARY PAYOR" means (i) each Obligor referred to in clauses (A),
(B), (E), (F) and (G) of the definition of "Obligor", (ii) collectively, all
Obligors of the type referred to in clause (C) of the definition of "Obligor"
and (iii) collectively, all Obligors of the type referred to in clause (D) of
the definition of "Obligor".
"PROCEEDS" means "proceeds" as defined in Section 9-306 (1) of the
UCC.
<PAGE> 17
"PURCHASE" means, on any Business Day, the sale, assignment,
contribution, transfer and/or other conveyance of Receivables, together with the
Related Assets with respect thereto, from the Seller to the Purchaser in
accordance with the terms of ARTICLE II hereof.
"PURCHASE PRICE" means, with respect to any Purchase on any date, the
aggregate price to be paid to the Seller in connection therewith, which shall be
an amount equal to (i) the Outstanding Balance of the Receivables that are the
subject of such Purchase, MINUS any Contractual Adjustments in respect of such
Receivables, MULTIPLIED by (ii) the Purchase Price Percentage then in effect.
"PURCHASE PRICE CREDIT" means a credit in favor of the Purchaser
against the Purchase Price otherwise due and payable by the Purchaser hereunder.
"PURCHASE PRICE PERCENTAGE" means 97%, or such other percentage as may
be agreed from time to time by the Purchaser and the Seller and which would
provide the Purchaser with a reasonable return on its Purchases hereunder after
taking into account (i) the time value of money based upon the anticipated dates
of collection of such Receivables and the cost to the Purchaser of financing its
investment in such Receivables during such period and (ii) the risk of
nonpayment by the Obligors. The Seller and the Purchaser may agree from time to
time to change the Purchase Price Percentage based on changes in the items
described in clauses (i) and (ii) above, PROVIDED that any change to the
Purchase Price Percentage shall apply only prospectively and shall not affect
the Purchase Price in respect of Purchases made prior to the date on which the
Purchaser and the Seller agree to make such change.
"PURCHASER" means NMC Funding Corporation, and its successors and
permitted assigns.
"RECEIVABLE" means the indebtedness of any Obligor owed (at the time
it arises, and before giving effect to any transfer or conveyance contemplated
in the Transferring Affiliate Letter, the BMA Transfer Agreement or hereunder)
to the Seller or any Transferring Affiliate under a Contract, whether
constituting an account, chattel paper, instrument, insurance claim, investment
property or general intangible, arising in connection with the sale or lease of
merchandise or the rendering of services by an Originating
<PAGE> 18
Entity, and includes the right to payment of any Finance Charges and other
obligations of such Obligor with respect thereto.
"RECORDS" means all Contracts and other documents, books, records and
other information (including, without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to receivables and the related Obligors.
"RELATED ASSETS" has the meaning specified in Section 2.1(a) hereof.
"RELATED SECURITY" means with respect to any Receivable, all of the
Seller's rights, title and interest in, to and under:
(i) all of the Seller's or any Transferring Affiliate's interest,
if any, in the merchandise (including returned or repossessed merchandise),
if any, the sale of which gave rise to such Receivable;
(ii) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements signed by an Obligor
describing any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or arrangements
of any kind from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise, including, without limitation, insurance, guaranties and other
agreements or arrangements under the Medicare program, the Medicaid
program, state renal programs, CHAMPUS/VA, private insurance policies, and
hospital and other health care programs and health care provider
arrangements;
(iv) all Records related to such Receivable;
<PAGE> 19
(v) all rights and remedies of the Seller (A) under the
Transferring Affiliate Letter, together with all financing statements filed
in connection therewith against the Transferring Affiliates and (B) under
the BMA Transfer Agreement, together with all financing statements filed in
connection therewith against BMA; and
(vi) all Proceeds of any of the foregoing.
"RESPONSIBLE OFFICER" means any of the Chief Executive Officer, the
President, the Chief Financial Officer, the Controller, the Treasurer or an
Assistant Treasurer of the Seller.
"REVOLVING LOAN" has the meaning specified in Section 2.2(c).
"SELLER" means National Medical Care, Inc., a Delaware corporation,
and its successors and permitted assigns.
"SELLER DEFAULT" has the meaning specified in Section 7.1.
"SETTLEMENT DATE" means (i) the last Business Day of each calendar
month with respect to the immediately preceding calendar month and (ii) any
additional day designated by the Purchaser.
"SOCIAL SECURITY ACT" means the Social Security Act, as amended from
time to time, and the regulations promulgated and rulings and advisory opinions
issued thereunder.
"SPECIAL ACCOUNT" means a special depositary account maintained at a
bank acceptable to the Agent for the purpose of receiving Collections, which
account is in the name of either (i) the Originating Entity in respect of the
Receivables giving rise to such Collections or (ii) a Designated Account Agent
acting on behalf of such Originating Entity.
"SPECIAL ACCOUNT BANK" means any of the banks holding one or more
Special Accounts.
<PAGE> 20
"SPECIAL ACCOUNT LETTER" means a letter, in substantially the form of
Exhibit D hereto, from an Originating Entity (or, if applicable, a Designated
Account Agent) to any Special Account Bank, executed by such Originating Entity
(or such Designated Account Agent) to such Special Account Bank.
"STANDARD & POOR'S" or "S&P" means Standard & Poor's Ratings Services,
a division of McGraw-Hill Companies, Inc.
"SUBORDINATED NOTE" has the meaning specified in SECTION 2.2(d)
hereof.
"SUBSIDIARY" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"TAA" means that certain Transfer and Administration Agreement of even
date herewith among the Purchaser, as "Transferor", the Seller, as the initial
"Collection Agent" thereunder, the Company, the Bank Investors and the Agent, as
the same may from time to time be amended, restated, supplemented or otherwise
modified.
"TERMINATION DATE" means the date, occurring after the "Termination
Date" under the TAA, which the parties hereto agree shall be the Termination
Date for purposes of this Agreement.
"TRANSACTION DOCUMENTS" has the meaning specified in the TAA.
"TRANSFERRING AFFILIATE" means a company specified on Exhibit J, as
such Exhibit may be amended from time to time as provided in Section 2.7;
PROVIDED, HOWEVER, that no such company shall be a Transferring Affiliate from
and after the occurrence of any Event of Bankruptcy by or with respect thereto
unless any Receivables that arose from sales by such company exist on such date,
in which case such company shall continue to be a Transferring Affiliate until
<PAGE> 21
the respective Outstanding Balances of all such Receivables shall have been
reduced to zero; and provided further that, solely with respect to the
Receivables and Related Security transferred by it to the Seller pursuant to the
BMA Transfer Agreement, BMA shall constitute a "Transferring Affiliate"
hereunder.
"TRANSFERRING AFFILIATE LETTER" means, collectively, the respective
letters, in each case in substantially the form of Exhibit I hereto, from the
Transferring Affiliates (other than BMA) to the Agent, the Purchaser and the
Seller, as the same may be amended, restated, supplemented or otherwise modified
from time to time with the consent of the Purchaser and the Agent.
"UCC" means, with respect to any state, the Uniform Commercial Code as
from time to time in effect in such state.
"U.S." or "UNITED STATES" means the United States of America.
"US GOVERNMENT OBLIGOR" means any Obligor that is the government of
the United States, or any subdivision or agency thereof the obligations of which
are supported by the full faith and credit of the United States, and shall
include any Obligor referred to in clause (A), (B) or (F) of the definition of
"Obligor".
"VOTING STOCK" means, with respect to any Person, capital stock issued
by such 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 though the right so to vote
has been suspended by the happening of such a contingency.
SECTION 1.2. OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the
<PAGE> 22
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including", the words "to" and "until" each
means "to but excluding", and the word "within" means "from and excluding a
specified date and to and including a later specified date".
ARTICLE II
PURCHASE AND SETTLEMENTS
SECTION 2.1. PURCHASES OF RECEIVABLES; AGREEMENT TO PURCHASE.
(a) Subject to the terms and conditions hereinafter set forth, the Purchaser
hereby purchases from the Seller, and the Seller hereby sells, transfers,
assigns and otherwise conveys to the Purchaser, all of the Seller's right, title
and interest in and to each and every Receivable existing as of the Closing Date
as well as each and every Receivable which may arise at any time thereafter
until the Termination Date, together, in each case, with the Related Security,
Collections and Proceeds with respect thereto (such Related Security,
Collections and Proceeds, collectively, the "RELATED ASSETS"). All of the
Seller's right, title and interest in and to all Receivables and the Related
Assets with respect thereto arising on each day prior to the Termination Date
shall, without further action of any type being required on the part of the
Purchaser or the Seller (and notwithstanding any delay in making payment of the
Purchase Price therefor, or any delay in making any notation reflecting payment
of such Purchase Price), be automatically transferred on such day to the
Purchaser, whereupon the Purchaser shall have the obligation to pay the Purchase
Price in respect thereof in the manner, at the time and otherwise in accordance
with the terms specified in this Agreement. Prior to paying the Purchase Price
hereunder in respect of any Purchase, the Purchaser may request of the Seller,
and the Seller shall deliver, such approvals, opinions, information, reports or
documents as the Purchaser may reasonably request.
(b) It is the intention of the parties hereto that
each Purchase of Receivables made hereunder shall constitute a true sale of such
Receivables and the
<PAGE> 23
Related Assets with respect thereto (including, in the case of Receivables, a
"sale of accounts," as such term is used in Article 9 of the UCC), which sales
shall, in each case, be absolute and irrevocable and provide the Purchaser with
the full benefits of ownership of such Receivables and Related Assets. Except
for the Purchase Price Credits owed pursuant to Section 2.3 hereof, each sale of
Receivables by the Seller to the Purchaser is made without recourse to the
Seller; PROVIDED, HOWEVER, that (i) the Seller shall be liable to the Purchaser
for all representations, warranties and covenants made by the Seller pursuant to
the terms of this Agreement or any other Transaction Document, and (ii) such
sale does not constitute and is not intended to result in an assumption by the
Purchaser of any obligation of the Seller, any Transferring Affiliate or any
other Person arising under or in connection with the Receivables, the Related
Assets and/or the related Contracts. In view of the intention of the parties
hereto that the Purchases of Receivables made hereunder shall constitute sales
of such Receivables rather than a loan secured by such Receivables, the Seller
agrees on or prior to the date hereof to mark its master data processing records
relating to the Receivables with a legend, acceptable to the Purchaser,
evidencing that the Purchaser has purchased such Receivables as provided in this
Agreement and to note in its financial statements that its Receivables have been
sold to the Purchaser.
(c) Notwithstanding any other provision of this
Agreement to the contrary, no Purchases shall be made hereunder from and after
the time of any Event of Bankruptcy with respect to the Seller or the Purchaser.
SECTION 2.2. PAYMENT FOR THE PURCHASES. (a) The Purchase Price
for the initial Purchase of Receivables hereunder shall be payable in full by
the Purchaser to the Seller, and shall be paid to the Seller in the following
manner on the date of such initial Purchase: (i) by the issuance of equity in
the manner contemplated in that certain Stockholder and Subscription Agreement
dated as of August 28, 1997 between the Seller and the Purchaser and having a
value of not less than the greater of (A) $5,000,000 or (B) three percent
(3.00%) of the Net Investment outstanding at such time under the TAA, after
giving effect to such sale under the TAA, (ii) by delivery of immediately
available funds, to the extent of funds made
<PAGE> 24
available to the Purchaser in connection with its subsequent sale of an interest
in such Receivables to the Agent (on behalf of the Company or the Bank
Investors, as applicable) under the TAA and (iii) the balance, with the proceeds
of a Revolving Loan. The Purchase Price for each Purchase after the initial
Purchase shall be payable in full by the Purchaser to the Seller or its designee
on the date of such Purchase, EXCEPT that the Purchaser may, with respect to any
such Purchase, offset against such Purchase Price any amounts owed by the Seller
to the Purchaser hereunder and which have become due but remain unpaid.
(b) If on any date the amount of cash available to
the Purchaser to pay for the Purchases of Receivables to be made on such date is
less the Purchase Price owing therefor, the Purchaser shall, with notice to the
Seller, pay such remaining part of the Purchase Price by borrowing from the
Seller a revolving loan (each a "REVOLVING LOAN"), and the Seller, subject to
the remaining provisions of this paragraph, irrevocably agrees to advance, and
shall be deemed to have advanced, a Revolving Loan in the amount so specified by
the Purchaser; PROVIDED, HOWEVER, that no such Revolving Loan shall be made to
the Purchaser, if, after giving effect thereto, either (i) the aggregate
outstanding amount of the Revolving Loans would exceed the aggregate Outstanding
Balance of the Eligible Receivables MINUS the aggregate Net Investment
outstanding at such time under the TAA or (ii) the Purchaser's net worth would
be less than the greater of (A) $5,000,000 or (B) three percent (3.00%) of the
aggregate Net Investment outstanding at such time under the TAA. The Revolving
Loans shall be evidenced by, and shall be payable in accordance with the terms
and provisions of, a promissory note in the form of Exhibit E hereto (the
"SUBORDINATED NOTE") and shall be payable solely from funds which the Purchaser
is not required under the TAA to set aside for the benefit of, or otherwise pay
over to, the Agent, the Company and/or the Bank Investors.
(c) In the case of any Purchase subsequent to the
initial Purchase, if the Purchaser has insufficient funds to pay in full the
applicable Purchase Price therefor (after taking into account the proceeds
received from any Transfers under the TAA and the proceeds of Revolving Loans
made hereunder), then the Seller shall be deemed to have contributed to the
capital of the Purchaser Receivables
<PAGE> 25
having a Purchase Price equal to the otherwise unpaid portion of the total
Purchase Price owed on such day.
(d) The respective Purchase Prices for the Purchases
made during any calendar month shall be settled on a monthly basis on the
Settlement Date occurring in the succeeding calendar month, such settlement to
be made based on the information contained in the Investor Report in respect of
such calendar month. With respect to any such settlement, each adjustment to the
outstanding balance of the Subordinated Note made pursuant to this Article II
and each capital contribution made by the Seller to the Purchaser pursuant to
this Article II shall be deemed to have occurred and shall be effective as of
the last Business Day of the calendar month to which such settlement relates.
Notwithstanding the foregoing, to the extent the Purchaser receives either
Collections or proceeds from any Incremental Transfers, which, in either case,
it is not required to hold in trust for, or remit to, the Agent, the Company
and/or any of the Bank Investors pursuant to the TAA, then the Purchaser shall
remit such funds to the Seller (net of any funds needed to pay existing expenses
of the Purchaser which are then accrued and unpaid) in the following order of
application: FIRST to pay the Purchase Price for any Receivables Purchased from
the Seller; and SECOND to pay amounts owed by the Purchaser to the Seller under
the Subordinated Note; PROVIDED, that if on any Settlement Date it is determined
that the aggregate amount of funds so remitted by the Purchaser to the Seller
during any calendar month exceeded the aggregate of the amounts described in
clauses FIRST and SECOND above due and payable by the Purchaser to the Seller
during such calendar month, such excess funds shall be returned forthwith by the
Seller to the Purchaser.
SECTION 2.3. PURCHASE PRICE CREDIT ADJUSTMENTS. (a) If on any
day the Outstanding Balance of a Receivable is either (x) reduced as a result of
any defective, rejected or returned merchandise or services, any discount,
credit, Contractual Adjustment, rebate, dispute, warranty claim, repossessed or
returned goods, chargeback, allowance, any billing adjustment or other
adjustment, or (y) reduced or canceled as a result of a setoff or offset in
respect of any claim by any Person (whether such claim arises out of the same or
a related transaction or an unrelated transaction), the Purchaser shall be
entitled to a Purchase Price Credit
<PAGE> 26
in an amount equal to the full amount of such reduction or cancellation. In
addition, if on any day any representation or warranty contained in Article III
with respect to any Receivable is not true when made or deemed made, the
Purchaser shall be entitled to a Purchase Price Credit in an amount equal the
Outstanding Balance of such Receivable. If any Purchase Price Credit to which
the Purchaser is entitled pursuant to this SECTION 2.3 exceeds the Purchase
Price of the Receivables to be sold hereunder on any date, then the Seller shall
pay the remaining amount of such Purchase Price Credit to the Purchaser in cash
on the next succeeding Business Day; PROVIDED that, if the Termination Date has
not occurred, the Seller shall be allowed to deduct the remaining amount of such
Purchase Price Credit from any indebtedness owed to it under the Subordinated
Note.
(b) Any payment by an Obligor in respect of any
indebtedness owed by it to the Seller shall, except as otherwise specified by
such Obligor or otherwise required by contract or law and unless otherwise
instructed by the Purchaser, be applied as a Collection of any Receivable of
such Obligor which was included in a Purchase hereunder (starting with the
oldest such Receivable) before being applied to any other receivable or other
indebtedness of such Obligor.
SECTION 2.4. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be
paid or deposited by the Seller hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 a.m. (New York City time)
on the day when due in immediately available funds. The Seller shall, to the
extent permitted by law, pay to the Purchaser, upon demand, interest on all
amounts not paid or deposited when due hereunder at a rate equal to 2% per annum
plus the Base Rate. All computations of interest hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
but excluding the last day) elapsed. Any computations by the Purchaser of
amounts payable by the Seller hereunder shall be binding upon the Seller absent
manifest error.
SECTION 2.5. TRANSFER OF RECORDS TO PURCHASER. (a) In
connection with the Purchases of Receivables hereunder, the Seller hereby sells,
transfers, assigns and otherwise conveys to the Purchaser all of the Seller's
right
<PAGE> 27
and title to and interest in the Records relating to all Receivables included in
any Purchase hereunder, without the need for any further documentation in
connection with any such Purchase. In connection with such transfer, the Seller
hereby grants to each of the Purchaser and the Collection Agent (including,
without limitation, any successor Collection Agent appointed in accordance with
the TAA) an irrevocable, non-exclusive license to use, without royalty or
payment of any kind, all software now or hereafter used by the Seller to account
for the Receivables, to the extent necessary to administer the Receivables,
whether such software is owned by the Seller or is owned by others and used by
the Seller under license agreements with respect thereto (the "Software"). As of
the date hereof, with respect to all Software now existing, either (i) no
consent by any licensor of the Seller to such grant is required, (ii) if any
such consent is required, such consent has been obtained, or (iii) the data
administered and managed with the use of such Software is in a form such that
other types of software that are generally available may be used to administer
and manage such data in the same fashion as then being administered and managed
with the applicable Software. If after the date hereof the consent by any
licensor of the Seller to such grant shall be required, the Seller shall
promptly obtain such consent. The license granted hereby shall be irrevocable,
and shall not expire until the date on which this Agreement shall terminate in
accordance with its terms.
(b) The Seller shall take such action requested by
the Purchaser and/or the Agent, from time to time hereafter, that may be
reasonably necessary or appropriate to ensure that the Purchaser (and its
assignees) has (i) an enforceable ownership interest in the Records relating to
the Receivables purchased from the Seller hereunder and (ii) an enforceable
right (whether by license or sublicense or otherwise) to use all of the computer
software used to account for the Receivables and/or to recreate such Records.
SECTION 2.6. PROTECTION OF OWNERSHIP INTEREST OF THE
PURCHASER. (a) The Seller agrees that it will, and will cause each Transferring
Affiliate to, from time to time, at its expense, promptly execute and deliver
all instruments and documents and take all actions as may be
<PAGE> 28
necessary or as the Purchaser or the Agent may reasonably request in order to
perfect or protect the ownership interest of the Purchaser in the Receivables
and Related Assets with respect thereto or to enable the Purchaser to exercise
or enforce any of its rights and remedies hereunder. Without limiting the
foregoing, the Seller will, upon the request of the Purchaser or the Agent, in
order to accurately reflect this purchase and sale transaction, execute and file
such financing or continuation statements or amendments thereto or assignments
thereof as may be requested by the Purchaser or the Agent. The Seller shall,
upon request of the Purchaser or the Agent, obtain such additional search
reports as the Purchaser or the Agent shall request. To the fullest extent
permitted by applicable law, each of the Purchaser and the Agent shall be
permitted to sign and file continuation statements and amendments thereto and
assignments thereof without the Seller's signature. Carbon, photographic or
other reproduction of this Agreement or any financing statement shall be
sufficient as a financing statement. The Seller shall not, and shall not permit
any Transferring Affiliate to, change its respective name, identity or corporate
structure (within the meaning of Section 9-402(7) of the UCC as in effect in any
applicable state) nor relocate its respective chief executive office or any
office where Records are kept unless it shall have: (i) given each of the
Purchaser and the Agent at least thirty (30) days prior notice thereof and (ii)
prepared at Seller's expense and delivered to each of the Purchaser and the
Agent all financing statements, instruments and other documents necessary to
preserve and protect the Purchaser's ownership interest in the Receivables and
the Related Assets with respect thereto or requested by the Purchaser or the
Agent in connection with such change or relocation. Any filings under the UCC or
otherwise that are occasioned by such change in name or location shall be made
at the expense of the Seller.
(b) In addition and without limiting the authority of
the Purchaser or the Agent set forth in subsection (a) above, but subject to
subsection (c) below, the Seller shall, and shall cause each Transferring
Affiliate to, instruct any or all of the Special Account Banks (which
instructions shall be maintained in full force and effect) to transfer directly
to the Concentration
<PAGE> 29
Account all Collections from time to time on deposit in the applicable Special
Accounts on a daily basis in accordance with the terms set forth in the
applicable Special Account Letter. In the event the Seller shall at any time
determine, for any of the reasons described in subsection (c) below, that the
Seller or any Transferring Affiliate shall be unable to comply fully with the
requirements of this subsection (b), the Seller shall promptly so advise the
Purchaser and the Agent, and the Purchaser, the Agent and the Seller shall
commence discussions with a view toward implementing an alternative arrangement
therefor satisfactory to the Purchaser and the Agent.
(c) Anything to the contrary herein notwithstanding,
all Medicare or Medicaid payments which are made by an Obligor with respect to
any Receivables shall be collected from such Obligor only by (i) the applicable
Originating Entity or (ii) an agent of such Originating Entity, EXCEPT to the
extent that an Obligor may be required to submit any such payments directly to a
Person other than such Originating Entity pursuant to a court-ordered assignment
which is valid, binding and enforceable under applicable federal and state
Medicare Regulations and Medicaid Regulations; and neither this Agreement nor
any other Transaction Document shall be construed to permit any other Person, in
violation of applicable Medicare Regulations or Medicaid Regulations to collect
or receive, or to be entitled to collect or receive, any such payments prior to
such Originating Entity's or such agent's receipt thereof.
SECTION 2.7. ADDITIONAL TRANSFERRING AFFILIATES. (a) If (i)
one or more direct or indirect wholly-owned subsidiaries of the Seller (other
than the Transferring Affiliates) now owned or hereafter acquired, is primarily
engaged in the same business as is conducted on the date hereof by the Seller
and the Transferring Affiliates or (ii) the Seller reorganizes its corporate
structure such that facilities generating Receivables on the date hereof (or
acquired as contemplated by clause (i)) are owned by one or more additional
wholly-owned subsidiaries of the Seller, any or all of the wholly-owned
subsidiaries referred to in clauses (i) and (ii) may, following 30-days' prior
written notice by the Seller to the Purchaser and the Agent and with the prior
written consent of the Purchaser and the Agent
<PAGE> 30
(which consent shall not be unreasonably withheld or delayed), become
Transferring Affiliates under this Agreement upon delivery to the Purchaser and
the Agent of (x) counterparts of the Transferring Affiliate Letter duly executed
by such subsidiary or subsidiaries and (y) the documents relating to such
subsidiary or subsidiaries of the kind delivered by or on behalf of the
Transferring Affiliates (other than BMA) pursuant to Section 4.1, together with
such other instruments, documents and agreements as either the Purchaser or the
Agent may reasonably request in connection therewith.
(b) Upon the addition of any wholly-owned subsidiary
of the Seller as a Transferring Affiliate pursuant to subsection (a) above, the
provisions of this Agreement, including Exhibit J, shall, without further act or
documentation, be deemed amended to apply to such subsidiary to the same extent
as the same apply to the Transferring Affiliates as of the date hereof and the
term "Transferring Affiliate" in this Agreement shall mean and refer to such
subsidiary as well as each then existing Transferring Affiliate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller represents and warrants to the Purchaser that:
(a) CORPORATE EXISTENCE AND POWER. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all corporate power and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is now
conducted. The Seller is duly qualified to do business in, and is in good
standing in, every other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect.
<PAGE> 31
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance by the Seller of this
Agreement and the other Transaction Documents to which the Seller is a party are
within the Seller's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Official Body or official thereof (except as contemplated by Section 2.6
hereof), and do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation (including, without limitation, any
CHAMPUS/VA Regulation, any Medicaid Regulation or any Medicare Regulation) or of
the Certificate of Incorporation or By-laws of the Seller or of any agreement,
judgment, injunction, order, writ, decree or other instrument binding upon the
Seller or result in the creation or imposition of any Adverse Claim on the
assets of the Seller or any of its Subsidiaries (except as contemplated by
Section 2.6 hereof).
(c) BINDING EFFECT. Each of this Agreement and the
other Transaction Documents to which the Seller is a party constitutes the
legal, valid and binding obligation of the Seller, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally.
(d) PERFECTION. Immediately preceding each Purchase
hereunder, the Seller shall be the owner of all of the Receivables included in
such Purchase, free and clear of all Adverse Claims. On or prior to each
Purchase hereunder, all financing statements and other documents required to be
recorded or filed, or notices to Obligors required to be given, in order to
perfect and protect the ownership interest of the Purchaser against all
creditors of and purchasers from the Seller will have been duly given to such
Obligors or filed in each filing office necessary for such purpose, as
applicable, and all filing fees and taxes, if any, payable in connection with
such filings shall have been paid in full.
(e) ACCURACY OF INFORMATION. All information
heretofore furnished by the Seller (including, without limitation, each Investor
Report (to the extent such Investor Report is prepared by the Seller or any
other
<PAGE> 32
Parent Group Member or contains any information supplied by the Seller or
any such Parent Group Member), any reports delivered pursuant to Section 6.5 and
the Seller's financial statements) to the Purchaser, the Company, any Bank
Investor, the Agent or the Administrative Agent for purposes of or in connection
with this Agreement or any other Transaction Document or any transaction
contemplated hereby or thereby is, and all such information hereafter furnished
by the Seller to the Purchaser, the Company, any Bank Investor, the Agent or the
Administrative Agent will be, true and accurate in every material respect, on
the date such information is stated or certified.
(f) TAX STATUS. The Seller has filed all tax returns
(federal, state and local) required to be filed and has paid or made adequate
provision for the payment of all taxes, assessments and other governmental
charges.
(g) ACTION, SUITS. Except as set forth in Exhibit F
hereof, there are no actions, suits or proceedings pending, or to the knowledge
of the Seller threatened, in or before any court, arbitrator or other body,
against or affecting (i) the Seller or any of its properties or (ii) any
Affiliate of the Seller or its respective properties, which may, in the case of
proceedings against or affecting any such Affiliate, individually or in the
aggregate, have a Material Adverse Effect.
(h) USE OF PROCEEDS. No proceeds of any Purchase will
be used by the Seller to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) PLACE OF BUSINESS. The principal place of
business and chief executive office of the Seller are located at the address of
the Seller indicated in Section 9.3 hereof and the offices where the Seller
keeps substantially all its Records, are located at the address(es) described on
Exhibit G or such other locations notified to the Purchaser and the Agent in
accordance with Section 2.6 hereof in jurisdictions where all action required by
Section 2.6 hereof has been taken and completed. The principal place of business
and chief executive office of each Transferring Affiliate are located at the
address of such Transferring Affiliate indicated in Exhibit J hereof
<PAGE> 33
and the offices where the each Transferring Affiliate keeps substantially all
its Records, are located at the address(es) specified on Exhibit J with respect
to such Transferring Affiliate or such other locations notified to the Purchaser
and the Agent in accordance with Section 2.6 hereof in jurisdictions where all
action required by Section 2.6 hereof has been taken and completed.
(j) GOOD TITLE. Upon each Purchase, the Purchaser
shall acquire all legal and equitable title to, and a valid and perfected first
priority ownership interest in, each Receivable that exists on the date of such
Purchase and in the Related Security, Collections and other Proceeds with
respect thereto free and clear of any Adverse Claim.
(k) TRADENAMES, ETC. As of the date hereof: (i) the
Seller's chief executive office is located at the address for notices set forth
in Section 9.3 hereof; (ii) the Seller has no subsidiaries or divisions other
than those listed on Exhibit H hereto; (iii) the Seller has, within the last
five (5) years, not operated under any tradename, and, within the last five (5)
years, has not changed its name, merged with or into or consolidated with any
other corporation or been the subject of any proceeding under Title 11, United
States Code (Bankruptcy), except, in each case, as disclosed on Exhibit H
hereto; and (iv) none of the Transferring Affiliates has, within the last five
(5) years, operated under any tradename or, within the last five (5) years,
changed its name, merged with or into or consolidated with any other Person or
been the subject of any proceeding under Title 11, United States Code
(Bankruptcy), except in each case as disclosed on Exhibit J.
(l) NATURE OF RECEIVABLES. Each Receivable purchased
by, or otherwise transferred to, the Purchaser hereunder shall be an "eligible
asset" as defined in Rule 3a-7 under the Investment Company Act, of 1940, as
amended, and, except as otherwise disclosed in writing on or prior to the date
of such purchase or transfer, shall be an Eligible Receivable as of such date.
(m) AMOUNT OF RECEIVABLES. As of July 31, 1997, the
aggregate Outstanding Balance of the Receivables in existence and the Net
Receivable Balance (as defined in the TAA) were not less than the respective
amounts certified
<PAGE> 34
as such in (i) the Investor Report dated as of the date hereof and provided to
the Agent or (ii) the Investor Report delivered after the date hereof in
accordance with Section 4.2(a) of the TAA.
(n) CREDIT AND COLLECTION POLICY. Since July 10,
1997, there have been no material changes in the Credit and Collection Policy
other than as permitted hereunder. Since such date, no material adverse change
has occurred in the overall rate of collection of the Receivables.
(o) COLLECTIONS AND SERVICING. Since July 10, 1997,
there has been no material adverse change in the ability of the Collection Agent
(to the extent it is the Seller or any other Parent Group Member) to service and
collect the Receivables.
(p) NO SELLER DEFAULT. No event has occurred and is
continuing and no condition exists which constitutes a Seller Default or a
Potential Seller Default.
(q) NOT AN INVESTMENT COMPANY. The Seller is not, and
is not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all provisions of
such Act.
(r) ERISA. Each of the Seller and its ERISA
Affiliates is in compliance in all material respects with ERISA and no lien
exists in favor of the Pension Benefit Guaranty Corporation on any of the
Receivables.
(s) SPECIAL ACCOUNT BANKS. The names and addresses of
all the Special Account Banks (and, if applicable, the Designated Account Agents
in respect thereof), together with the account numbers of the Special Accounts
at such Special Account Banks, are specified in Exhibit C hereto (or at such
other Special Account Banks, with such other Special Accounts or with such other
Designated Account Agents as have been notified to the Purchaser and the Agent
in accordance with Section 5.2(e)). Neither the Seller nor any Transferring
Affiliate has granted to any Person dominion and control over any Special
Account, or the right to take dominion and control over any Special Account at a
future time or upon the occurrence of a
<PAGE> 35
future event and each Special Account is otherwise free and clear of any
Adverse Claim.
(t) BULK SALES. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(u) PREFERENCE; VOIDABILITY (THIS AGREEMENT). With
respect to each Receivable transferred to the Purchaser under this Agreement,
the Purchaser has given reasonably equivalent value to the Seller in
consideration for such transfer of such Receivable and the Related Assets with
respect thereto, no such transfer has been made for or on account of an
antecedent debt owed by the Seller to the Purchaser and no such transfer is or
may be voidable under any Section of the Bankruptcy Code.
(v) TRANSFERS BY TRANSFERRING AFFILIATES. With
respect to each Receivable, and Related Security, if any, with respect thereto,
originally owed to any Transferring Affiliate, the Seller (i) purchased such
Receivable and Related Security from such Transferring Affiliate under the
Transferring Affiliate Letter or from BMA under the BMA Transfer Agreement, such
purchase being deemed to have been made on the date such Receivable was created
(or on the Closing Date, in the case of a Receivable outstanding such date),
(ii) by the last Business Day of the month following the month in which such
purchase was so made, paid to the applicable Transferring Affiliate in cash or
by way of a credit to such Transferring Affiliate in the appropriate
intercompany account, an amount equal to the face amount of such Receivable and
(iii) settled from time to time each such credit, by way of payments in cash, or
by way of credits in amounts equal to cash expended, obligations incurred or the
value of services or property provided by or on behalf of the Seller, in each
case for the benefit of such Transferring Affiliate, to the account of such
Transferring Affiliate in accordance with the Seller's and such Transferring
Affiliate's cash management and accounting policies.
(w) PREFERENCE; VOIDABILITY (TRANSFERRING
AFFILIATES). The Seller shall have given reasonably equivalent value to each
Transferring Affiliate in consideration for the transfer to the Seller of the
<PAGE> 36
Receivables and Related Security from such Transferring Affiliate, and each such
transfer shall not have been made for or on account of an antecedent debt owed
by such Transferring Affiliate to the Seller and no such transfer is or may be
voidable under any Section of the Bankruptcy Code.
(x) OWNERSHIP. FMC owns, directly or indirectly, all
of the issued and outstanding common stock of (and such stock comprises more
than 80% of the Voting Stock of) FMCH, free and clear of any Adverse Claim
except to the extent such stock is pledged in connection with the Bank Revolver.
All of the issued and outstanding stock of each Originating Entity is owned
directly or indirectly by FMCH, free and clear of any Adverse Claim except to
the extent such stock is pledged in connection with the Bank Revolver. All of
the issued and outstanding stock of the Purchaser is owned by the Seller, free
and clear of any Adverse Claim.
(y) REPRESENTATIONS AND WARRANTIES OF THE
TRANSFERRING AFFILIATES. Each of the representations and warranties of the
Transferring Affiliates set forth in the Transferring Affiliate Letter and each
of the representations and warranties of BMA set forth in the BMA Transfer
Agreement are true and correct in all material respects and the Seller hereby
remakes all such representations and warranties for the benefit of the
Purchaser.
Any document, instrument, certificate or notice delivered to
the Purchaser (or any of its assignees) hereunder shall be deemed a
representation and warranty by the Seller.
SECTION 3.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES
BY THE SELLER. On each day that a Purchase is made hereunder, the Seller, by
accepting the proceeds of such Purchase, shall be deemed to have certified that
all representations and warranties described in Section 3.1 hereof are correct
on and as of such day as though made on and as of such day.
<PAGE> 37
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS PRECEDENT TO CLOSING. The
effectiveness of this Agreement is subject to the conditions precedent that (i)
the Purchaser shall have received copies of each of the documents, instruments,
certificates and opinions described in Section 4.1 of the TAA and (ii) each of
the conditions precedent to the execution, delivery and effectiveness of the TAA
shall have been satisfied and/or waived in accordance with the terms thereof.
SECTION 4.2. CONDITIONS PRECEDENT TO PURCHASES. The obligation
of the Purchaser to make a Purchase on any Business Day is subject to the
conditions precedent that:
(a) the Seller shall have delivered to the Purchaser, in form
and substance satisfactory to the Purchaser, all reports required to
have been delivered by it pursuant to Section 6.5, together with such
additional information as may be reasonably requested by the Purchaser;
and
(b) the representations and warranties set forth in Article
III shall be true and correct on and as of the date of such Purchase as
though made on and as of such date, both before and after giving effect
to such Purchase and the application of the proceeds therefrom.
By accepting the proceeds of any Purchase, the Seller shall be
deemed to have represented and warranted that the foregoing conditions precedent
are satisfied.
Notwithstanding any failure or inability of the Seller to
satisfy any of the foregoing conditions precedent on any date in respect of any
Purchase, title to the Receivables and the Related Assets with respect thereto
included in such Purchase shall vest in the Purchaser without any action
required on the part of the Purchaser (but without impairment of its obligation
to pay the Purchase Price in respect thereof in accordance with the terms of
this Agreement), and the Purchaser (as owner of such Receivables) shall have a
claim against the Seller
<PAGE> 38
arising in respect of the representations and warranties made by the Seller in
connection with such Purchase.
ARTICLE V
COVENANTS
SECTION 5.1. AFFIRMATIVE COVENANTS OF SELLER. At all times
from the date hereof to the Collection Date, unless each of the Purchaser and
the Agent shall otherwise consent in writing:
(a) FINANCIAL REPORTING. The Seller will, and will
cause each of the Transferring Affiliates to, maintain, for itself and each of
its respective Subsidiaries, a system of accounting established and administered
in accordance with GAAP, and furnish to each of the Purchaser and the Agent:
(i) ANNUAL REPORTING. As soon as available and in any
event within 105 days after the close of the fiscal year of the Seller,
a company-prepared consolidated balance sheet of the Seller and its
Subsidiaries as of the end of such fiscal year and the related
company-prepared consolidated statements of income and retained
earnings for such fiscal year.
(ii) QUARTERLY REPORTING. As soon as available and in
any event within 50 days after the end of each of the first three
fiscal quarters of the Seller, a company-prepared consolidated balance
sheet of the Seller and its Subsidiaries as of the end of such quarter
and the related company-prepared consolidated statements of income and
retained earnings for such quarterly period.
In the case of each of the financial statements
required to be delivered under clause (i) or (ii) above, such financial
statement shall set forth in comparative form the figures for the
corresponding period or periods of the preceding fiscal year or the
portion of the fiscal year ending with such period, as applicable (but
not for any period prior to the Closing
<PAGE> 39
Date), in each case subject to normal recurring year-end audit
adjustments. Each such financial statement shall be prepared in
accordance with GAAP consistently applied.
(iii) COMPLIANCE CERTIFICATE. Together with the
financial statements required hereunder, a compliance certificate
signed by a Responsible Officer stating that (x) the attached financial
statements have been prepared in accordance with GAAP and accurately
reflect the financial condition of the applicable Person and (y) to the
best of such Person's knowledge, no Seller Default or Potential Seller
Default exists, or if any Seller Default or Potential Seller Default
exists, stating the nature and status thereof.
(iv) NOTICE OF SELLER DEFAULT OR POTENTIAL SELLER
DEFAULT. As soon as possible and in any event within two (2) days (or
the next Business Day thereafter if such day is not a Business Day)
after the occurrence of each Seller Default or each Potential Seller
Default, a statement of a Responsible Officer setting forth details of
such Seller Default or Potential Seller Default and the action which
the Seller proposes to take with respect thereto.
(v) CHANGE IN CREDIT AND COLLECTION POLICY AND DEBT
RATINGS. Within ten (10) days after the date any material change in or
amendment to any provision of the Credit and Collection Policy is made,
a copy of the Credit and Collection Policy then in effect indicating
such change or amendment.
(vi) CREDIT AND COLLECTION POLICY. Within ninety (90)
days after the close of each of the Seller's fiscal years, a complete
copy of the Credit and Collection Policy then in effect.
(vii) ERISA. Promptly after the filing or receiving
thereof, copies of all reports and notices with respect to any
Reportable Event (as defined in Article IV of ERISA) which the Seller
or any ERISA Affiliate of the Seller files under ERISA with the
Internal Revenue Service, the Pension Benefit Guaranty
<PAGE> 40
Corporation or the U.S. Department of Labor or which the Seller or any
ERISA Affiliates of the Seller receives from the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor.
(viii) NOTICES UNDER TRANSACTION DOCUMENTS. Forthwith
upon its receipt thereof, a copy of each notice, report, financial
statement, certification, request for amendment, directive, consent,
waiver or other modification or any other writing issued under or in
connection with any other Transaction Document by any party thereto
(including, without limitation, by the Seller).
(ix) INVESTIGATIONS AND PROCEEDINGS. Unless
prohibited by either (i) the terms of the subpoena, request for
information or other document referred to below, (ii) law (including,
without limitation, rules and regulations) or (iii) restrictions
imposed by the U.S. federal or state government or any agency or
instrumentality thereof and subject to the Agent's execution of a
confidentiality agreement in form and substance satisfactory to both
the Seller and the Agent, as soon as possible and in any event (A)
within five Business Days after any Originating Entity receives any
subpoena, request for information, or any other document relating to
any possible violation by any Originating Entity of, or failure by any
Originating Entity to comply with, any rule, regulation or statute from
HHS or any other governmental agency or instrumentality, notice of such
receipt and, if requested by the Purchaser or the Agent, the
information contained in, or copies of, such subpoena, request or other
document, and (B) periodic updates and other management reports
relating to the subpoenas, requests for information and other documents
referred to in clause (A) above as may be reasonably requested by the
Purchaser or the Agent unless such updates or requests could reasonably
be deemed a contravention or waiver of any available claim of legal
privilege, or would otherwise materially impair available defenses, of
any Originating Entity.
<PAGE> 41
(x) OTHER INFORMATION. Such other information
(including non-financial information) as the Purchaser or the Agent may
from time to time reasonably request with respect to the Seller, any
party to the Parent Agreement, any Transferring Affiliate or any
Subsidiary of any of the foregoing.
(b) CONDUCT OF BUSINESS. The Seller (i) will carry on
and conduct its business in substantially the same manner and in substantially
the same fields of enterprise as it is presently conducted and do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted and (ii) will cause each other Originating Entity to do
each of the foregoing in respect of such Originating Entity.
(c) COMPLIANCE WITH LAWS. The Seller will, and will
cause each other Originating Entity to, comply with all laws, rules and
regulations (including, without limitation, all CHAMPUS/VA Regulations, Medicaid
Regulations and Medicare Regulations), and all orders, writs, judgments,
injunctions, decrees or awards to which it or its respective properties may be
subject.
(d) FURNISHING OF INFORMATION AND INSPECTION OF
RECORDS. The Seller will, and will cause each other Originating Entity to,
furnish to each of the Purchaser and the Agent from time to time such
information with respect to the Receivables as the Purchaser or the Agent may
reasonably request, including, without limitation, listings identifying the
Obligor and the Outstanding Balance for each Receivable. The Seller will, and
will cause each other Originating Entity to, at any time and from time to time
during regular business hours permit the Purchaser, the Agent, or any of their
respective agents or representatives, (i) to examine and make copies of and take
abstracts from Records and (ii) to visit the offices and properties of the
Seller or such other Originating Entity, as applicable, for the purpose of
examining such Records, and to discuss matters relating to Receivables or the
Seller's or such other Originating Entity's performance hereunder and under the
other Transaction Documents to which such Person is a party with
<PAGE> 42
any of the officers, directors, employees or independent public accountants of
the Seller or such other Originating Entity, as applicable, having knowledge of
such matters; PROVIDED, HOWEVER, that the Purchaser acknowledges that in
exercising the rights and privileges conferred in this Section 5.1(d) it or its
agents or representatives may, from time to time, obtain knowledge of
information, practices, books, correspondence and records ("Confidential
Information") identified to it in writing as being of a confidential nature or
in which the Seller or another Originating Entity has a proprietary interest.
The Purchaser agrees that all such Confidential Information so obtained by it is
to be regarded as confidential information and that such Confidential
Information may be subject to laws, rules and regulations regarding patient
confidentiality, and agrees that (x) it shall retain in confidence, and shall
ensure that its agents and representatives retain in confidence, and will not
disclose, any of such Confidential Information without the prior written consent
of the Seller and (y) it will not, and will ensure that its agents and
representatives will not, make any use whatsoever (other than for purposes of
this Agreement) of any of such Confidential Information without the prior
written consent of the Seller; PROVIDED, HOWEVER, that such Confidential
Information may be disclosed to the extent that such Confidential Information
(i) may be or becomes generally available to the public (other than as a breach
of this Section 5.1(d)), (ii) is required or appropriate in response to any
summons or subpoena in connection with any litigation or (iii) is required by
law to be disclosed; and PROVIDED, FURTHER, HOWEVER, that such Confidential
Information may be disclosed to (A) the Agent, the Company, any Bank Investor,
the Credit Support Provider and the Liquidity Provider, subject to the terms of
Section 5.1(d) of the TAA, (B) the Agent's or any such Person's legal counsel,
auditors and other business advisors, (C) any such Person's government
regulators and (D) the Company's rating agencies, PROVIDED that the Person
making such disclosure shall advise each recipient thereof referred to in
clauses (A), (B), (C) and (D) above that such Confidential Information is to be
regarded and maintained as confidential information and that the Agent has
agreed to keep confidential such Confidential Information as provided in clauses
(x) and (y) above.
<PAGE> 43
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The
Seller will, and will cause each other Originating Entity to, maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the event
of the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new Receivable and
all Collections of and adjustments to each existing Receivable). The Seller
will, and will cause each other Originating Entity to, give each of the
Purchaser and the Agent notice of any material change in the administrative and
operating procedures of the Seller or such other Originating Entity, as
applicable, referred to in the previous sentence.
(f) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CONTRACTS. The Seller, at its expense, will, and will cause each other
Originating Entity to, timely and fully perform and comply with all material
provisions, covenant and other promises required to be observed by the Seller or
such other Originating Entity under the Contracts related to the Receivables.
(g) CREDIT AND COLLECTION POLICIES. The Seller will,
and will cause each other Originating Entity to, comply in all material respects
with the Credit and Collection Policy in regard to each Receivable and the
related Contract.
(h) SPECIAL ACCOUNTS. The Seller shall, and shall
cause each other Originating Entity to (i) establish and maintain Special
Accounts with Special Account Banks, or to engage a Designated Account Agent to
maintain a Special Account with a Special Account Bank on its behalf, (ii)
instruct all Obligors to cause all Collections to be deposited directly into a
Special Account, (iii) report on each banking day to the Concentration Account
Bank, the amount of all Collections on deposit on such banking day in the
Special Accounts at each Special Account Bank and (iv) instruct (or cause the
applicable Designated Account Agent to instruct) each Special Account Bank to
transfer to the Concentration Account prior to the close of business on such
<PAGE> 44
banking day all Collections on deposit during such banking day in the Special
Accounts at such Special Account Bank; PROVIDED, HOWEVER, that if the
Collections on deposit in any Special Account during such banking day shall be
less than $5,000.00 (the "Minimum Amount"), the Special Account Bank shall
transfer such Collections to the Concentration Account on the next succeeding
banking day on which Collections in such Special Account first exceed the
Minimum Amount. With respect to any Special Account that is located at or
maintained by a Bank Investor, the Seller shall, by not later than the date that
occurs six months after the Closing Date, (i) close, or cause the applicable
Originating Entity to close, such Special Account and (ii) instruct, and cause
each other Originating Entity to instruct, all Obligors theretofore remitting
payments to such Special Account to remit all future payments on Receivables and
Related Security to a Special Account located at and maintained by a financial
institution that is not a Bank Investor.
(i) COLLECTIONS RECEIVED. The Seller shall, and shall
cause each other Originating Entity to, segregate and hold in trust, and
deposit, immediately, but in any event not later than the day that occurs
forty-eight (48) hours of its receipt thereof (or, if such day is not a Business
Day, the next Business Day following such receipt) to the Concentration Account
all Collections received from time to time by the Seller or such other
Originating Entity, as the case may be.
(j) SALE TREATMENT. The Seller will not, and will not
permit any Transferring Affiliate to, account for (including for accounting and
tax purposes), or otherwise treat, the transactions contemplated by this
Agreement, the Transferring Affiliate Letter or the BMA Transfer Agreement in
any manner other than as a sale of Receivables by the Seller to the Purchaser or
by the applicable Transferring Affiliate to the Seller, as applicable. In
addition, the Seller shall, and shall cause each Transferring Affiliate to,
disclose (in a footnote or otherwise) in all of its respective financial
statements (including any such financial statements consolidated with any other
Persons' financial statements) the existence and nature of the transactions
contemplated hereby, by the TAA , by the Transferring Affiliate Letter and by
the BMA Transfer
<PAGE> 45
Agreement, and the interest of the Purchaser in the Transferred Assets.
(k) SEPARATE BUSINESS. The Seller acknowledges that
the Agent, the Company and the Bank Investors are entering into the transactions
contemplated in the TAA in reliance upon the Purchaser's identity as a separate
legal entity from the Seller. Therefore, from and after the Closing Date, the
Seller shall take all actions reasonably required to maintain the Purchaser's
status as a separate legal entity and to make it manifest to third parties that
the Purchaser is an entity with assets and liabilities distinct from those of
the Seller or any other member of the Parent Group. Without limiting the
generality of the foregoing, the Seller shall (i) not hold itself out to third
parties as liable for the debts of the Purchaser nor purport to own the
Receivables or any of the other assets acquired by the Purchaser hereunder, (ii)
shall take all other actions necessary on its part to ensure that the Purchaser
is at all times in compliance with the covenants set forth in Section 5.1(k) of
the TAA and (iii) shall cause all tax liabilities arising in connection with the
transactions contemplated herein or otherwise to be allocated between the Seller
and the Purchaser on an arm's-length basis.
(l) PAYMENT TO THE TRANSFERRING AFFILIATES. With
respect to any Receivable purchased by the Seller from any Transferring
Affiliate, the Seller shall cause such sale to be effected under, and in strict
compliance with the terms of, the Transferring Affiliate Letter and the BMA
Transfer Agreement, as applicable, including, without limitation, the terms
relating to the amount and timing of payments to be made to each Transferring
Affiliate in respect of the purchase price for such Receivable.
(m) PERFORMANCE AND ENFORCEMENT OF THE TRANSFERRING
AFFILIATE LETTER AND BMA TRANSFER AGREEMENT. The Seller shall timely perform the
obligations required to be performed by the Seller, and shall vigorously enforce
the rights and remedies accorded to the Seller, under each of the Transferring
Affiliate Letter and the BMA Transfer Agreement. The Seller shall take all
actions to perfect and enforce its rights and interests (and the rights and
interests of the Purchaser, the Agent, the Company and the
<PAGE> 46
Bank Investors, as assignees of the Seller) under the Transferring Affiliate
Letter and\or the BMA Transfer Agreement as the Purchaser or the Agent may from
time to time reasonably request, including, without limitation, making claims to
which it may be entitled under any indemnity, reimbursement or similar provision
contained in the Transferring Affiliate Letter or the BMA Transfer Agreement.
SECTION 5.2. NEGATIVE COVENANTS OF THE SELLER. At all times
from the date hereof to the Collection Date, unless the Agent shall otherwise
consent in writing:
(a) NO SALES, LIENS, ETC. Except as otherwise
provided herein, the Seller will not, and will not permit any other Originating
Entity to, sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Adverse Claim upon (or the filing of any
financing statement) or with respect to (x) any of the Affected Assets, (y) any
inventory or goods, the sale of which may give rise to a Receivable or any
Receivable or related Contract, or (z) any Special Account or any other account
to which any Collections of any Receivable are sent, or assign any right to
receive income in respect thereof.
(b) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except
as otherwise permitted in Section 6.2 hereof, the Seller will not, and will not
permit any other Originating Entity to, extend, amend or otherwise modify the
terms of any Receivable, or amend, modify or waive any term or condition of any
Contract related thereto.
(c) NO CHANGE IN BUSINESS OR CREDIT AND COLLECTION
POLICY. The Seller will not, and will not permit any other Originating Entity
to, make any change in the character of its business or in the Credit and
Collection Policy, which change would, in either case, impair the collectibility
of any Receivable or otherwise have a Material Adverse Effect.
(d) NO MERGERS, ETC. The Seller will not, and will
not permit any other Originating Entity to, merge with or into or consolidate
with or into, or convey, transfer, lease or otherwise dispose of (whether in one
<PAGE> 47
transaction or in a series of transactions), all or substantially all of its
assets (whether now owned or hereafter acquired and except as contemplated in
the Transaction Documents) to any Person, except that (i) any Transferring
Affiliate may merge or consolidate with any other Transferring Affiliate if, but
only if, each of the Purchaser and the Agent shall have received at least ten
Business Days' prior written notice of such merger or consolidation and (ii) the
Seller may merge or consolidate with any other Person if, but only if, (x)
immediately after giving effect to such merger or consolidation, no Seller
Default or Potential Seller Default would exist and (y) each of the Purchaser
and the Agent shall have received a written agreement, in form and substance
satisfactory to each of the Purchaser and the Agent, executed by the corporation
resulting from such merger or consolidation, under which agreement such
corporation shall become the Seller hereunder and the Collection Agent under the
TAA, and shall assume the duties, obligations and liabilities of the Seller and
the Collection Agent under this Agreement, the TAA, the Special Account Letters
and each other Transaction Document to which the Seller is party (whether in its
individual capacity or as Collection Agent), together with the documents
relating to the Seller of the kind delivered by or on behalf of the Seller
pursuant to Section 3.1 of the TAA.
(e) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS,
SPECIAL ACCOUNT BANKS AND DESIGNATED ACCOUNT AGENTS. The Seller will not, and
will not permit any other Originating Entity to:
(i) add or terminate any bank as a Special Account Bank from
those listed in Exhibit C hereto, or make any change in its
instructions to Obligors regarding payments to be made to any Special
Account Bank; PROVIDED that the Seller may, and may permit any
Originating Entity to, (A) add any bank as a Special Account Bank for
purposes of this Agreement at any time following delivery to the Agent
of written notice of such addition and a Special Account Letter duly
executed by such bank, and (B) terminate any Special Account Bank at
any time following delivery to the Agent of written notice of such
termination and evidence satisfactory to the Agent that the affected
<PAGE> 48
Obligors shall have been instructed to remit all subsequent Collections
to another Special Account; or
(ii) make any change in the instructions contained in any
Special Account Letter; or
(iii) add or terminate any Person as a Designated Account
Agent from those listed in Exhibit C hereto, or make any change in its
instructions to such Designated Account Agent regarding the handling of
the Collections in the applicable Special Account; PROVIDED that the
Seller may, and may permit any Originating Entity to, (A) add any
Person that satisfies the requirements set forth herein of a
"Designated Account Agent" as a Designated Account Agent for purposes
of this Agreement at any time following delivery to the Agent of
written notice of such addition and an Account Agent Agreement duly
executed by such Person, and (B) terminate any Designated Account Agent
at any time following delivery to the Agent of written notice of such
termination and evidence satisfactory to the Agent that either an
Originating Entity or a new Designated Account Agent shall have been
added in accordance with the terms of this Agreement to succeed such
terminated Designated Account Agent in respect of the applicable
Special Account or the affected Obligors shall have been instructed to
remit all subsequent Collections to another Special Account.
(f) DEPOSITS TO SPECIAL ACCOUNTS AND THE
CONCENTRATION ACCOUNT. The Seller will not, and will not permit any of the other
Originating Entities or Designated Account Agents to, deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Special
Account or the Concentration Account cash or cash proceeds other than
Collections of Receivables.
(g) CHANGE OF NAME, ETC. The Seller will not, and
will not permit any other Originating Entity to, change its name, identity or
structure or the location of its chief executive office, unless at least 10 days
prior to the effective date of any such change the Seller delivers to the Agent
(i) such documents, instruments or agreements, executed by the Seller and/or the
affected Originating Entities, as are necessary to reflect such change and to
<PAGE> 49
continue the perfection of the Purchaser's ownership interests in the Affected
Assets and (ii) new or revised Special Account Letters executed by the Special
Account Banks which reflect such change and enable the Agent to continue to
exercise its rights contained in Section 2.8 of the TAA.
(h) AMENDMENT TO TRANSFERRING AFFILIATE LETTER, ETC..
The Seller will not, and will not permit any other Originating Entity to, (i)
amend, modify, or supplement the Transferring Affiliate Letter, the BMA Transfer
Agreement or any instrument, document or agreement executed in connection
therewith (collectively the "Initial Transfer Documents"), (ii) terminate or
cancel any Initial Transfer Document, (iii) issue any consent or directive under
any Initial Transfer Document, (iv) undertake any enforcement proceeding in
respect of any of the Initial Transfer Documents, or (v) waive, extend the time
for performance or grant any indulgence in respect of any provision of any
Initial Transfer Document, in each case except with the prior written consent of
the Purchaser, the Agent and the Administrative Agent; nor shall the Seller
take, or permit any other Originating Entity to take, any other action under any
of the Initial Transfer Documents that shall have a material adverse affect on
the Purchaser, the Agent, the Company or any Bank Investor or which is
inconsistent with the terms of this Agreement.
(i) ERISA MATTERS. The Seller will not, and will not
permit any other Originating Entity to, (i) engage or permit any of its
respective ERISA Affiliates to engage in any prohibited transaction (as defined
in Section 4975 of the Code and Section 406 of ERISA) for which an exemption is
not available or has not previously been obtained from the U.S. Department of
Labor; (ii) permit to exist any accumulated funding deficiency (as defined in
Section 302(a) of ERISA and Section 412(a) of the Code) or funding deficiency
with respect to any Benefit Plan other than a Multiemployer Plan; (iii) fail to
make any payments to any Multiemployer Plan that the Seller, such Originating
Entity or any ERISA Affiliate thereof is required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (iv)
terminate any Benefit Plan so as to result in any liability; or (v) permit to
exist any occurrence of any reportable event described in Title IV of
<PAGE> 50
ERISA which represents a material risk of a liability to the Seller, such
Originating Entity or any ERISA Affiliate thereof under ERISA or the Code, if
such prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events occurring within any fiscal year of the
Seller, in the aggregate, involve a payment of money or an incurrence of
liability by the Seller, any Originating Entity or any ERISA Affiliate thereof,
in an amount in excess of $500,000.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.1. COLLECTION OF RECEIVABLES. The servicing,
administering and collection of the Receivables shall be conducted by the
Collection Agent. For so long as the Person acting as Collection Agent is the
Seller, the Seller shall perform its duties as Collection Agent under the TAA in
accordance with the terms thereof, it being understood that it shall hold all
Receivables, Related Assets, Records and Collections which it receives from time
to time solely in its capacity as Collection Agent and shall not claim or retain
any legal or beneficial title or interest therein. If at any time the Collection
Agent is a Person other than the Seller, the Seller agrees promptly to provide
all information requested by the Collection Agent in connection with the
performance of its responsibilities under the TAA, and agrees to exert its best
efforts to assist any successor Collection Agent in assuming and performing its
duties as Collection Agent.
SECTION 6.2. RIGHTS OF PURCHASER. At any time:
(i) The Purchaser (or the Agent as assignee of
the Purchaser) may direct that payment of all amounts payable under any
Receivable be made directly to the Purchaser (or the Agent, as the case may be)
or its designee.
(ii) The Seller shall, at the Purchaser's
request (or at the request of the Agent, as assignee of the Purchaser) and at
the Seller's expense, give notice of the Purchaser's ownership of Receivables
and/or
<PAGE> 51
the Agent's interest in the Receivables to each Obligor and direct that payments
be made directly to the Purchaser (or the Agent, as the case may be) or its
designee.
(iii) The Seller shall, at the Purchaser's or the
Agent's request, (A) assemble all of the Records, and shall make the same
available to the Purchaser, the Agent or its designee at a place selected by the
Purchaser, the Agent or its designee, and (B) segregate all cash, checks and
other instruments received by it from time to time constituting Collections of
Receivables in a manner acceptable to the Purchaser and the Agent and shall,
promptly upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the Agent or its
designee.
Notwithstanding the foregoing clauses (i), (ii) and (iii), neither the Purchaser
nor any of its assigns shall at any time direct, or cause any Originating Entity
to direct, Obligors of Receivables or Related Security payable under the
Medicare or Medicaid program to make payment of amounts due or to become due to
such Originating Entity in respect of such Receivables or Related Security
directly to the Concentration Account or to the Purchaser, the Purchaser's
assigns or any of their respective designees, EXCEPT for any such payment in
respect of such Receivables or Related Security or any assignment thereof that
is established by, or made pursuant to, the order of a court of competent
jurisdiction.
SECTION 6.3. SPECIAL ACCOUNTS. The Seller hereby transfers to
the Purchaser, and shall cause each of the Transferring Affiliates to transfer
to the Purchaser, effective concurrently with the initial Purchase hereunder,
all right, title and interest of such Originating Entity in and to each Special
Account, together with each lock-box related thereto and all agreements between
such Originating Entity and the applicable Special Account Bank. The Seller
hereby authorizes the Purchaser and its assigns to take, to the extent permitted
by applicable law, any and all steps in the Seller's or any other Originating
Entity's name (which power, in the case of each Transferring Affiliate, the
Seller is authorized to grant pursuant to authority granted to the Seller under
the Transferring Affiliate Letter) and
<PAGE> 52
on behalf of the Seller and such Originating Entity necessary or desirable, in
the determination of the Purchaser or such assign, to collect all amounts due
under any and all Receivables, including, without limitation, endorsing the
Seller's or such Originating Entity's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts; provided, however, that neither the Purchaser nor any of its assigns
shall have the power or authority to direct Obligors of Receivables or Related
Security payable under the CHAMPUS/VA, Medicare or Medicaid program to make
payment of amounts due or to become due to the Seller or any Transferring
Affiliate in respect of such Receivables or Related Security directly to the
Concentration Account or to the Purchaser, the Purchaser's assigns or any of
their respective designees, EXCEPT for any such payment in respect of such
Receivables or Related Security or any assignment thereof that is established
by, or made pursuant to, the order of a court of competent jurisdiction.
SECTION 6.4. RESPONSIBILITIES OF THE SELLER. Anything herein
to the contrary notwithstanding, the Seller shall, and/or shall cause each other
Originating Entity to, (i) perform all of such Person's obligations under the
Contracts related to the Receivables to the same extent as if interests in such
Receivables had not been sold hereunder and under the Transferring Affiliate
Letter and/or the BMA Transfer Agreement, and the exercise by the Purchaser of
its rights hereunder and under the Transferring Affiliate Letter and the BMA
Transfer Agreement shall not relieve the Seller from such obligations and (ii)
pay when due any taxes, including without limitation, any sales taxes payable in
connection with the Receivables and their creation and satisfaction. Neither the
Purchaser nor any of its assignees shall have any obligation or liability with
respect to any Receivable or related Contracts, nor shall it be obligated to
perform any of the obligations of the Seller thereunder.
SECTION 6.5. REPORTS. On or prior to each Settlement Date, the
Seller shall prepare and forward to the Purchaser a report setting forth the
following with respect to the immediately preceding calendar month: (i) the
aggregate Outstanding Balance of Receivables included in the Purchases occurring
during such month, (ii) the aggregate
<PAGE> 53
Purchase Price payable to the Seller in respect of such Purchases, specifying
the Purchase Price Percentage in effect for such month and the aggregate
Purchase Price Credits deducted in calculating such aggregate Purchase Price,
(iii) the aggregate amount of funds received by the Seller during such month
which are to be applied toward the aggregate Purchase Price owing for such month
pursuant to Section 2.2(d), (iv) the increase or decrease in the amount
outstanding under the Subordinated Note as of the end of such month after giving
effect to the application of funds toward the aggregate Purchase Price, (v) the
amount of any capital contribution made by the Seller to the Purchaser as of the
end of such month and (vi) such other information concerning the Receivables as
the Purchaser may reasonably request. Promptly following any request therefor by
the Purchaser, the Seller shall prepare and provide to the Purchaser a listing
by Obligor of all Receivables together with an aging of such Receivables.
ARTICLE VII
SELLER DEFAULTS
SECTION 7.1. SELLER DEFAULTS. The occurrence of any one or
more of the following events shall constitute a Seller Default:
(a) the Seller shall fail to make any payment or
deposit to be made by it hereunder when due; or
(b) any representation, warranty, certification or
statement made or deemed made by the Seller in this Agreement, by FMC or FMCH
under the Parent Agreement, or by the Seller, FMC, FMCH or any other Parent
Group Member in any other Transaction Document to which it is a party or in any
other document certificate or other writing delivered pursuant hereto or
thereto, shall prove to have been incorrect in any material respect when made or
deemed made; or
(c) the Seller shall default in the performance of
any payment or undertaking
<PAGE> 54
(other than those covered by clause (a) above) to be performed or observed under
(i) Section 5.1(a)(iv); PROVIDED that, in the case of
any failure to provide any such notice relating to a Potential
Seller Default that shall have ceased to exist prior to the
date such notice was required to have been given under Section
5.1(a)(iv), the failure to give such notice shall not
constitute a Seller Default unless a senior officer of the
Seller (including, the Treasurer, any Assistant Treasurer,
General Counsel or any assistant or associate general counsel
of the Seller) shall have known of the occurrence of such
Potential Seller Default during such period; or
(ii) any of Sections 5.1(a)(v), 5.1 (a)(x), 5.1
(a)(ix), 5.1(b)(i), 5.1(f), 5.1(g), 5.1(h), 5.1(i), 5.1(k),
5.2(a), 5.2(c), 5.2(d), 5.2(e), 5.2(f), 5.2(g), 5.2(h) or 6.2;
or
(iii) Section 5.1(b)(ii), and such default shall
continue for 2 Business Days; or
(iv) any other provision hereof and such default in
the case of this clause (iv) shall continue for ten (10) days;
(d) failure of the Seller, FMC, FMCH or any
Transferring Affiliate to pay when due any amounts due under any agreement to
which any such Person is a party and under which any Indebtedness greater than
$5,000,000 is governed; or the default by the Seller, FMC, FMCH or any
Transferring Affiliate in the performance of any term, provision or condition
contained in any agreement to which any such Person is a party and under which
any Indebtedness owing by the Seller, FMC, FMCH or any Transferring Affiliate
greater than $5,000,000 was created or is governed, regardless of whether such
event is an "event of default" or "default" under any such agreement; or any
Indebtedness owing by the Seller, FMC, FMCH or any Transferring Affiliate
greater than
<PAGE> 55
$5,000,000 shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment and other than in the case of an
instrument stated to be payable on demand) prior to the date of maturity
thereof; or
(e) any Event of Bankruptcy shall occur with respect
to the Seller, any other Originating Entity, FMC or FMCH; PROVIDED that, in the
case of any Event of Bankruptcy relating to any Transferring Affiliate, such
Event of Bankruptcy shall not constitute a Seller Default hereunder if at such
time the "Percentage Factor" (as defined in the TAA) does not exceed the
"Maximum Percentage Factor" (as defined in the TAA) after reducing the "Net
Receivables Balance" (as defined in the TAA) by an amount equal to the aggregate
Outstanding Balance of all Receivables otherwise included in the calculation of
the Net Receivables Balance which either (i) have been originated by such
Transferring Affiliate or (ii) are owing from any Obligor that shall have been
directed to remit payments thereon to a Special Account that is a Special
Account to which Obligors in respect of the Transferring Affiliate that is the
subject of such Event of Bankruptcy shall have been directed to remit payments;
or
(f) after giving effect to any Purchase hereunder,
the Purchaser shall, for any reason, fail or cease to have all right, title and
interest in and to all of the Receivables which are to be included in such
Purchase, together with the Related Security and Collections with respect
thereto, free and clear of any Adverse Claim, subject only to the interests
therein of the Agent, on behalf of the Company and the Bank Investors; or
(g) the Transferring Affiliate Letter, the BMA
Transfer Agreement or any other Transaction Document shall have terminated; or
any material provision thereof shall cease for any reason to be valid and
binding on any party thereto or any party shall so state in writing; or any
party to any Transaction Document (other than the Purchaser, the Agent, the
Company or any Bank Investor) shall fail to perform any material term, provision
or condition contained in any Transaction Document on its part to be performed
or a default shall otherwise occur thereunder; or
<PAGE> 56
(h) either FMCH or the Seller shall enter into any
transaction or merger whereby it is not the surviving entity; or
(i) there shall have occurred any material adverse
change in the operations of any of FMCH or the Seller since December 31, 1996 or
any other Material Adverse Effect shall have occurred; or
(j) a default shall occur under the Parent Agreement;
or the Parent Agreement shall for any reason terminate; or any material
provision thereof shall cease to be valid and binding on any party thereto or
any party thereto shall so state in writing; or
(k) (i) the Seller shall cease to own, free and clear
of any Adverse Claim all of the outstanding shares of capital stock of the
Transferor on a fully diluted basis; or (ii) FMCH shall cease to own, directly
or indirectly, free and clear of any Adverse Claim all of the outstanding shares
of capital stock of any of the Originating Entities on a fully diluted basis; or
(iii) FMC shall cease to own, directly or indirectly, free and clear of any
Adverse Claim other than a pledge
made pursuant to the Bank Revolver, all of the Voting Stock of FMCH other than
the preferred stock of FMCH outstanding as of the date hereof (which preferred
stock outstanding as of the date hereof shall not represent more than 20% of the
total Voting Stock of FMCH); or (iv) Fresenius AG, a corporation organized under
the laws of the Federal Republic of Germany, shall cease to own, directly or
indirectly, free and clear of any Adverse Claim at least a majority of the
Voting Stock of FMC.
SECTION 7.2. REMEDIES. (a) Upon the occurrence of any Seller
Default, the Purchaser shall have, in addition to all other rights and remedies
under this Agreement or otherwise, all other rights and remedies provided under
the UCC of the applicable jurisdiction and other applicable laws, all of which
rights shall be cumulative.
<PAGE> 57
ARTICLE VIII
INDEMNIFICATION; EXPENSES
SECTION 8.1. INDEMNITIES BY THE SELLER. Without limiting any
other rights which the Purchaser may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Purchaser and any successors and permitted
assigns (including, without limitation, the Company, the Bank Investors, the
Agent, the Administrative Agent, the Collateral Agent, the Liquidity Provider
and the Credit Support Provider) and their respective officers, directors and
employees (collectively, "INDEMNIFIED PARTIES") from and against any and all
damages, losses, claims, liabilities, costs and expenses, including, without
limitation, reasonable attorneys' fees (which such attorneys may be employees of
the Liquidity Provider, the Credit Support Provider, the Agent, the
Administrative Agent, the Collateral Agent or the Purchaser, as applicable) and
disbursements (all of the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") awarded against or incurred by any of them in any action
or proceeding between the Seller or any Parent Group Member (including any
Parent Group Member, in its capacity as the Collection Agent) and any of the
Indemnified Parties or between any of the Indemnified Parties and any third
party or otherwise arising out of or as a result of this Agreement, the other
Transaction Documents, the ownership or maintenance, either directly or
indirectly, by the Purchaser and its assigns of Receivables and Related Assets
or any of the other transactions contemplated hereby or thereby, excluding,
however, (i) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of an Indemnified Party or (ii) recourse
(except as otherwise specifically provided in this Agreement) for uncollectible
Receivables. Without limiting the generality of the foregoing, the Seller shall
indemnify each Indemnified Party for Indemnified Amounts relating to or
resulting from:
(i) any representation or warranty made by any Parent
Group Member (including any Parent Group Member, in its capacity as the
Collection Agent) or any officers of any Parent Group Member (including
any Parent Group Member, in its capacity as the Collection Agent) under
or in connection with this Agreement, the Parent Agreement, the
Transferring Affiliate Letter,
<PAGE> 58
the BMA Transfer Agreement, any of the other Transaction Documents, any
Investor Report or any other information or report delivered by any
Parent Group Member pursuant to or in connection with any Transaction
Document, which shall have been false or incorrect in any material
respect when made or deemed made;
(ii) the failure by any Parent Group Member
(including any Parent Group Member, in its capacity as the Collection
Agent) to comply with any applicable law, rule or regulation
(including, without limitation, any CHAMPUS/VA Regulation, any Medicaid
Regulation or any Medicare Regulation), including with respect to any
Receivable or the related Contract, or the nonconformity of any
Receivable or the related Contract with any such applicable law, rule
or regulation;
(iii) the failure to vest and maintain vested in the
Purchaser a first priority ownership interest in the Affected Assets
free and clear of any Adverse Claim;
(iv) the failure to file, or any delay in filing,
financing statements, continuation statements, or other similar
instruments or documents under the UCC of any applicable jurisdiction
or other applicable laws with respect to any of the Affected Assets;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being the legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of
merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(vi) any failure of the Collection Agent (if a Parent
Group Member or designee thereof) to perform its duties or obligations
in accordance with the provisions of the TAA; or
<PAGE> 59
(vii) any products liability claim or personal injury
or property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable;
(viii) the transfer of an ownership interest in any
Receivable other than an Eligible Receivable;
(ix) the failure by any Parent Group Member
(individually or as Collection Agent) to comply with any term,
provision or covenant contained in this Agreement or any of the other
Transaction Documents to which it is a party or to perform any of its
respective duties under the Contracts;
(x) the failure of any Originating Entity to pay when
due any taxes, including without limitation, sales, excise or personal
property taxes payable in connection with any of the Receivables; (xi)
the commingling by the Seller, any other Originating Entity or the
Collection Agent (if a Parent Group Member or designee thereof) of
Collections of Receivables at any time with other funds;
(xii) any investigation, litigation or proceeding
related to this Agreement, any of the other Transaction Documents, the
use of proceeds of Transfers by the Seller or any other Originating
Entity, the ownership of any Receivable, Related Security or Contract
or any interest therein;
(xiii) the failure of any Special Account Bank or any
Designated Account Agent to remit any amounts held by it pursuant to
the instructions set forth in the applicable Special Account Letter or
any instruction of the Collection Agent, the Seller, any Originating
Entity or the Agent (to the extent such Person is entitled to give such
instructions in accordance with the terms of the Transaction Documents)
whether by reason of the exercise of set-off rights or otherwise;
(xiv) any inability to obtain any judgment in or
utilize the court or other adjudication system of,
<PAGE> 60
any state in which an Obligor may be located as a result of the failure
of the Seller to qualify to do business or file any notice of business
activity report or any similar report;
(xv) any failure of the Seller to give reasonably
equivalent value to any Transferring Affiliate in consideration of the
purchase by the Seller from such Transferring Affiliate of any
Receivable, or any attempt by any Person to void, rescind or set-aside
any such transfer or any transfer of any Receivable hereunder under
statutory provisions or common law or equitable action, including,
without limitation, any provision of the Bankruptcy Code;
(xvi) any action taken by the Seller, any other
Originating Entity or the Collection Agent (if a Parent Group Member or
designee thereof) in the enforcement or collection of any Receivable;
PROVIDED, HOWEVER, that if the Company enters into agreements for the
purchase of interests in receivables from one or more Other
Transferors, the Company shall allocate such Indemnified Amounts which
are in connection with the Liquidity Provider Agreement (as defined in
the TAA), the Credit Support Agreement (as defined in the TAA) or the
credit support furnished by the Credit Support Provider to the Seller
and each Other Transferor; and PROVIDED, FURTHER, that if such
Indemnified Amounts are attributable to any Parent Group Member and not
attributable to any Other Transferor, the Seller shall be solely liable
for such Indemnified Amounts or if such Indemnified Amounts are
attributable to Other Transferors and not attributable to any Parent
Group Member, such Other Transferors shall be solely liable for such
Indemnified Amounts;
(xvii) any reduction or extinguishment of, or any
failure by any Obligor to pay (in whole or in part), any Receivable or
any Related Security with respect thereto as a result of or on account
of any violation of or prohibition under any law, rule or regulation
now or hereafter in effect from time to time, including without
limitation and CHAMPUS/VA Regulation, any Medicaid Regulation or any
Medicare Regulation, or as a result of or on account of the
<PAGE> 61
entering of any judicial or regulatory order or agreement adversely
affecting the Seller or any Parent Group Member; or
(xviii) any failure by the Seller or any Parent Group
Member to maintain all governmental and other authorization and approvals
necessary to render the services, or sell the merchandise, resulting in
Receivables.
SECTION 8.2. OTHER COSTS AND EXPENSES. (a) The Seller agrees,
upon receipt of a written invoice, to pay or cause to be paid, and to save the
Purchaser harmless against liability for the payment of, all reasonable
out-of-pocket expenses (including, without limitation, the out-of-pocket
expenses payable by the Purchaser under Section 8.4 of the TAA) or intangible,
documentary or recording taxes incurred by or on behalf of the Purchaser or any
other Indemnified Party (i) in connection with the negotiation, execution,
delivery and preparation of this Agreement, the other Transaction Documents and
any documents or instruments delivered pursuant hereto and thereto and the
transactions contemplated hereby or thereby (including, without limitation, the
perfection or protection of the Purchaser's ownership of Receivables and Related
Assets with respect thereto) and (ii) from time to time (a) relating to any
amendments, waivers or consents under this Agreement and the other Transaction
Documents, (b) arising in connection with the Purchaser's enforcement or
preservation of rights (including, without limitation, the perfection and
protection of the transfers of Receivables and Related Assets under this
Agreement), or (c) arising in connection with any audit, dispute, disagreement,
litigation or preparation for litigation involving this Agreement or any of the
other Transaction Documents.
(b) If the Seller fails to perform any of its
agreements or obligations under this Agreement, following expiration of any
applicable cure period, the Purchaser (or any assignee thereof) may (but shall
not be required to) perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of the Purchaser (or any such assignee)
incurred in connection therewith shall be payable by the Seller upon the
Purchaser's (or any such assignee's) written demand therefor.
<PAGE> 62
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. TERM OF AGREEMENT. This Agreement shall terminate
on the date after the Collection Date on which (i) no further Purchases are to
be made hereunder, (ii) the aggregate Outstanding Balance of Receivables
conveyed to the Purchaser hereunder has been reduced to zero or written off in
accordance with the Credit and Collection Policy and (iii) the Seller has paid
the Purchaser all indemnities, adjustments and other amounts which may be owed
to the Purchaser hereunder; PROVIDED, HOWEVER, that (x) the rights and remedies
of the Purchaser with respect to any representation and warranty made or deemed
to be made by the Seller pursuant to this Agreement, (y) the indemnification and
payment provisions of Article VII, and (z) the agreements set forth in Section
9.9 hereof, shall be continuing and shall survive any termination of this
Agreement.
SECTION 9.2. WAIVERS; AMENDMENTS. No failure or delay on the
part of the Purchaser in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further exercise
thereof or the exercise of any other power, right or remedy. The rights and
remedies herein provided shall be cumulative and nonexclusive of any rights or
remedies provided by law. No provision of this Agreement or the Subordinated
Note may be amended, supplemented, modified or waived except in writing by the
Seller, the Purchaser, the Agent, the Company and the "Majority Investors" under
and as defined in the TAA. It is expressly understood and acknowledged that the
prior written consent of the Agent shall be required in order for the Purchaser
to grant a consent, authorization or approval requested by the Seller hereunder,
or for the Purchaser to agree to any amendment, waiver or other modification to
the terms or conditions of this Agreement.
<PAGE> 63
SECTION 9.3. NOTICES. Except as provided below, all
communications and notices provided for hereunder shall be in writing (including
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth below or at
such other address or telecopy number as such party may hereafter specify for
the purposes of notice to such party. Each such notice or other communication
shall be effective (i) if given by telecopy when such telecopy is transmitted to
the telecopy number specified in this Section 9.3 and confirmation is received,
(ii) if given by mail 3 Business Days following such posting, postage prepaid,
U.S. certified or registered, (iii) if given by overnight courier, one (1)
Business Day after deposit thereof with a national overnight courier service, or
(iv) if given by any other means, when received at the address specified in this
Section 9.3.
If to the Purchaser:
NMC Funding Corporation
Two Ledgemont Center
95 Hayden Avenue
Lexington, Massachusetts 02173
Telephone: (617) 402-9000
Telecopy: (617) 860-9357
Attn: James V. Luther
Payment Information:
Chase Manhattan Bank, N.A.
ABA 021-000-021
Account 115-0-62615
If to the Seller:
National Medical Care, Inc.
Two Ledgemont Center
95 Hayden Avenue
Lexington, Massachusetts 02173
Telephone: (617) 402-9000
Telecopy: (617) 860-9357
Attn: James V. Luther
Payment Information:
Chase Manhattan Bank, N.A.
ABA 021-000-021
Account 115-0-62615
<PAGE> 64
SECTION 9.4. GOVERNING LAW; SUBMISSION TO JURISDICTION;
INTEGRATION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE SELLER HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE
CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The Seller
hereby irrevocably waives, to the fullest extent it may effectively do so, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Nothing in
this Section 9.4 shall affect the right of the Purchaser to bring any action or
proceeding against the Seller or any of its properties in the courts of other
jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH,
RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement contains the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(d) The Seller hereby appoints John B. Madden, Jr.,
of Arent Fox Kintner Plotkin & Kahn, located at 1675 Broadway, New York, New
York 10019 as the authorized agent upon whom process may be served in any action
arising out of or based upon this Agreement, the other Transaction Documents to
which such Person is a party or the transactions contemplated hereby or thereby
that may be
<PAGE> 65
instituted in the United States District Court for the Southern District of New
York and of any New York State Court sitting in the City of New York by the
Purchaser or any of its assignees.
SECTION 9.5. SEVERABILITY; 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 when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding on the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that the Seller may not assign any of its rights or delegate
any of its duties hereunder or under any of the other Transaction Documents to
which it is a party without the prior written consent of each of the Purchaser
and the Agent. The Purchaser may assign at any time any or all of its rights and
obligations hereunder and interests herein to any other Person without the
consent of the Seller. Without limiting the foregoing, the Seller acknowledges
that the Purchaser, pursuant to the TAA, shall assign to the Agent, on behalf of
the Company or the Bank Investors, as the case may be, all of its rights,
remedies, powers and privileges hereunder and that each of the Agent, the
Company and such Bank Investors may further assign such rights, remedies, powers
and privileges to the extent permitted in the TAA. The Seller agrees that the
Agent, as the assignee of the Purchaser, shall, subject to the terms of the TAA,
have the right to enforce this Agreement and to exercise directly all of the
Purchaser's rights and remedies under this Agreement (including, without
limitation, the right to give or withhold any consents or approvals of the
Purchaser to be given or withheld hereunder) and the Seller agrees to cooperate
fully with the Agent in the exercise of such rights and remedies. The Seller
further agrees to give to
<PAGE> 66
the Agent copies of all notices, reports and other documents it is required to
give to the Purchaser hereunder and to permit the Agent the rights of inspection
and audit granted to the Purchaser hereunder. In addition, the Seller agrees
that to the extent the Purchaser is herein permitted to take any action or to
provide any information or report, the Agent may similarly so direct and require
(with or without the concurrence of the Purchaser) the Seller to take such
action or to provide such information or report.
SECTION 9.7. WAIVER OF CONFIDENTIALITY. The Seller hereby
consents to the disclosure of any non-public information with respect to it
received by the Purchaser, the Company, the Agent, any Bank Investor or the
Administrative Agent to any of the Purchaser, the Company, the Agent, any
nationally recognized rating agency rating the Company's Commercial Paper, the
Administrative Agent, the Collateral Agent, any Bank Investor or potential Bank
Investor, the Liquidity Provider or the Credit Support Provider in relation to
this Agreement or the TAA.
SECTION 9.8. CONFIDENTIALITY AGREEMENT. The Seller hereby
agrees that it will not disclose, and will cause each Parent Group Member to
refrain from disclosing, the contents of this Agreement or any other proprietary
or confidential information of the Purchaser, the Company, the Agent, the
Administrative Agent, the Collateral Agent, any Liquidity Provider or any Bank
Investor to any other Person except (i) its auditors and attorneys, employees or
financial advisors (other than any commercial bank) and any nationally
recognized rating agency PROVIDED such auditors, attorneys, employees financial
advisors or rating agencies are informed of the highly confidential nature of
such information or (ii) following notice thereof to the Agent, as otherwise
required by applicable law (including the federal securities laws) or order of a
court of competent jurisdiction.
SECTION 9.9. BANKRUPTCY PETITIONS. (a) The Seller hereby
covenants and agrees that, prior to the date which is one year and one day after
the payment in full of all outstanding Commercial Paper or other indebtedness of
the Company, it will not, and the Seller will cause each Parent Group Member to
not, institute against, or join any other Person in instituting against, the
Company any
<PAGE> 67
bankruptcy, reorganization, arrangement insolvency or liquidation proceedings or
other similar proceeding under the laws of the United States or any state of the
United States.
(b) The Seller hereby covenants and agrees that, prior to the
date which is one year and one day after this Agreement shall have terminated in
accordance with its terms, it will not institute against, or join any other
Person in instituting against, the Purchaser any bankruptcy, reorganization,
arrangement insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States
SECTION 9.10. PURCHASE TERMINATION. The Seller's obligation to
sell, transfer, assigns and otherwise convey Receivables and Related Assets to
the Purchaser hereunder may be terminated at any time by the Seller by giving
written notice thereof to Purchaser and the Agent of the Seller's election to
discontinue Purchases hereunder, in which event the Purchase Termination Date
(as defined in the TAA) shall thereafter occur on the date specified therefor by
the Seller in such notice, but in any event not less than 60 days after the
Agent's receipt of such notice.
SECTION 9.11. SUBORDINATION. The Seller agrees that any
indebtedness, obligation or claim, it may from time to time hold or otherwise
have (including, without limitation any obligation or claim arising in
connection with the Revolving Loans) against the Purchaser or any assets or
properties of the Purchaser, whether arising hereunder or otherwise existing,
shall be subordinate in right of payment to the prior payment in full of any
indebtedness or obligation of the Purchaser owing to the Agent, the Company or
any Bank Investor under the TAA. The subordination provision contained herein is
for the direct benefit of, and may be enforced by, the Agent, the Company, any
Bank Investor and/or any of their respective assignees under the TAA.
SECTION 9.12. CHARACTERIZATION OF THE TRANSACTIONS
CONTEMPLATED BY THE AGREEMENT. It is the intention of the parties that each
Purchase hereunder shall constitute a sale of such Receivables, together with
the Related Assets with respect thereto, from the Seller to the
<PAGE> 68
Purchaser, conveying good title thereto free and clear of any Adverse Claims,
and that such Receivables and Related Assets not be part of the Seller's estate
in the event of an insolvency. If, notwithstanding the foregoing, the
transactions contemplated hereby should be deemed a financing, the parties
intend that the Seller shall be deemed to have granted to the Purchaser, and the
Seller hereby grants to the Purchaser, a first priority perfected and continuing
security interest in all of the Seller's right, title and interest in, to and
under the Receivables, together with the Related Assets with respect thereto,
and together with all of the Seller's rights under the Transferring Affiliate
Letter, the BMA Transfer Agreement and all other Transaction Documents with
respect to the Receivables and with respect to any obligations thereunder of any
Originating Entity with respect to the Receivables, and that this Agreement
shall constitute a security agreement under applicable law. The Seller hereby
assigns to the Purchaser all of its rights and remedies under the Transferring
Affiliate Letter and the BMA Transfer Agreement (and all instruments, documents
and agreements executed in connection therewith) with respect to the Receivables
and with respect to any obligations thereunder of any Originating Entity with
respect to the Receivables.
[Remainder of page intentionally left blank]
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Receivables Purchase Agreement as of the date first written
above.
NMC FUNDING CORPORATION,
as Purchaser
By: /s/ James V. Luther
----------------------------------------
Name: James V. Luther
Title: Assistant Treasurer
NATIONAL MEDICAL CARE, INC.,
as Seller
By: /s/ James V. Luther
----------------------------------------
Name: James v. Luther
Title: President
<PAGE> 70
Signature Page to Receivables Purchase Agreement
dated as of August 28, 1997
<PAGE> 71
EXHIBIT A
to
RECEIVABLES PURCHASE AGREEMENT
FORMS OF CONTRACTS
<PAGE> 72
EXHIBIT B
to
RECEIVABLES PURCHASE AGREEMENT
CREDIT AND COLLECTION POLICIES AND PRACTICES
<PAGE> 73
EXHIBIT C
to
RECEIVABLES PURCHASE AGREEMENT
LIST OF SPECIAL ACCOUNT BANKS
AND DESIGNATED ACCOUNT AGENTS
<PAGE> 74
EXHIBIT D
to
RECEIVABLES PURCHASE AGREEMENT
FORM OF SPECIAL ACCOUNT LETTER
<PAGE> 75
EXHIBIT E
to
RECEIVABLES PURCHASE AGREEMENT
FORM OF SUBORDINATED NOTE
<PAGE> 76
EXHIBIT F
to
RECEIVABLES PURCHASE AGREEMENT
LIST OF ACTIONS AND SUITS
<PAGE> 77
EXHIBIT G
to
RECEIVABLES PURCHASE AGREEMENT
LOCATION OF RECORDS
<PAGE> 78
EXHIBIT H
to
RECEIVABLES PURCHASE AGREEMENT
LIST OF SELLER'S SUBSIDIARIES,
DIVISIONS AND TRADENAMES
<PAGE> 79
EXHIBIT I
to
RECEIVABLES PURCHASE AGREEMENT
FORM OF TRANSFERRING AFFILIATE LETTER
<PAGE> 80
EXHIBIT J
to
RECEIVABLES PURCHASE AGREEMENT
LIST OF TRANSFERRING AFFILIATES, CHIEF EXECUTIVE
OFFICES OF TRANSFERRING AFFILIATES AND TRADENAMES
<PAGE> 81
EXHIBIT K
to
RECEIVABLES PURCHASE AGREEMENT
FORM OF ACCOUNT AGENT AGREEMENT
<PAGE> 1
Exhibit 10.4
TRANSFER AND ADMINISTRATION AGREEMENT
between
ENTERPRISE FUNDING CORPORATION,
as Company
and
NMC FUNDING CORPORATION
as Transferor
and
NATIONAL MEDICAL CARE, INC.
as Collection Agent
and
NATIONSBANK, N.A.
as Agent and Bank Investor
Dated as of August 28, 1997
<PAGE> 2
TABLE OF CONTENTS
PRELIMINARY STATEMENTS 1
ARTICLE I DEFINITIONS 1
SECTION 1.1. Certain Defined Terms 1
SECTION 1.2. Other Terms 30
SECTION 1.3. Computation of Time Periods 30
ARTICLE II PURCHASE AND SETTLEMENTS 31
SECTION 2.1. Facility 31
SECTION 2.2. Transfers; Certificates; Eligible Receivables 31
SECTION 2.3. Selection of Tranche Periods and Tranche Rates 35
SECTION 2.4. Discount, Fees and Other Costs and Expenses 38
SECTION 2.5. NonLiquidation Settlement and Reinvestment
Procedures 39
SECTION 2.6. Liquidation Settlement Procedures. 39
SECTION 2.7. Fees 41
SECTION 2.8. Protection of Ownership Interest of the
Company and the Bank Investors; Special
Accounts and Concentration Account 41
SECTION 2.9. Deemed Collections; Application of Payments 43
SECTION 2.10. Payments and Computations, Etc 44
SECTION 2.11. Reports 44
SECTION 2.12. Collection Account 45
SECTION 2.13. Sharing of Payments, Etc 45
SECTION 2.14. Right of Setoff 46
SECTION 2.15. Additional Transferring Affiliates 46
ARTICLE III REPRESENTATIONS AND WARRANTIES 47
SECTION 3.1. Representations and Warranties of the Transferor 47
SECTION 3.2. Reaffirmation of Representations and Warranties
by the Transferor 52
SECTION 3.3. Representations and Warranties of the
Collection Agent 53
ARTICLE IV CONDITIONS PRECEDENT 55
SECTION 4.1. Conditions to Closing 55
ARTICLE V COVENANTS 59
<PAGE> 3
SECTION 5.1. Affirmative Covenants of Transferor 59
SECTION 5.2. Negative Covenants of the Transferor 67
SECTION 5.3. Affirmative Covenants of the Collection Agent 71
SECTION 5.4. Negative Covenants of the Collection Agent 73
ARTICLE VI ADMINISTRATION AND COLLECTION 74
SECTION 6.1. Appointment of Collection Agent 74
SECTION 6.2. Duties of Collection Agent 74
SECTION 6.3. Right After Designation of New Collection Agent 76
SECTION 6.4. Collection Agent Default 78
SECTION 6.5. Responsibilities of the Transferor 79
ARTICLE VII TERMINATION EVENTS 79
SECTION 7.1. Termination Events 79
SECTION 7.2. Termination 83
ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS 84
SECTION 8.1. Indemnities by the Transferor 84
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses 87
SECTION 8.3. Taxes 90
SECTION 8.4. Other Costs, Expenses and Related Matters 92
SECTION 8.5. Reconveyance Under Certain Circumstances 93
ARTICLE IX THE AGENT; BANK COMMITMENT 93
SECTION 9.1. Authorization and Action 93
SECTION 9.2. Agent's Reliance, Etc. 95
SECTION 9.3. Credit Decision 96
SECTION 9.4. Indemnification of the Agent 96
SECTION 9.5. Successor Agent 96
SECTION 9.6. Payments by the Agent 97
SECTION 9.7. Bank Commitment; Assignment to Bank Investors 97
ARTICLE X MISCELLANEOUS 101
SECTION 10.1. Term of Agreement 101
SECTION 10.2. Waivers; Amendments 102
SECTION 10.3. Notices 102
SECTION 10.4. Governing Law; Submission to Jurisdiction;
Integration 104
<PAGE> 4
SECTION 10.5. Severability; Counterparts 105
SECTION 10.6. Successors and Assigns 105
SECTION 10.7. Waiver of Confidentiality 105
SECTION 10.8. Confidentiality Agreement 106
SECTION 10.9. No Bankruptcy Petition Against the Company 106
SECTION 10.10. No Recourse Against Stockholders,
Officers or Directors 106
SECTION 10.11. Characterization of the Transactions
Contemplated by the Agreement 107
<PAGE> 5
EXHIBITS
EXHIBIT A Forms of Contracts
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Special Account Banks, Designated Account Agents and
Concentration Bank
EXHIBIT D-1 Form of Special Account Letter
EXHIBIT D-2 Form of Concentration Account Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Form of Transfer Certificate
EXHIBIT G Form of Assignment and Assumption Agreement
EXHIBIT H List of Actions and Suits (Sections 3.1(g), 3.1(k) and 3.3(e))
EXHIBIT I Location of Records
EXHIBIT J [RESERVED]
EXHIBIT K Forms of Opinions of Counsel
EXHIBIT L Forms of Secretary's Certificate
EXHIBIT M Form of Certificate
EXHIBIT N List of Approved Fiscal Intermediaries
EXHIBIT O Form of Transferring Affiliate Letter
EXHIBIT P Form of Parent Agreement
EXHIBIT Q List of Transferring Affiliates
EXHIBIT R Form of Account Agent Agreement
EXHIBIT S List of Closing Documents
<PAGE> 6
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "AGREEMENT"), dated as of
August 28, 1997, by and among NMC FUNDING CORPORATION, a Delaware corporation,
as transferor (in such capacity, the "TRANSFEROR"), NATIONAL MEDICAL CARE, INC.,
a Delaware corporation, as the initial "Collection Agent", ENTERPRISE FUNDING
CORPORATION, a Delaware corporation (the "COMPANY"), and NATIONSBANK, N.A., a
national banking association ("NATIONSBANK"), as agent for the Company and the
Bank Investors (in such capacity, the "AGENT") and as a Bank Investor.
PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to convey, transfer and assign, from
time to time, undivided percentage interests in certain accounts receivable, and
the Company may desire to, and the Bank Investors, if requested, shall, accept
such conveyance, transfer and assignment of such undivided percentage interests,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ACCOUNT AGENT AGREEMENT" means an agreement in substantially the form
of Exhibit R hereto.
"ADMINISTRATIVE AGENT" means NationsBank, N.A., as administrative agent.
"ADMINISTRATIVE FEE" means the fee payable by the Transferor to the
Company pursuant to Section 2.7(a) hereof, the terms of which are set forth in
the Fee Letter.
<PAGE> 7
"ADVERSE CLAIM" means a lien, security interest, charge or encumbrance,
or other right or claim in, of or on any Person's assets or properties in favor
of any other Person (including any UCC financing statement or any similar
instrument filed against such Person's assets or properties).
"AFFECTED ASSETS" means, collectively, the Receivables and the Related
Security, Collections and Proceeds relating thereto.
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of voting stock, by contract or otherwise.
"AGENT" means NationsBank, in its capacity as agent for the Company and
the Bank Investors, and any successor thereto appointed pursuant to Article IX.
"AGGREGATE UNPAIDS" means, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Discount with respect to all Tranche
Periods at such time, (ii) the Net Investment at such time, and (iii) all other
amounts owed (whether due or accrued) hereunder by the Transferor to the Company
at such time.
"AGREEMENT" shall have the meaning specified in the Preamble to this
Agreement.
"APPLICABLE MARGIN" means, for purposes of calculating the Eurodollar
Rate for any Eurodollar Tranche Period, the applicable margin corresponding to
the Consolidated Leverage Ratio (as such term is defined in the Parent
Agreement) set forth below as determined as of the last day of the month then
most recently ended for which an Investor Report shall have been delivered to
the Agent:
<PAGE> 8
Consolidated
Leverage
Ratio Applicable Margin
[Smaller] 1.75 0%
[Greater or equal to] 1.75 but [Smaller than] 2.0 0%
[Greater or equal to] 2.0 but [Smaller than] 2.5 0%
[Greater or equal to] 2.50 but [Smaller than] 3.0 0%
[Greater or equal to] 3.0 but [Smaller than] 3.25 0%
[Greater or equal to] 3.25 but [Smaller than] 3.75 0%
[Greater or equal to] 3.75 but [Smaller than] 4.0 .125%
[Greater or equal to] 4.0 but [Smaller than] 4.25 .250%
[Greater or equal to] 4.25 .500%
The Applicable Margin shall be determined on each date that an Investor Report
shall be delivered by the Transferor or the Collection Agent to the Agent and
such Applicable Margin shall remain in effect until the date upon which the next
Investor Report shall have been so delivered to the Agent, at which time the
Applicable Margin shall be redetermined in accordance with the Consolidated
Leverage Ratio reported at such time.
"ARRANGEMENT FEE" means the fee payable by the Transferor to the
Administrative Agent pursuant to Section 2.7(b) hereof, the terms of which are
set forth in the Fee Letter.
"ASSIGNMENT AMOUNT" with respect to a Bank Investor shall mean at any
time an amount equal to the lesser of (i) such Bank Investor's Pro Rata Share of
the Net Investment at such time and (ii) such Bank Investor's unused Commitment.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an Assignment and Assumption
Agreement substantially in the form of Exhibit G attached hereto.
<PAGE> 9
"AUDITOR" shall have the meaning specified in Section 6.2(c).
"BANK INVESTORS" shall mean NationsBank, N.A. and each other financial
institution identified as such on the signature pages hereof and their
respective successors and assigns.
"BANK REVOLVER" means that certain Credit Agreement dated as of
September 27, 1996, among NMC and certain subsidiaries and affiliates as
borrowers, certain subsidiaries and affiliates as guarantors, the lenders named
therein, NationsBank, N.A., as paying agent, and The Bank of Nova Scotia, The
Chase Manhattan Bank, Dresdner Bank AG, New York and Grand Cayman Branches, and
NationsBank, N.A. as managing agents.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
ss.101 et seq., as amended.
"BASE RATE" or "BR" means, a rate per annum equal to the greater of (i)
the prime rate of interest announced by the Liquidity Provider (or, if more than
one Liquidity Provider, then by NationsBank) from time to time, changing when
and as said prime rate changes (such rate not necessarily being the lowest or
best rate charged by the Liquidity Provider (or NationsBank, as applicable)) and
(ii) the sum of (a) 1.50% and (b) the rate equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, 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 Liquidity Provider (or, if more than one Liquidity
Provider, then by NationsBank) from three Federal funds brokers of recognized
standing selected by it.
"BENEFIT PLAN" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Transferor, the Seller or any ERISA
Affiliate of the Transferor or the Seller is, or at any time during the
<PAGE> 10
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA.
"BMA" means Bio-Medical Applications Management Company, Inc., a
Delaware corporation, and its successors and permitted assigns.
"BMA TRANSFER AGREEMENT" means that certain Receivables Purchase
Agreement of even date herewith by and between BMA, as seller, and NMC, as
purchaser, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day on
which banks in New York, New York or Charlotte, North Carolina are authorized or
required by law to close, and, when used with respect to the determination of
any Eurodollar Rate or any notice with respect thereto, any such day which is
also a day for trading by and between banks in United States dollar deposits in
the London interbank market.
"BR TRANCHE" means a Tranche as to which Discount is calculated at the
Base Rate.
"BR TRANCHE PERIOD" means, with respect to a BR Tranche, either (i)
prior to the Termination Date, a period of up to 30 days requested by the
Transferor and agreed to by the Company, NationsBank on behalf of the Liquidity
Provider, or the Agent, as the case may be, commencing on a Business Day
requested by the Transferor and agreed to by the Company, NationsBank or the
Agent, as the case may be, or (ii) after the Termination Date, a period of one
day. If such BR Tranche Period would end on a day which is not a Business Day,
such BR Tranche Period shall end on the next succeeding Business Day.
"CAPITALIZED LEASE" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"CERTIFICATE" means the certificate issued to the Agent for the benefit
of the Company and the Bank Investors pursuant to Section 2.2(d) hereof.
<PAGE> 11
"CHAMPUS/VA" means, collectively, (i) the Civilian Health and Medical
Program of the Uniformed Service, a program of medical benefits covering
retirees and dependents of a member or a former member of a uniformed service,
provided, financed and supervised by the United States Department of Defense and
established by 10 USC ss.1071 ET SEQ. and (ii) the Civilian Health and Medical
Program of Veterans Affairs, a program of medical benefits covering dependents
of veterans, administered by the United States Veterans' Administration and
Department of Defense and established by 38 USC ss.1713 ET SEQ.
"CHAMPUS/VA REGULATIONS" means collectively, all regulations of the
Civilian Health and Medical Program of the Uniformed Services and the Civilian
Health and Medical Program of Veterans Affairs, including (a) all federal
statutes (whether set forth in 10 USC 1071, 38 USC 1713 or elsewhere) affecting
CHAMPUS/VA; and (b) all applicable provisions of all rules, regulations
(including 32 CFR 199 and 38 CFR 17.54), manuals, orders, and administrative,
reimbursement and other guidelines of all Governmental Authorities (including,
without limitation, HHS, the Department of Defense, the Veterans'
Administration, the Department of Transportation, the Assistant Secretary of
Defense (Health Affairs), and the Office of CHAMPUS, or any Person or entity
succeeding to the functions of any of the foregoing) promulgated pursuant to or
in connection with any of the foregoing (whether or not having the force of
law), in each case as may be amended, supplemented or otherwise modified from
time to time.
"CLOSING DATE" means August 28, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGENT" means NationsBank, N.A., as collateral agent for any
Liquidity Provider, any Credit Support Provider, the holders of Commercial Paper
and certain other parties.
"COLLECTION ACCOUNT" means the account, established by the Agent, for
the benefit of the Company and the Bank Investors, pursuant to Section 2.12.
<PAGE> 12
"COLLECTION AGENT" means at any time the Person then authorized pursuant
to Section 6.1 to service, administer and collect Receivables.
"COLLECTION AGENT DEFAULT" has the meaning specified in Section 6.4
hereof.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, and cash proceeds of Related Security
with respect to such Receivable.
"COLLECTION DELAY PERIOD" means 10 days or such other number of days as
the Agent may select upon three Business Days' notice to the Transferor.
"COMMERCIAL OBLIGOR" means any Obligor referred to in clause (C) or (E)
of the definition of "Obligor" contained in this Section 1.1 hereof.
"COMMERCIAL PAPER" means the promissory notes issued by the Company in
the commercial paper market.
"COMMITMENT" means (i) with respect to each Bank Investor party hereto,
the commitment of such Bank Investor to make acquisitions from the Transferor or
the Company in accordance herewith in an amount not to exceed the dollar amount
set forth opposite such Bank Investor's signature on the signature page hereto
under the heading "COMMITMENT", MINUS the dollar amount of any Commitment or
portion thereof assigned pursuant to an Assignment and Assumption Agreement PLUS
the dollar amount of any increase to such Bank Investor's Commitment consented
to by such Bank Investor prior to the time of determination, (ii) with respect
to any assignee of a Bank Investor party hereto taking pursuant to an Assignment
and Assumption Agreement, the commitment of such assignee to make acquisitions
from the Transferor or the Company not to exceed the amount set forth in such
Assignment and Assumption Agreement MINUS the dollar amount of any Commitment or
portion thereof assigned pursuant to an Assignment and Assumption Agreement
prior to such time of determination and (iii) with respect to any assignee of an
assignee referred to in clause (ii), the commitment of such
<PAGE> 13
assignee to make acquisitions from the Transferor or the Company not to exceed
the amount set forth in an Assignment and Assumption Agreement between such
assignee and its assign.
"COMMITMENT TERMINATION DATE" means August 27, 1998, or such later date
to which the Commitment Termination Date may be extended by Transferor, the
Agent and the Bank Investors not later than 60 days prior to the then current
Commitment Termination Date.
"COMPANY" means Enterprise Funding Corporation, and its successors and
assigns.
"CONCENTRATION ACCOUNT" means a special depositary account in the name
of the Transferor maintained at a bank acceptable to the Agent for the purpose
of receiving Collections remitted from the Special Accounts. "CONCENTRATION
ACCOUNT AGREEMENT" means an agreement substantially in the form attached as
Exhibit D-2 hereto among the Transferor, the Concentration Account Bank and the
Agent.
"CONCENTRATION ACCOUNT BANK" means the bank holding the Concentration
Account.
"CONCENTRATION ACCOUNT NOTICE" means a notice, in substantially the form
of the Notice of Effectiveness attached to the Concentration Account Agreement,
from the Agent to the Concentration Account Bank.
"CONCENTRATION FACTOR" means for any Designated Obligor on any date of
determination (calculated prior to the payment of any Transfer Price to be made
on such date but as if such payment had been made): (a) in the case of each
Commercial Obligor and each Hospital Obligor, 5% of the Net Investment
outstanding on such date; (b) in the case of each US Government Obligor, 80% of
the Net Investment outstanding on such date, or (c) in the case of any Obligor
(including any of the foregoing), such other amount determined by the Agent in
the reasonable exercise of its good faith judgment and disclosed in a written
notice delivered to the Transferor.
<PAGE> 14
"CONFIDENTIAL INFORMATION" shall have the meaning specified in Section
5.1(d).
"CONTRACT" means an agreement between an Originating Entity and an
Obligor which (i) if in writing, is in substantially the form of one of the
forms of written contract set forth in Exhibit A hereto or otherwise approved by
the Company, and (ii) if an open account agreement, is evidenced by one of the
forms of invoices set forth in Exhibit A hereto or otherwise approved by the
Company, in each case pursuant to or under which such Obligor shall be obligated
to pay for services or merchandise from time to time.
"CONTRACTUAL ADJUSTMENT" means, with respect to any Receivable, an
amount by which the Outstanding Balance of such Receivable is reduced as a
result of (i) Medicare or Medicaid program funding and fee requirements or (ii)
any other reasonable and customary insurance company or other charge or
reimbursement policies or procedures.
"CP RATE" means, with respect to any CP Tranche Period, the rate
equivalent to the rate (or if more than one rate, the weighted average of the
rates) at which Commercial Paper having a term equal to such CP Tranche Period
may be sold by any placement agent or commercial paper dealer selected by the
Company, PROVIDED, HOWEVER, that if the rate (or rates) as agreed between any
such agent or dealer and the Company is a discount rate, then the rate (or if
more than one rate, the weighted average of the rates) resulting from the
Company's converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum.
"CP TRANCHE" means a Tranche as to which Discount is calculated at a CP
Rate.
"CP TRANCHE PERIOD" means, with respect to a CP Tranche, a period of
days not to exceed 90 days commencing on a Business Day requested by the
Transferor and agreed to by the Company pursuant to Section 2.3. If a CP Tranche
Period would end on a day which is not a Business Day, such CP Tranche Period
shall end on the next succeeding Business Day.
<PAGE> 15
"CREDIT AND COLLECTION POLICY" shall mean the Transferor's credit and
collection policy or policies and practices, relating to Contracts and
Receivables existing on the date hereof and referred to in Exhibit B attached
hereto, as modified from time to time in compliance with Section 5.2(c).
"CREDIT SUPPORT AGREEMENT" means the agreement between the Company and
the Credit Support Provider evidencing the obligation of the Credit Support
Provider to provide credit support to the Company in connection with the
issuance by the Company of Commercial Paper.
"CREDIT SUPPORT PROVIDER" means the Person or Persons who provides
credit support to the Company in connection with the issuance by the Company of
Commercial Paper.
"DEALER FEE" means the fee payable by the Transferor to the Collateral
Agent, pursuant to Section 2.4 hereof, the terms of which are set forth in the
Fee Letter.
"DEEMED COLLECTIONS" means any Collections on any Receivable deemed to
have been received pursuant to Section 2.9(a) or (b) hereof.
"DEFAULTED RECEIVABLE" means a Receivable: (i) as to which any payment,
or part thereof, remains unpaid for over 270 days from the original due date for
such Receivable; (ii) as to which an Event of Bankruptcy has occurred and is
continuing with respect to the Obligor thereof; (iii) which has been identified
by the Transferor, any Originating Entity or the Collection Agent as
uncollectible; or (iv) which, consistent with the Credit and Collection Policy,
should be written off as uncollectible.
"DEFAULT RATIO" means the ratio (expressed as a percentage) computed as
of the last day of each calendar month by dividing (i) the aggregate Outstanding
Balance of all Receivables that became Defaulted Receivables during such month
together with all Receivables under the Medicare or Medicaid Program that were
deemed disputed as provided for in the PROVISO to clause (xi) of the definition
of "Eligible Receivables" during such month, by (ii) the aggregate Outstanding
Balance of Receivables that shall have
<PAGE> 16
been acquired by the Seller during the month occurring nine months prior to such
calendar month.
"DELINQUENT RECEIVABLE" means a Receivable: (i) as to which any payment,
or part thereof, remains unpaid for more than 90 days from the original due date
for such Receivable and (ii) which is not a Defaulted Receivable.
"DESIGNATED ACCOUNT AGENT" means, in the case of any Originating Entity,
an Affiliate thereof that (i) is, directly or indirectly, a wholly-owned
Subsidiary of FMCH, (ii) has agreed to maintain a deposit account for the
benefit of such Originating Entity to which Obligors in respect of such
Originating Entity have been directed to remit payments on Receivables, and
(iii) shall have executed and delivered to the Agent an Account Agent Agreement.
"DESIGNATED OBLIGOR" means, at any time, each Obligor; PROVIDED,
HOWEVER, that any Obligor shall cease to be a Designated Obligor upon notice to
the Transferor from the Agent, delivered at any time.
"DILUTION HORIZON" means the ratio (expressed as a percentage) computed
as of the last day of each calendar month by dividing (i) the aggregate
Outstanding Balance of all Receivables acquired by the Transferor during the
calendar month preceding such calendar month by (ii) the Net Receivables Balance
as of such last day of such calendar month.
"DILUTION RATIO" means, with respect to any calendar month, the greater
of (a) the ratio (expressed as a percentage) computed as of the last day of such
calendar month by dividing (i) the aggregate amount of any Receivables that are
reduced or canceled as a result of any defective, rejected or returned
merchandise or services and all credits, rebates, discounts, disputes, warranty
claims, repossessed or returned goods, chargebacks, allowances and any other
billing and other adjustment (whether effected through the granting of credits
against the applicable Receivables or by the issuance of a check or other
payment in respect of (and as payment for) such reduction) by the Seller, the
Transferor or the Collection Agent, provided to Obligors in respect of
Receivables during such month by (ii)
<PAGE> 17
the aggregate Outstanding Balance of all Receivables which arose during the
preceding month and (b) 3.0%.
"DILUTION RESERVE" means, at any time, an amount equal to the product of
(i) the Dilution Reserve Percentage and (ii) the Net Receivables Balance on such
date.
"DILUTION RESERVE PERCENTAGE" means, on any day, an amount equal to:
[ ( 1.5 x ADR ) + [( DS - ADR ) x ( DS / ADR)] ] x DH
Where:
ADR = the average Dilution Ratio in respect of the 12 calendar month period
then most recently ended.
DS = the highest Dilution Ratio at any time during the 12 calendar month
period then most recently ended.
DH = the Dilution Horizon on such date.
"DISCOUNT" means, with respect to any Tranche Period:
(TR x TNI x AD)
---------------
360
Where:
TR = the Tranche Rate applicable to such Tranche Period.
TNI = the portion of the Net Investment allocated to such Tranche Period.
AD = the actual number of days during such Tranche Period.
PROVIDED, HOWEVER, that no provision of this Agreement shall require the payment
or permit the collection of Discount in excess of the maximum amount permitted
by applicable law; and PROVIDED, FURTHER, that Discount shall not be considered
<PAGE> 18
paid by any distribution if at any time such distribution is rescinded or must
be returned for any reason.
"DISCOUNT RESERVE" means, at any time, an amount equal to:
TD + LY
Where:
TD = the sum of the unpaid Discount for all Tranche Periods.
LY = the Liquidation Yield
"EARLY COLLECTION FEE" means, for any Tranche Period (such Tranche
Period to be determined without regard to the last sentence in Section 2.3(a)
hereof) during which the portion of the Net Investment that was allocated to
such Tranche Period is reduced for any reason whatsoever, the excess, if any, of
(i) the additional Discount that would have accrued during such Tranche Period
if such reductions had not occurred, minus (ii) the income, if any, received by
the recipient of such reductions from investing the proceeds of such reductions.
"ELIGIBLE INVESTMENTS" means any of the following (a) negotiable
instruments or securities represented by instruments in bearer or registered or
in book-entry form which evidence (i) obligations fully guaranteed by the United
States of America; (ii) time deposits in, or bankers acceptances issued by, any
depositary institution or trust company incorporated under the laws of the
United States of America or any state thereof and subject to supervision and
examination by Federal or state banking or depositary institution authorities;
PROVIDED, HOWEVER, that at the time of investment or contractual commitment to
invest therein, the certificates of deposit or short-term deposits, if any, or
long-term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of such depositary institution or trust company shall have a
credit rating from Moody's and S&P of at least "P-1" and "A-1", respectively, in
the case of the certificates of deposit or short-term deposits, or a rating
<PAGE> 19
not lower than one of the two highest investment categories granted by Moody's
and by S&P; (iii) certificates of deposit having, at the time of investment or
contractual commitment to invest therein, a rating from Moody's and S&P of at
least "P-1" and A-1", respectively; or (iv) investments in money market funds
rated in the highest investment category or otherwise approved in writing by the
applicable rating agencies; (b) demand deposits in any depositary institution or
trust company referred to in (a) (ii) above; (c) commercial paper (having
original or remaining maturities of no more than 30 days) having, at the time of
investment or contractual commitment to invest therein, a credit rating from
Moody's and S& P of at least "P-1" and "A-1", respectively; and (e) repurchase
agreements involving any of the Eligible Investments described in clauses
(a)(i), (a)(iii) and (d) hereof so long as the other party to the repurchase
agreement has at the time of investment therein, a rating from Moody's and S&P
of at least "P-1" and "A-1", respectively.
"ELIGIBLE RECEIVABLE" means, at any time, any Receivable:
(i) which has been (A) originated by the Seller or a Transferring
Affiliate, (B) sold by the applicable Transferring Affiliate to the Seller
pursuant to (and in accordance with) the Transferring Affiliate Letter or the
BMA Transfer Agreement, free and clear of any Adverse Claim, in the case of a
Receivable originated by a Transferring Affiliate, and (C) sold to the
Transferor pursuant to (and in accordance with) the Receivables Purchase
Agreement, with the effect that the Transferor has good title thereto, free and
clear of all Adverse Claims;
(ii) which (together with the Collections and Related Security
related thereto) has been the subject of either a valid transfer and assignment
from the Transferor to the Agent, on behalf of the Company and the Bank
Investors, of all of the Transferor's right, title and interest therein or the
grant of a first priority perfected security interest herein (and in the
Collections and Related Security related thereto), effective until the
termination of this Agreement;
<PAGE> 20
(iii) the Obligor of which (A) is a United States resident, (B) is a
Designated Obligor at the time of the initial creation of an interest therein
hereunder, (C) is not an Affiliate of any Originating Entity or any of the
parties hereto, (D) other than in the case of any Obligor of the type described
in clause (A), (B) or (F) of the definition herein of "Obligor", is not a
government or a governmental subdivision or agency and (E) is not referred to in
clause (G) of the definition herein of "Obligor";
(iv) which is not a Defaulted Receivable at the time of the initial
creation of an interest therein hereunder;
(v) which is not a Delinquent Receivable at the time of the initial
creation of an interest of the Company therein;
(vi) which, (A) arises pursuant to a Contract with respect to which
each of the Seller and the Transferor has performed all obligations required to
be performed by it thereunder, including without limitation shipment of the
merchandise and/or the performance of the services purchased thereunder; (B) has
been billed in accordance with the Credit and Collection Policy and in
accordance with such requirements (including any requirements that relate to the
timing of billing) as may have been imposed by the applicable Obligor thereon
(including, without limitation, any Official Body associated with any of the
CHAMPUS/VA, Medicaid or Medicare programs); and (C) according to the Contract
related thereto, is required to be paid in full upon receipt by the Obligor
thereof of the invoice related thereto or at a later time not to exceed 90 days
from the original billing date therefor;
(vii) which is an "eligible asset" as defined in Rule 3a-7 under the
Investment Company Act of 1940, as amended;
(viii) a purchase of which with the proceeds of Commercial Paper would
constitute a "current transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended;
<PAGE> 21
(ix) which is an "account" or "general intangible" within the meaning
of Article 9 of the UCC of all applicable jurisdictions;
(x) which is denominated and payable only in United States dollars
in the United States;
(xi) which, (A) arises under a Contract that has been duly authorized
and that, together with the Receivable related thereto, is in full force and
effect and constitutes the legal, valid and binding obligation of the related
Obligor enforceable against such Obligor in accordance with its terms, (B) is
not subject to any litigation, dispute, counterclaim or other defense and (C) is
not subject to any offset other than as set forth in the related Contract;
PROVIDED, HOWEVER, that for the purposes of this clause (xi), any Receivable
under the Medicare, Medicaid or CHAMPUS/VA program as to which any payment, or
part thereof, remains unpaid for 270 days or more from the original invoice date
shall be deemed to be a disputed Receivable and, further, any Receivable, for
which the Transferor receives a partial payment that is below the estimated
value of such Receivable, net of Contractual Adjustments, shall be deemed to be
a disputed Receivable;
(xii) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, (A) laws, rules and regulations relating
to healthcare, insurance, usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy and (B) CHAMPUS/VA Regulations, Medicare
Regulations and Medicaid Regulations) and with respect to which no part of the
Contract related thereto is or would, as a result of any of the transactions
contemplated herein, be in violation of any such law, rule or regulation in any
material respect and with respect to which no Originating Entity or the
Transferor, and to the best knowledge of the Seller and the Transferor, no other
party to the Contract related thereto, is in violation of any such law, rule or
regulation in any material respect;
(xiii) which (A) satisfies all applicable requirements of the Credit
and Collection Policy, (B) is
<PAGE> 22
assignable as contemplated under the Transaction Documents, and (C) complies
with such other criteria and requirements as the Agent may from time to time
specify to the Transferor following five Business Days' notice;
(xiv) which was generated in the ordinary course of an Originating
Entity's business;
(xv) the Obligor of which has been directed to make all payments to a
Special Account with respect to which there shall be a Special Account Letter
(and, if applicable, an Account Agent Agreement) in effect;
(xvi) neither the assignment of which under the Transferring Affiliate
Letter or the BMA Transfer Agreement by the applicable Transferring Affiliate,
the assignment of which under the Receivables Purchase Agreement by the Seller
and the assignment of which hereunder by the Transferor nor the performance or
execution of any of the other transactions contemplated in any of the
Transaction Documents with respect thereto violates, conflicts or contravenes
any applicable laws, rules or regulations (including without limitation, any
CHAMPUS/VA Regulations, any Medicaid Regulations and any Medicare Regulations),
orders or writs or any contractual or other restriction, limitation or
encumbrance;
(xvii) which has not been compromised, adjusted or modified (including
by the extension of time for payment or the granting of any discounts,
allowances or credits); PROVIDED, HOWEVER, that only such portion of such
Receivable that is the subject of such compromise, adjustment or modifications
shall be deemed to be ineligible pursuant to the terms of this clause (xvii);
(xviii) which, in the case of any Receivable payable by an Obligor
through a fiscal intermediary or similar entity, is payable through one of the
Persons in such capacity that is specified in Exhibit N hereto or that has
otherwise been approved by the Agent;
(xix) as to which, in the case of any Obligor of the type described in
clause (C) or (D) of the definition of "Obligor" herein, notice of the interest
therein of the Transferor shall have been given to such Obligor; and
<PAGE> 23
(xx) which, in the case of any Receivable arising from a sale of
services or merchandise by (A) NMC Homecare, Inc. or National Medical Care Home
Care Service Agency, Inc., such Receivable shall have been billed through either
the "AS 400" billing system or the "Mesta" system or (B) NMC Diagnostic
Services, Inc., such Receivable shall have been billed through the "IDX" billing
system or, in any such case, through any successor billing system described to
the Agent by the Seller or the Transferor and approved by the Agent from time to
time.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA AFFILIATE" means, with respect to any Person, (i) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code (as in effect from time to time, the
"Code")) as such Person; (ii) a trade or business (whether or not incorporated)
under common control (within the meaning of Section 414(c) of the Code) with
such Person; or (iii) a member of the same affiliated service group (within the
meaning of Section 414(n) of the Code) as such Person, any corporation described
in clause (i) above or any trade or business described in clause (ii) above.
"ESTIMATED MATURITY PERIOD" shall mean, at any time, the period, rounded
upward to the nearest whole number of days, equal to the weighted average number
of days until due of the Receivables as calculated by the Collection Agent in
good faith and set forth in the most recent Investor Report, such calculation to
be based on the assumptions that (a) each Receivable within a particular aging
category (as set forth in the Investor Report) will be paid on the last day of
such aging category and (b) the last day of the last such aging category
coincides with the last date on which any Outstanding Balance of Receivables
would be written off as uncollectible or charged against any applicable reserve
or similar account in accordance with the objective requirements of the Credit
and Collection Policy and the Seller's and the Transferor's normal accounting
practices applied on a basis consistent with those reflected in the Seller's
financial statements, PROVIDED, HOWEVER, that if
<PAGE> 24
the Agent, the Company or any of the Bank Investors shall reasonably disagree
with any such calculation, the Agent may recalculate the Estimated Maturity
Period, and such recalculation, in the absence of manifest error, shall be
conclusive.
"EURODOLLAR RATE" means, with respect to any Eurodollar Tranche Period,
a rate which is equal to the sum (rounded upwards, if necessary, to the next
higher 1/100 of 1%) of (A) the Applicable Margin at such time, (B) the rate
obtained by dividing (i) the applicable LIBOR Rate by (ii) a percentage equal to
100% minus the reserve percentage used for determining the maximum reserve
requirement as specified in Regulation D (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) that is applicable
to the Agent during such Eurodollar Tranche Period in respect of eurocurrency or
eurodollar funding, lending or liabilities (or, if more than one percentage
shall be so applicable, the daily average of such percentage for those days in
such Eurodollar Tranche Period during which any such percentage shall be
applicable) plus (C) the then daily net annual assessment rate (rounded upwards,
if necessary, to the nearest 1/100 of 1%) as estimated by the Agent for
determining the current annual assessment payable by the Agent to the Federal
Deposit Insurance Corporation in respect of eurocurrency or eurodollar funding,
lending or liabilities.
"EURODOLLAR TRANCHE" means a Tranche as to which Discount is calculated
at the Eurodollar Rate.
"EURODOLLAR TRANCHE PERIOD" means, with respect to a Eurodollar Tranche,
prior to the Termination Date, a period of up to one month requested by the
Transferor and agreed to by the Company, NationsBank, on behalf of the Liquidity
Provider, or the Agent, as the case may be, commencing on a Business Day
requested by the Transferor and agreed to by the Company, NationsBank or the
Agent, as applicable; PROVIDED, HOWEVER, that if such Eurodollar Tranche Period
would expire on a day which is not a Business Day, such Eurodollar Tranche
Period shall expire on the next succeeding Business Day; PROVIDED, FURTHER, that
if such Eurodollar Tranche Period would expire on (a) a day which is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Eurodollar
<PAGE> 25
Tranche Period shall expire on the next preceding Business Day or (b) a Business
Day for which there is no numerically corresponding day in the applicable
subsequent calender month, such Eurodollar Tranche Period shall expire on the
last Business Day of such month.
"EVENT OF BANKRUPTCY" means, with respect to any Person, (i) that such
Person (a) shall generally not pay its debts as such debts become due or (b)
shall admit in writing its inability to pay its debts generally or (c) shall
make a general assignment for the benefit of creditors; (ii) any proceeding
shall be instituted by or against such Person seeking to adjudicate it as
bankruptcy or insolvent, or seeking liquidation, winding up, reorganization,
arrangements, 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 any substantial part of
its property or (iii) if such Person is a corporation (or other business
entity), such Person or any Subsidiary shall take any corporate (or analogous)
action to authorize any of the actions set forth in the preceding clauses (i) or
(ii).
"EXCLUDED TAXES" shall have the meaning specified in Section 8.3 hereof.
"FACILITY FEE" means the fee payable by the Transferor to the Company
pursuant to Section 2.7(a) hereof, the terms of which are set forth in the Fee
Letter.
"FACILITY LIMIT" means $204,000,000; PROVIDED that such amount may not
at any time exceed the aggregate Commitments at any time in effect.
"FEE LETTER" means the letter agreement dated the date hereof between
the Transferor and the Company with respect to the fees to be paid by the
Transferor hereunder, as amended, modified or supplemented from time to time.
"FINANCE CHARGES" means, with respect to a Contract, any finance,
interest, late or similar charges owing by an Obligor pursuant to such Contract.
<PAGE> 26
"FMC" means Fresenius Medical Care AG, a corporation organized and
existing under the laws of the Federal Republic of Germany.
"FMCH" means Fresenius Medical Care Holdings, Inc., a New York
corporation, and its successors and permitted assigns.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
accounting profession, which are in effect as of the date of this Agreement.
"GUARANTY" means, with respect to any Person any agreement by which such
Person assumes, guarantees, endorses, contingently agrees to purchase or provide
funds for the payment of, or otherwise becomes liable upon, the obligation of
any other Person, or agrees to maintain the net worth or working capital or
other financial condition of any other Person or otherwise assures any other
creditor of such other Person against loss, including, without limitation, any
comfort letter, operating agreement or take-or-pay contract and shall include,
without limitation, the contingent liability of such Person in connection with
any application for a letter of credit.
"HCFA" means the Health Care Financing Administration, an agency of the
HHS charged with administering and regulating, among other things, certain
aspects of Medicaid and Medicare.
"HHS" means the Department of Health and Human Services, an agency of
the Federal Government of the United States.
"HOSPITAL OBLIGOR" means any Obligor referred to in clause (D) of the
definition of "Obligor" contained in this Section 1.1 hereof.
"INCREMENTAL TRANSFER" means a Transfer upon giving effect to which the
Net Investment hereunder shall be increased.
<PAGE> 27
"INDEBTEDNESS" means, with respect to any Person and without
duplication, such Person's (i) obligations for borrowed money, (ii) obligations
representing the deferred purchase price of property other than accounts payable
arising in the ordinary course of such Person's business on terms customary in
the trade, (iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease obligations and (vi)
obligations for which such Person is obligated pursuant to a Guaranty.
"INDEMNIFIED AMOUNTS" has the meaning specified in Section 8.1 hereof.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1 hereof.
"INITIAL TRANSFER DOCUMENTS" shall have the meaning specified in Section
5.2(h).
"INTEREST COMPONENT" shall mean, (i) with respect to any Commercial
Paper issued on an interest-bearing basis, the interest payable on such
Commercial Paper at its maturity (including any dealer commissions) and (ii)
with respect to any Commercial Paper issued on a discount basis, the portion of
the face amount of such Commercial Paper representing the discount incurred in
respect thereof (including any dealer commissions).
"INVESTOR REPORT" means a report, in substantially the form attached
hereto as Exhibit E or in such other form as is mutually agreed to by the
Transferor and the Agent, furnished by the Collection Agent pursuant to Section
2.11 hereof.
"LAW" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.
"LIBOR RATE" means, with respect to any Eurodollar Tranche Period, the
rate at which deposits in dollars are
<PAGE> 28
offered to the Agent, in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days before the first day of such Eurodollar Tranche
Period in an amount approximately equal to the Eurodollar Tranche to which the
Eurodollar Rate is to apply and for a period of time approximately equal to the
applicable Eurodollar Tranche Period.
"LIQUIDATION YIELD" means, at any time, an amount equal to:
(RVF x LBR x NI) x (EMP + CDF)
----------
360
Where:
RVF = the Rate Variance Factor at such time;
LBR = the Base Rate at such time which is applicable to the liquidation
period after a Termination Event;
NI = the Net Investment at such time;
EMP = the Estimated Maturity Period of the Receivables; and
CDF = the Collection Delay Factor.
"LIQUIDITY PROVIDER" means the Person or Persons who will provide
liquidity support to the Company in connection with the issuance by the Company
of Commercial Paper.
"LIQUIDITY PROVIDER AGREEMENT" means the agreement between the Company
and the Liquidity Provider evidencing the obligation of the Liquidity Provider
to provide liquidity support to the Company in connection with the issuance by
the Company of Commercial Paper.
"LOSS HORIZON" means, as of any date, the product of (a) a ratio
(expressed as a percentage) computed by dividing (i) the aggregate Outstanding
Balance of all Receivables acquired by the Seller during the nine most recently
ended calendar months by (ii) the aggregate Outstanding Balance of all
Receivables that are not more than 270 days past due as of the last day of the
most
<PAGE> 29
recently ended calendar month times (b) the highest average Default Ratio for
any consecutive three month period during the immediately preceding 12-month
period.
"LOSS PERCENTAGE" means on any day the greater of (i) one and one-half
(1.5) times the Loss Horizon as of such day and (ii) 20%.
"LOSS RESERVE" means, on any day, an amount equal to:
LP x (NI + DLR + DR + SFR)
Where:
LP = the Loss Percentage at the close of business of the Collection Agent
on such day;
NI = the Net Investment at the close of business of the Collection Agent on
such day;
DLR = the Dilution Reserve at the close of business of the Collection Agent
on such day;
DR = the Discount Reserve at the close of business of the Collection Agent
on such day;
SFR = the Servicing Fee Reserve at the close of business of the Collection
Agent on such day.
Notwithstanding the foregoing, the Loss Reserve shall at all times be at least
equal to $10,000,000.
"LOSS-TO-LIQUIDATION RATIO" means the ratio (expressed as a percentage)
computed as of the last day of each calendar month by dividing (i) the aggregate
Outstanding Balance of all Receivables which became Defaulted Receivables during
such month, by (ii) the aggregate amount of Collections received by the
Collection Agent during such period.
"MAJORITY INVESTORS" means, at any time, the Agent and those Bank
Investors which hold Commitments aggregating in excess of 66 and 2/3% of the
Facility Limit as of such date.
<PAGE> 30
"MATERIAL ADVERSE EFFECT" means a material adverse effect on any of (i)
the collectibility or enforceability of a material portion of the Receivables or
Related Security, (ii) the ability of the Transferor or any Originating Entity
to charge or collect a material portion of the Receivables or Related Security,
(iii) the ability of (A) the Transferor or any Originating Entity to perform or
observe in any material respect any provision of this Agreement or any other
Transaction Document to which it is a party or (B) of FMC or FMCH to cause the
due and punctual performance and observation by the Seller or the Transferor of
any such provision or, if the Seller or the Transferor shall fail to do so, to
perform or observe any such provision required to be performed or observed by
the Seller or the Transferor under this Agreement or any other Transaction
Document to which the Seller or the Transferor is party, in each case pursuant
to the Parent Agreement, (iv) the ability of (A) any Transferring Affiliate to
perform or observe in any material respect any provision of the Transferring
Affiliate Letter or, in the case of BMA, the BMA Transfer Agreement or, in the
case of any Designated Account Agent, the applicable Account Agent Agreement, or
(B) of FMC or FMCH to cause the due and punctual performance and observation by
such Transferring Affiliate, BMA or such Designated Account Agent of any such
provision or, if such Transferring Affiliate, BMA or such Designated Account
Agent shall fail to do so, to perform or observe any such provision, in each
case pursuant to the Parent Agreement, (v) the financial condition, operations,
businesses or properties of FMC, FMCH, NMC or the Transferor or (vi) the
interests of the Agent, the Company or the Bank Investors under the Transaction
Documents.
"MAXIMUM PERCENTAGE FACTOR" means 98%.
"MEDICAID" means the medical assistance program established by Title XIX
of the Social Security Act (42 USC ss.ss.1396 ET SEQ.) and any statutes
succeeding thereto.
"MEDICAID REGULATIONS" means, collectively, (a) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting Medicaid; (b) all state statutes and plans for medical assistance
enacted in connection with such statutes and federal rules and regulations
promulgated pursuant to or in connection with
<PAGE> 31
such statutes; and (c) all applicable provisions of all rules, regulations
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Authorities (including, without limitation, HHS, HCFA, the office
of the Inspector General for HHS, or any Person succeeding to the functions of
any of the foregoing) promulgated pursuant to or in connection with any of the
foregoing (whether or not having the force of law), in each case as may be
amended, supplemented or otherwise modified from time to time.
"MEDICARE" means the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss.1395 et
seq.) and any statutes succeeding thereto.
"MEDICARE REGULATIONS" means, collectively, (a) all federal statutes
(whether set forth in Title XVIII of the Social Security Act or elsewhere)
affecting Medicare; and (b) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Authorities (including, without limitation, HHS, HCFA, the Office
of the Inspector General for HHS, or any Person succeeding to the functions of
any of the foregoing) promulgated pursuant to or in connection with the
foregoing (whether or not having the force of law), as each may be amended,
supplemented or otherwise modified from time to time.
"MINIMUM AMOUNT" shall have the meaning specified in Section 5.1(h).
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding five years contributed to by the Transferor, the Seller or
any ERISA Affiliate of the Transferor or the Seller on behalf of its employees.
"NATIONSBANK" shall have the meaning specified in the Preamble to this
Agreement.
"NET ASSET TEST" shall mean, in connection with any assignment by the
Company of an interest in the Net
<PAGE> 32
Investment pursuant to Section 9.7 hereof, that on the day immediately prior to
the day on which such assignment is to take effect, the Net Receivables Balance
shall be greater than the Net Investment.
"NET INVESTMENT" means the sum of the cash amounts paid to the
Transferor for each Incremental Transfer less the aggregate amount of
Collections received and applied by the Agent to reduce such Net Investment
pursuant to Section 2.5, 2.6 or 2.9 hereof; PROVIDED that the Net Investment
shall be restored and reinstated in the amount of any Collections so received
and applied if at any time the distribution of such Collections is rescinded or
must otherwise be returned for any reason; and PROVIDED FURTHER that the Net
Investment may be increased by the amount described in Section 9.7(d) as
described therein.
"NET RECEIVABLES BALANCE" means at any time the Outstanding Balance of
the Eligible Receivables at such time reduced by the sum of (i) the aggregate
amount by which the Outstanding Balance of all Eligible Receivables of each
Designated Obligor or class of Designated Obligors exceeds the Concentration
Factor for such Designated Obligor or class of Designated Obligors, PLUS (ii)
the aggregate Outstanding Balance of all Eligible Receivables which are
Defaulted Receivables, PLUS (iii) the aggregate Outstanding Balance of all
Eligible Receivables of each Obligor with respect to which 25% or more of such
Obligor's Receivables are Defaulted Receivables.
"NMC" means National Medical Care, Inc., a Delaware corporation and
owner of 100% of the outstanding stock of the Transferor.
"NPRBI" shall have the meaning specified in Section 2.13.
"OBLIGOR" of any Receivable means (i) any Person obligated to make
payments of such Receivable pursuant to a Contract and/or (ii) any Person owing
any amount in respect of such Receivable, or in respect of any Related Security
with respect to such Receivable, all such Persons referred to in any of clauses
(A), (B), (E), (F) and (G) below, and each Person referred to in any of clauses
(C) and (D) below,
<PAGE> 33
to be deemed for purposes of this Agreement to be one Obligor:
(A): all Persons owing Receivables or Related Security under
the Medicare program.
(B): all Persons owing Receivables or Related Security under
the Medicaid program.
(C): each Person which is an insurance company.
(D): each Person which is a hospital or other health care
provider.
(E): all Persons, other than health care providers or Persons
referred to in clause (A), (B), (C) or (D) above or clause (F) or (G)
below, owing Receivables arising from the sale by NMC Medical Products,
Inc. of services or merchandise.
(F): all Persons owing Receivables or Related Security under
the CHAMPUS/VA Program.
(G): all Persons who receive the services or merchandise the
sale of which results in Receivables that are not insured, guaranteed or
otherwise supported in respect thereof by any of the Persons referred to
in clauses (A) through (F) above, including any Person owing any amount
in respect of Receivables by reason of insurance policy deductibles or
co-insurance agreements or arrangements.
"OFFICIAL BODY" means any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
<PAGE> 34
"ORIGINATING ENTITY" means any of the Seller and any Transferring
Affiliate.
"OTHER TRANSFEROR" means any Person other than the Transferor that has
entered into a receivables purchase agreement or transfer and administration
agreement with the Company.
"OUTSTANDING BALANCE" means, with respect to any Receivable at any time,
the then outstanding principal amount thereof excluding any accrued and
outstanding Finance Charges related thereto.
"PARENT AGREEMENT" means an agreement substantially in the form set
forth as Exhibit P hereto dated as of the date hereof made by FMC and FMCH in
respect of the obligations of the Originating Entities and NMC under the
Transaction Documents, as the same may be amended, restated, supplemented or
otherwise modified from time to time with the consent of the Agent.
"PARENT GROUP" means, collectively, FMC, FMCH, NMC, the Transferor, the
Originating Entities and their Subsidiaries and Affiliates, and "PARENT GROUP
MEMBER" means any such Person individually.
"PAYOR" shall, solely for purposes of Section 8.3, have the meaning
specified in such section.
"PERCENTAGE FACTOR" shall mean the fraction (expressed as a percentage)
computed at any time of determination as follows:
NI + LR + DLR + DR + SFR
------------------------
NRB
Where:
NI = the Net Investment at the time of such computation;
LR = the Loss Reserve at the time of such computation;
<PAGE> 35
DLR = the Dilution Reserve at the time of such computation;
DR = the Discount Reserve at the time of such computation;
SFR = the Servicing Fee Reserve at the time of such computation; and
NRB = the Net Receivables Balance at the time of such computation.
"PERSON" means any corporation, limited liability company, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
enterprise, government or any department or agency or any government.
"POTENTIAL TERMINATION EVENT" means an event which but for the lapse of
time or the giving of notice, or both, would constitute a Termination Event.
"PRIMARY PAYOR" means (i) each Obligor referred to in clauses (A), (B),
(E), (F) and (G) of the definition of "Obligor" contained in this Section 1.1,
(ii) collectively, all Obligors of the type referred to in clause (C) of the
definition of "Obligor" contained in this Section 1.1 and (iii) collectively,
all Obligors of the type referred to in clause (D) of the definition of
"Obligor" contained in this Section 1.1.
"PRO RATA SHARE" means, for a Bank Investor, the Commitment of such Bank
Investor divided by the sum of the Commitments of all Bank Investors.
"PROCEEDS" means "proceeds" as defined in Section 9-306 (1) of the UCC.
"PROGRAM FEE" means the fee payable by the Transferor to the Company
pursuant to Section 2.7(a) hereof, the terms of which are set forth in the Fee
Letter.
<PAGE> 36
"PURCHASED INTEREST" means the interest in the Receivables acquired by
the Liquidity Provider through purchase pursuant to the terms of the Liquidity
Provider Agreement.
"PURCHASE TERMINATION DATE" means the date upon which the Transferor
shall cease, for any reason whatsoever, to make purchases of Receivables from
the Seller under the Receivables Purchase Agreement or the Receivables Purchase
Agreement shall terminate for any reason whatsoever.
"RATE VARIANCE FACTOR" means the number, computed from time to time in
good faith by the Agent, that reflects the largest potential variance (from
minimum to maximum) in selected interest rates over a period of time selected by
the Agent from time to time, set forth in written notice by the Agent to the
Transferor and the Collection Agent.
"RECEIVABLE" means the indebtedness of any Obligor under a Contract and
sold by the Seller to the Transferor pursuant to the Receivables Purchase
Agreement, whether constituting an account, chattel paper, instrument, insurance
claim, investment property or general intangible, arising in connection with the
sale or lease of merchandise, or the rendering of services, by an Originating
Entity, and includes the right to payment of any Finance Charges and other
obligations of such Obligor with respect thereto.
"RECEIVABLES PURCHASE AGREEMENT" means the Receivables Purchase
Agreement dated as of August 28, 1997 by and between NMC, as seller, and the
Transferor, as purchaser, as such agreement may be amended, modified or
supplemented and in effect from time to time.
"RECIPIENT" shall, solely for purposes of Section 8.3, have the meaning
specified in such section.
"RECORDS" means all Contracts and other documents, books, records and
other information (including, without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to receivables and the related Obligors.
"REINVESTMENT TERMINATION DATE" means the second Business Day after the
delivery by the Company to the
<PAGE> 37
Transferor of written notice that the Company elects to commence the
amortization of its interest in the Net Investment or otherwise liquidate its
interest in the Transferred Interest.
"REINVESTMENT TRANSFER" means a Transfer occurring in connection with
the reinvestment of Collections pursuant to Section 2.2(b) and 2.5.
"RELATED COMMERCIAL PAPER" shall mean Commercial Paper issued by the
Company the proceeds of which were used to acquire, or refinance the acquisition
of, an interest in Receivables with respect to the Transferor.
"RELATED SECURITY" means with respect to any Receivable, all of the
Transferor's rights, title and interest in, to and under:
(i) all of the Seller's, the Transferor's or any
Transferring Affiliate's interest, if any, in the merchandise (including
returned or repossessed merchandise), if any, the sale of which gave
rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to
such Receivable or otherwise, including, without limitation, insurance,
guaranties and other agreements or arrangements under the Medicare
program, the Medicaid program, state renal programs, CHAMPUS/VA, private
insurance policies, and hospital and other health care programs and
health care provider arrangements;
<PAGE> 38
(iv) all Records related to such Receivable;
(v) all rights and remedies of the Transferor (A) under the
Receivables Purchase Agreement, together with all financing statements
filed by the Transferor against the Seller in connection therewith, (B)
under the Transferring Affiliate Letter, together with all financing
statements filed in connection therewith against the Transferring
Affiliates, (C) under the BMA Transfer Agreement, together with all
financing statements filed in connection therewith against BMA and (D)
under the Parent Agreement; and
(vi) all Proceeds of any of the foregoing.
"SECTION 8.2 COSTS" has the meaning specified in Section 8.2(d) hereof.
"SELLER" means NMC and its successors and permitted assigns.
"SERVICING FEE" means the fees payable by the Company or the Bank
Investors to the Collection Agent, with respect to a Tranche, in an amount equal
to 0.25% per annum on the amount of the Net Investment allocated to such Tranche
pursuant to Section 2.3 hereof. Such fee shall accrue from the date of the
initial purchase of an interest in the Receivables to the date on which the
Percentage Factor is reduced to zero. Such fee shall be payable only from
Collections pursuant to, and subject to the priority of payments set forth in,
Section 2.5 hereof. After the Termination Date, such fee shall be payable only
from Collections pursuant to, and subject to the priority of payments set forth
in, Section 2.6 hereof.
"SERVICING FEE RESERVE" means at any time an amount equal to the product
of (i) the aggregate Outstanding Balance of all Receivables at such time, (ii)
the Servicing Fee percentage and (iii) a fraction having as the numerator, the
sum of (a) the Estimated Maturity Period PLUS (b) the Collection Delay Period,
and as the denominator, 360.
<PAGE> 39
"SOCIAL SECURITY ACT" means the Social Security Act, as amended from
time to time, and the regulations promulgated and rulings and advisory opinions
issued thereunder.
"SPECIAL ACCOUNT" means a special depositary account maintained at a
bank acceptable to the Agent for the purpose of receiving Collections, which
account is in the name of either (i) the Originating Entity in respect of the
Receivables giving rise to such Collections or (ii) a Designated Account Agent
acting on behalf of such Originating Entity.
"SPECIAL ACCOUNT BANK" means any of the banks holding one or more
Special Accounts.
"SPECIAL ACCOUNT LETTER" means a letter, in substantially the form of
Exhibit D-1 hereto, from an Originating Entity (or, if applicable, a Designated
Account Agent) to any Special Account Bank, executed by such Originating Entity
(or such Designated Account Agent) to such Special Account Bank. "STANDARD &
POOR'S" or "S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc..
"SUBORDINATED NOTE" shall have the meaning specified in the Receivables
Purchase Agreement.
"SUBSIDIARY" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"TAXES" shall have the meaning specified in Section 8.3 hereof.
"TERMINATION DATE" means the earliest of (i) the Business Day designated
by the Transferor to the Agent as the Termination Date at any time following 60
days' written notice to the Agent, (ii) the date of termination of the
commitment of the Liquidity Provider under the Liquidity Provider Agreement,
(iii) the date of termination of the
<PAGE> 40
commitment of the Credit Support Provider under the Credit Support Agreement,
(iv) the day upon which the Termination Date is declared or automatically occurs
pursuant to Section 7.2(a) hereof, (v) two Business Days prior to the Commitment
Termination Date, (vi) the day on which a Reinvestment Termination date shall
occur, (vii) the Purchase Termination Date, or (viii) August 27, 1998.
"TERMINATION EVENT" means an event described in Section 7.1 hereof.
"TRANCHE" means a portion of the Net Investment allocated to a Tranche
Period pursuant to Section 2.3 hereof.
"TRANCHE PERIOD" means a CP Tranche Period, a BR Tranche Period or a
Eurodollar Tranche Period.
"TRANCHE RATE" means the CP Rate, the Base Rate or the Eurodollar Rate.
"TRANSACTION COSTS" has the meaning specified in Section 8.4(a) hereof.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the
Receivables Purchase Agreement, the Fee Letter, the Special Account Letters, the
Concentration Account Agreement, the Account Agent Agreement(s), the
Certificates, the Transfer Certificates, the Transferring Affiliate Letter, the
BMA Transfer Agreement, the Parent Agreement and all of the other instruments,
documents and other agreements executed and delivered by any Originating Entity,
FMC, FMCH, NMC or the Transferor in connection with any of the foregoing, in
each case, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"TRANSFER" means a conveyance, transfer and assignment by the Transferor
to the Company or the Bank Investors of an undivided percentage ownership
interest in Receivables hereunder together with Related Security, Collections
and Proceeds with respect thereto (including, without limitation, as a result of
any reinvestment of Collections in Transferred Interests pursuant to Sections
2.2(b) and 2.5).
<PAGE> 41
"TRANSFER CERTIFICATE" has the meaning specified in Section 2.2(a)
hereof.
"TRANSFER DATE" means, with respect to each Transfer, the Business Day
on which such Transfer is made.
"TRANSFER PRICE" means with respect to any Incremental Transfer, the
amount paid to the Transferor by the Company or the Bank Investors as described
in the applicable Transfer Certificate.
"TRANSFEROR" means NMC Funding Corporation, a Delaware corporation, and
its successors and permitted assigns.
"TRANSFERRED INTEREST" means, at any time of determination, an undivided
percentage ownership interest in (i) each and every then outstanding Receivable,
(ii) all Related Security with respect to each such Receivable, (iii) all
Collections with respect thereto, and (iv) other Proceeds of the foregoing,
which undivided ownership interest shall be equal to the Percentage Factor at
such time, and only at such time (without regard to prior calculations). The
Transferred Interest in each Receivable, together with Related Security,
Collections and Proceeds with respect thereto, shall at all times be equal to
the Transferred Interest in each other Receivable, together with Related
Security, Collections and Proceeds with respect thereto. To the extent that the
Transferred Interest shall decrease as a result of a recalculation of the
Percentage Factor, the Agent, on behalf of the Company or the Bank Investors, as
applicable, shall be considered to have reconveyed to the Transferor (without
recourse, representation or warranty of any type or kind) an undivided
percentage ownership interest in each Receivable, together with Related
Security, Collections and Proceeds with respect thereto, in an amount equal to
such decrease such that in each case the Transferred Interest in each Receivable
shall be equal to the Transferred Interest in each other Receivable.
"TRANSFERRIN AFFILIATE" means a company specified on Exhibit Q hereto as
such Schedule may be amended from time to time as provided in Section 2.15;
PROVIDED, HOWEVER,
<PAGE> 42
that no such company shall be a Transferring Affiliate from
and after the occurrence of any Event of Bankruptcy by or with respect thereto
unless any Receivables that arose from sales by such company exist on such
date, in which case such company shall continue to be a Transferring Affiliate
until the respective Outstanding Balances of all such Receivables shall have
been reduced to zero; and PROVIDED, FURTHER, that, solely with respect to the
Receivables transferred by it to the Seller pursuant to the BMA Transfer
Agreement, BMA shall constitute a "Transferring Affiliate" hereunder.
"TRANSFERRING AFFILIATE LETTER" means, collectively, the respective
letters, in each case in substantially the form of Exhibit O hereto, from the
Transferring Affiliates (other than BMA) to the Agent, the Transferor and the
Seller, as the same may be amended, restated, supplemented or otherwise modified
from time to time with the consent of the Agent.
"UCC" means, with respect to any state, the Uniform Commercial Code as
from time to time in effect in such state.
"U.S." or "UNITED STATES" means the United States of America.
"US GOVERNMENT OBLIGOR" means any Obligor that is the federal government
of the United States, or any subdivision or agency thereof the obligations of
which are supported by the full faith and credit of the United States, and shall
include any Obligor referred to in clause (A),(B) or (F) of the definition of
"Obligor" contained in this Section 1.1.
"VOTING STOCK" means, with respect to any Person, capital stock issued
by such 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 though the right so to vote
has been suspended by the happening of such a contingency.
"VOTING STOCK" means, with respect to any Person, capital stock issued
by such 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 though the right so to vote
has been suspended by the happening of such a contingency.
SECTION 1.2. OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the
<PAGE> 43
UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
SECTION 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including", the words
"to" and "until" each means "to but excluding", and the word "within" means
"from and excluding a specified date and to and including a later specified
date".
ARTICLE II
PURCHASE AND SETTLEMENTS
SECTION 2.1. FACILITY. Upon the terms and subject to the conditions
herein set forth, (x) the Transferor may, at its option, convey, transfer and
assign to the Agent, on behalf of the Company or the Bank Investors, as
applicable, and (y) the Agent, on behalf of the Company may, provided that the
Termination Date shall not have occurred, at the Company's option, or the Agent,
on behalf of the Bank Investors, provided that the Termination Date shall not
have occurred, shall, if so requested, accept such conveyance, transfer and
assignment from the Transferor of, without recourse except as provided herein,
undivided percentage ownership interests (by way of an Incremental Transfer or a
Reinvestment Transfer, as applicable) in the Receivables, together with Related
Security, Collections and Proceeds with respect thereto, from time to time. By
accepting any conveyance, transfer and assignment hereunder, neither the
Company, any Bank Investor nor the Agent assumes or shall have any obligations
or liability under any of the Contracts, all of which shall remain the
obligations and liabilities of the Transferor and the Seller.
SECTION 2.2. TRANSFERS; CERTIFICATES; ELIGIBLE RECEIVABLES (a)
INCREMENTAL TRANSFERS. Upon the terms and subject to the conditions herein set
forth the Transferor may, at its option, request that an Incremental Transfer be
made by the Agent, on behalf of the Company or the Agent, on behalf of the Bank
Investors, as applicable. It shall be a condition precedent to each Incremental
Transfer that (i)
<PAGE> 44
after giving effect to the payment to the Transferor of the applicable Transfer
Price (x) the sum of the Net Investment PLUS the Interest Component of all
outstanding Related Commercial Paper, would not exceed the Facility Limit, (y)
the Percentage Factor would not exceed the Maximum Percentage Factor and (z) the
Net Investment would not exceed $200,000,000; (ii) the representations and
warranties set forth in Section 3.1 shall be true and correct both immediately
before and immediately after giving effect to any such Incremental Transfer and
the payment to the Transferor of the Transfer Price related thereto; (iii) an
Investor Report shall have been delivered prior to such Incremental Transfer as
required by Section 3.2 hereof and (iv) in the case of any Incremental Transfer
to the Bank Investors, either (x) the Bank Investors shall have previously
accepted the assignment by the Company of all of its interest in the Affected
Assets or (y) the Company shall have had an opportunity to direct that such
assignment occur on or prior to giving effect to such Incremental Transfer.
<PAGE> 45
The Transferor shall, by notice to the Agent given by
telecopy, offer to convey, transfer and assign to the Agent, on behalf of the
Company or the Bank Investors, as applicable, undivided percentage ownership
interests in the Receivables and the other Affected Assets relating thereto at
least three (3) Business Days prior to the proposed date of any Incremental
Transfer. Each such notice shall specify (w) whether such request is made to the
Agent, on behalf of the Company or on behalf of the Bank Investors (it being
understood and agreed that once any Transferred Interest hereunder is acquired
on behalf of the Bank Investors, the Agent, on behalf of Bank Investors, shall
be required to purchase all Transferred Interests, held by the Agent on behalf
of the Company in accordance with Section 9.7 and thereafter no additional
Incremental Transfers shall be acquired on behalf of the Company hereunder), (x)
the desired Transfer Price (which shall be at least $1,000,000 or integral
multiples of $250,000 in excess thereof) or, to the extent that the then
available unused portion of the Facility Limit is less than such amount, such
lesser amount equal to such available portion of the Facility Limit, (y) the
desired date of such Incremental Transfer and (z) the desired Tranche Period(s)
and allocations of the Net Investment of such Incremental Transfer thereto as
required by Section 2.3. The Agent will promptly notify the Company or each of
the Bank Investors, as the case may be, of the Agent's receipt of any request
for an Incremental Transfer to be made to the Agent on behalf of such Person. To
the extent that any such Incremental Transfer is requested of the Agent, on
behalf of the Company, the Company shall instruct the Agent to accept or reject
such offer by notice given to the Transferor and the Agent by telephone or
telecopy by no later than the close of its business on the Business Day
following its receipt of any such request. Each notice of proposed Transfer
shall be irrevocable and binding on the Transferor and the Transferor shall
indemnify the Company and each Bank Investor against any loss or expense
incurred by the Company or any Bank Investor, either directly or indirectly
(including, in the case of the Company, through the Liquidity Provider
Agreement) as a result of any failure for any reason (including failure to
satisfy any of the conditions precedent in respect thereof) by the Transferor to
complete such Incremental Transfer including, without limitation, any loss
(including loss of anticipated profits) or expense incurred by the Company or
<PAGE> 46
any Bank Investor, either directly or indirectly (including, in the case of the
Company, pursuant to the Liquidity Provider Agreement) by reason of the
liquidation or reemployment of funds acquired by the Company (or the Liquidity
Provider) or any Bank Investor (including, without limitation, funds obtained by
issuing commercial paper or promissory notes or obtaining deposits as loans from
third parties) for the Company or any Bank Investor to fund such Incremental
Transfer.
On the date of the initial Incremental Transfer, the Agent, on behalf of
the Company or the Bank Investors, as applicable, shall deliver written
confirmation to the Transferor of the Transfer Price, the Tranche Period(s) and
the Tranche Rate(s) relating to such Transfer and the Transferor shall deliver
to the Agent the Transfer Certificate in the form of Exhibit F hereto (the
"Transfer Certificate"). The Agent shall indicate the amount of the initial
Incremental Transfer together with the date thereof on the grid attached to the
Transfer Certificate. On the date of each subsequent Incremental Transfer, the
Agent shall send written confirmation to the Transferor of the Transfer Price,
the Tranche Period(s), the Transfer Date and the Tranche Rate(s) applicable to
such Incremental Transfer. The Agent shall indicate the amount of the
Incremental Transfer together with the date thereof as well as any decrease in
the Net Investment on the grid attached to the Transfer Certificate. The
Transfer Certificate shall evidence the Incremental Transfers.
By no later than 11:00 a.m. (New York time) on any Transfer Date, the
Company or each Bank Investor, as the case may be, shall remit its share (which,
in the case of an Incremental Transfer to the Bank Investors, shall be equal to
such Bank Investor's Pro Rata Share) of the aggregate Transfer Price for such
Transfer to the account of the Agent specified therefor from time to time by the
Agent by notice to such Persons. The obligation of each Bank Investor to remit
its Pro Rata Share of any such Transfer Price shall be several from that of each
other Bank Investor, and the failure of any Bank Investor to so make such amount
available to the Agent shall not relieve any other Bank Investor of its
obligation hereunder. Following each Incremental Transfer and the Agent's
receipt of funds from
<PAGE> 47
the Company or the Bank Investors as aforesaid, the Agent shall remit the
Transfer Price to the Transferor's account at the location indicated in Section
10.3 hereof, in immediately available funds, an amount equal to the Transfer
Price for such Incremental Transfer. Unless the Agent shall have received notice
from the Company or any Bank Investor, as applicable, that such Person will not
make its share of any Transfer Price relating to any Incremental Transfer
available on the applicable Transfer Date therefor, the Agent may (but shall
have no obligation to) make the Company's or any such Bank Investor's share of
any such Transfer Price available to the Transferor in anticipation of the
receipt by the Agent of such amount from the Company or such Bank Investor. To
the extent the Company or any such Bank Investor fails to remit any such amount
to the Agent after any such advance by the Agent on such Transfer Date, the
Company or such Bank Investor, on the one hand, and the Transferor, on the other
hand, shall be required to pay such amount, together with interest thereon at a
per annum rate equal to the Federal funds rate (as determined in accordance with
clause (ii) of the definition of "Base Rate"), in the case of the Company or any
such Bank Investor, or the Base Rate, in the case of the Transferor, to the
Agent upon its demand therefor (provided that the Company shall have no
obligation to pay such interest amounts except to the extent that it shall have
sufficient funds to pay the face amount of its Commercial Paper in full). Until
such amount shall be repaid, such amount shall be deemed to be Net Investment
paid by the Agent and the Agent shall be deemed to be the owner of a Transferred
Interest hereunder. Upon the payment of such amount to the Agent (x) by the
Transferor, the amount of the aggregate Net Investment shall be reduced by such
amount or (y) by the Company or such Bank Investor, such payment shall
constitute such Person's payment of its share of the applicable Transfer Price
for such Transfer.
(b) REINVESTMENT TRANSFERS. On each Business Day occurring
after the initial Incremental Transfer hereunder and prior to the Termination
Date, the Transferor hereby agrees to convey, transfer and assign to the Agent,
on behalf of the Company or the Bank Investors, and in consideration of
Transferor's agreement to maintain at all times prior to the Termination Date a
Net Receivables Balance in an amount at least sufficient to maintain the
<PAGE> 48
Percentage Factor at an amount not greater than the Maximum Percentage Factor,
the Agent, on behalf of the Company may, and the Agent, on behalf of the Bank
Investors shall agree to purchase from the Transferor undivided percentage
ownership interests in each and every Receivable, together with Related
Security, Collections and Proceeds with respect thereto, to the extent that
Collections are available for such Transfer in accordance with Section 2.5
hereof, such that after giving effect to such Transfer, (i) the amount of the
Net Investment at the close of business on such Business Day shall be equal to
the amount of the Net Investment at the close of the business on the Business
Day immediately preceding such Business Day plus the Transfer Price of any
Incremental Transfer made on such day, if any, and (ii) the Transferred Interest
in each Receivable, together with Related Security, Collections and Proceeds
with respect thereto, shall be equal to the Transferred Interest in each other
Receivable, together with Related Security, Collections and Proceeds with
respect thereto.
(c) ALL TRANSFERS. Each Transfer shall constitute a purchase
by the Agent, on behalf of the Company or the Bank Investors, as applicable, of
undivided percentage ownership interests in each and every Receivable, together
with Related Security, Collections and Proceeds with respect thereto, then
existing, as well as in each and every Receivable, together with Related
Security, Collections and Proceeds with respect thereto, which arises at any
time after the date of such Transfer. The Agent's aggregate undivided percentage
ownership interest in the Receivables, together with the Related Security,
Collections and Proceeds with respect thereto, held on behalf of the Company or
the Bank Investors, as applicable, shall equal the Percentage Factor in effect
from time to time. The Agent shall hold the Transferred Interests on behalf of
the Company and each Bank Investor in accordance with each of the Company's and
each Bank Investor's percentage interest in the Transferred Interest (determined
on the basis of the relationship that the portion of the Net Investment funded
by such Person bears to the aggregate Net Investment of the Company and all of
the Bank Investors at such time).
(d) CERTIFICATE. The Transferor shall issue to the Agent the
Certificate, in the form of the Exhibit M, on or prior to the date hereof.
<PAGE> 49
(e) PERCENTAGE FACTOR. The Percentage Factor shall be
initially computed by the Collection Agent as of the opening of business of the
Collection Agent on the date of the initial Incremental Transfer hereunder.
Thereafter until the Termination Date, the Collection Agent shall recompute the
Percentage Factor at the time of each Incremental Transfer pursuant to Section
2.2(a) and as of the close of business of the Collection Agent on each Business
Day (other than a day after the Termination Date) and report such recomputation
to the Agent monthly, in the Investor Report, and at such other times as may be
requested by the Agent. The Percentage Factor shall remain constant from the
time as of which any such computation or recomputation is made until the time as
of which the next such recomputation, if any, shall be made, notwithstanding any
additional Receivables arising, any Incremental Transfer made pursuant to
Section 2.2(a) or any Reinvestment Transfer made pursuant to Sections 2.2(b) and
2.5 during any period between computations of the Percentage Factor. The
Percentage Factor, as computed as of the close of business on the Business Day
immediately preceding the Termination Date, shall remain constant at all times
on and after the Termination Date until the date on which the Net Investment has
been reduced to zero, and all accrued Discount and Servicing Fees have been paid
in full and all other Aggregate Unpaids have been paid in full at which time the
Percentage Factor shall be recomputed in accordance with Section 2.6.
<PAGE> 50
SECTION 2.3. SELECTION OF TRANCHE PERIODS AND TRANCHE RATES.
(a) PRIOR TO THE TERMINATION DATE; TRANSFERRED INTEREST HELD
ON BEHALF OF THE COMPANY. At all times hereafter, but prior to the Termination
Date and not with respect to any portion of the Transferred Interest held on
behalf of the Bank Investors (or any of them), the Transferor may, subject to
the Company's approval and the limitations described below, request Tranche
Periods and allocate a portion of the Net Investment to each selected Tranche
Period, so that the aggregate amounts allocated to outstanding Tranche Periods
at all times shall equal the Net Investment held on behalf of the Company. The
Transferor shall give the Company irrevocable notice by telephone of the new
requested Tranche Period(s) at least three (3) Business Days prior to the
expiration of any then existing Tranche Period; PROVIDED, HOWEVER, that the
Company may select, in its sole discretion, any such new Tranche Period if (i)
the Transferor fails to provide such notice on a timely basis or (ii) the
Company determines, in its sole discretion, that the Tranche Period requested by
the Transferor is unavailable or for any reason commercially undesirable. The
Company confirms that it is its intention to allocate all or substantially all
of the Net Investment held on behalf of it to one or more CP Tranche Periods,
provided that the Company may determine, from time to time, in its sole
discretion, that funding such Net Investment by means of one or more CP Tranche
Periods is not possible or is not desirable for any reason. If the Liquidity
Provider acquires from the Company a Purchased Interest with respect to the
Receivables pursuant to the terms of the Liquidity Provider Agreement,
NationsBank, on behalf of the Liquidity Provider, may exercise the right of
selection granted to the Company hereby. The initial Tranche Period applicable
to any such Purchased Interest shall be a period of not greater than 14 days and
such Tranche shall be a BR Tranche. Thereafter, provided that the Termination
Date shall not have occurred, the Tranche Period applicable thereto shall be the
BR Rate or the Eurodollar Rate, as determined by NationsBank. In the case of any
Tranche Period outstanding upon the Termination Date, such Tranche Period shall
end on such date.
<PAGE> 51
(b) AFTER THE TERMINATION DATE; TRANSFERRED INTEREST HELD ON
BEHALF OF THE COMPANY. At all times on and after the Termination Date, with
respect to any portion of the Transferred Interest which shall be held by the
Agent on behalf of the Company, the Company or NationsBank, as applicable, shall
select all Tranche Periods and Tranche Rates applicable thereto.
(c) PRIOR TO THE TERMINATION DATE; TRANSFERRED INTEREST HELD
ON BEHALF OF BANK INVESTOR. At all times with respect to any portion of the
Transferred Interest held by the Agent on behalf of the Bank Investors, but
prior to the Termination Date, the initial Tranche Period applicable to such
portion of the Net Investment allocable thereto shall be a period of not greater
than 14 days and such Tranche shall be a BR Tranche. Thereafter, with respect to
such portion, and with respect to any other portion of the Transferred Interest
held on behalf of the Bank Investors (or any of them), provided that the
Termination Date shall not have occurred, the Tranche Period applicable thereto
shall be, at the Transferor's option, either a BR Tranche or a Eurodollar
Tranche. The Transferor shall give the Agent irrevocable notice by telephone of
the new requested Tranche Period at least three (3) Business Days prior to the
expiration of any then existing Tranche Period and, if the Transferor shall fail
to provide such notice, the Agent on behalf of the Bank Investors may, in its
sole discretion, select the new Tranche Period in respect of the applicable
Tranche. In the case of any Tranche Period outstanding upon the occurrence of
the Termination Date, such Tranche Period shall end on the date of such
occurrence.
(d) AFTER THE TERMINATION DATE; TRANSFERRED INTEREST HELD ON
BEHALF OF BANK INVESTOR. At all times on and after the Termination Date, with
respect to any portion of the Transferred Interest held by the Agent on behalf
of the Bank Investors, the Agent shall select all Tranche Periods and Tranche
Rates applicable thereto.
(e) EURODOLLAR RATE PROTECTION; ILLEGALITY. (i) If the Agent
is unable to obtain on a timely basis the information necessary to determine the
LIBOR Rate for any proposed Eurodollar Tranche, then
<PAGE> 52
(A) the Agent shall forthwith notify the Company or Bank
Investors, as applicable and the Transferor that the Eurodollar Rate
cannot be determined for such Eurodollar Tranche, and
(B) while such circumstances exist, neither the Company, the
Bank Investors or the Agent shall allocate the Net Investment of any
additional Transferred Interests purchased during such period or
reallocate the Net Investment allocated to any then existing Tranche
ending during such period, to a Eurodollar Tranche.
(ii) If, with respect to any outstanding Eurodollar Tranche,
the Company or any of the Bank Investors on behalf of which the Agent holds any
Transferred Interest therein notifies the Agent that it is unable to obtain
matching deposits in the London interbank market to fund its purchase or
maintenance of such Transferred Interest or that the Eurodollar Rate applicable
to such Transferred Interest will not adequately reflect the cost to the Person
of funding or maintaining its respective Transferred Interest for such Tranche
Period then the Agent shall forthwith so notify the Transferor, whereupon
neither the Agent nor the Company or the Bank Investors, as applicable, shall,
while such circumstances exist, allocate any Net Investment of any additional
Transferred Interest purchased during such period or reallocate the Net
Investment allocated to any Tranche Period ending during such period, to a
Eurodollar Tranche.
(iii) Notwithstanding any other provision of this Agreement,
if the Company or any of the Bank Investors, as applicable, shall notify the
Agent that such Person has determined (or has been notified by any Liquidity
Provider) that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful (either for the Company, such Bank
Investor, or such Liquidity Provider, as applicable), or any central bank or
other governmental authority asserts that it is unlawful, for the Company, such
Bank Investor or such Liquidity Provider, as applicable, to fund the purchases
or maintenance of Transferred Interests at the Eurodollar Rate, then (x) as of
the effective date of such notice from such Person to the Agent, the obligation
or ability of the Company or such Bank Investor, as applicable, to fund its
<PAGE> 53
purchase or maintenance of Transferred Interests at the Eurodollar Rate shall be
suspended until such Person notifies the Agent that the circumstances causing
such suspension no longer exist and (y) the Net Investment of each Eurodollar
Tranche in which such Person owns an interest shall either (1) if such Person
may lawfully continue to maintain such Transferred Interest at the Eurodollar
Rate until the last day of the applicable Tranche Period, be reallocated on the
last day of such Tranche Period to another Tranche Period in respect of which
the Net Investment allocated thereto accrues Discount at a Tranche Rate other
than the Eurodollar Rate or (2) if such Person shall determine that it may not
lawfully continue to maintain such Transferred Interest at the Eurodollar Rate
until the end of the applicable Tranche Period, such Person's share of the Net
Investment allocated to such Eurodollar Tranche shall be deemed to accrue
Discount at the Base Rate from the effective date of such notice until the end
of such Tranche Period.
<PAGE> 54
SECTION 2.4. DISCOUNT, FEES AND OTHER COSTS AND EXPENSES.
Notwithstanding the limitation on recourse under Section 2.1 hereof, the
Transferor shall pay, as and when due in accordance with this Agreement, all
fees hereunder, Discount (including Discount due the Company or any Bank
Investor), all amounts payable pursuant to Article VIII hereof, if any, and the
Servicing Fees. On the last day of each Tranche Period, the Transferor shall pay
to the Agent, on behalf of the Company or the Bank Investors, as applicable, an
amount equal to the accrued and unpaid Discount for such Tranche Period together
with, in the event the Transferred Interest is held on behalf of the Company, an
amount equal to the discount accrued on the Company's Commercial Paper to the
extent such Commercial Paper was issued in order to fund the Transferred
Interest in an amount in excess of the Transfer Price of an Incremental
Transfer. The Transferor shall pay to the Agent, on behalf of the Company, on
each day on which Related Commercial Paper is issued by the Company, the Dealer
Fee. Discount shall accrue with respect to each Tranche on each day occurring
during the Tranche Period related thereto. Nothing in this Agreement shall limit
in any way the obligations of the Transferor to pay the amounts set forth in
this Section 2.4.
<PAGE> 55
SECTION 2.5. NON-LIQUIDATION SETTLEMENT AND REINVESTMENT PROCEDURES. On
each day after the date of any Incremental Transfer but prior to the Termination
Date and provided that no Potential Termination Event shall have occurred and be
continuing, the Collection Agent shall, out of the Percentage Factor of
Collections received on or prior to such day and not previously applied or
accounted for: (i) set aside and hold in trust for the Agent, on behalf of the
Company or the Bank Investors, as applicable (or deposit into the Collection
Account if so required pursuant to Section 2.12 hereof), an amount equal to all
Discount and the Servicing Fee accrued through such day and not so previously
set aside or paid and (ii) apply the balance of such Percentage Factor of
Collections remaining after application of Collections as provided in clause (i)
of this Section 2.5 hereof to the Transferor, for the benefit of the Agent, on
behalf of the Company or the Bank Investors, as applicable, to the purchase of
additional undivided percentage interests in each Receivable pursuant to Section
2.2(b) hereof. On the last day of each Tranche Period, from the amounts set
aside as described in clause (i) of the first sentence of this Section 2.5
hereof, the Collection Agent shall deposit to the Agent's account, for the
benefit of the Company or the Bank Investors, as applicable, an amount equal to
the accrued and unpaid Discount for such Tranche Period and shall deposit to its
own account an amount equal to the accrued and unpaid Servicing Fee for such
Tranche Period. The Agent, upon its receipt of such amounts in the Agent's
account, shall distribute such amounts to the Company and/or the Bank Investors
entitled thereto as set forth above; provided that if the Agent shall have
insufficient funds to pay all of the above amounts in full on any such date, the
Agent shall pay such amounts ratably (based on the amounts owing to each such
Person) to all such Persons entitled to payment thereof. In addition, the
Collection Agent shall remit to the Transferor at the end of each Tranche
Period, such portion of Collections not allocated to the Agent, on behalf of
Company or the Bank Investors, as applicable.
SECTION 2.6. LIQUIDATION SETTLEMENT PROCEDURES. If at any time on or
prior to the Termination Date, the Percentage Factor is greater than the Maximum
Percentage Factor, then the Transferor shall immediately pay to the Agent, for
the benefit of the Company or the Bank Investors,
<PAGE> 56
as applicable, from previously received Collections, an amount equal to the
amount such that, when applied in reduction of the Net Investment, will result
in a Percentage Factor less than or equal to the Maximum Percentage Factor. Such
amount shall be applied to the reduction of the Net Investment of Tranche
Periods selected by the Agent. On the Termination Date and on each day
thereafter, and on each day on which a Termination Event or a Potential
Termination Event has occurred and is continuing, the Collection Agent shall set
aside and hold in trust for the Agent, on behalf of the Company or the Bank
Investors, as applicable (or deposit into the Collection Account if so required
pursuant to Section 2.12 hereof) the Percentage Factor of all Collections
received on such day and shall set aside and hold in trust for the Transferor
such portion of Collections not allocated to the Agent, on behalf of the Company
or the Bank Investors, as applicable. On the Termination Date or the day on
which a Termination Event or Potential Termination Event has occurred and is
continuing, the Collection Agent shall deposit to the Agent's account, for the
benefit of the Company or the Bank Investors, as applicable, any amounts set
aside pursuant to Section 2.5 above. On the last day of each Tranche Period to
occur on or after the Termination Date, during the continuance of a Termination
Event or Potential Termination Event, the Collection Agent shall deposit to the
Agent's account to the extent not already so deposited, for the benefit of the
Company or the Bank Investors, as applicable, the amounts so set aside for the
Agent, on behalf of the Company or the Bank Investors, pursuant to the second
preceding sentence, but not to exceed the sum of (i) the accrued Discount for
such Tranche Period, (ii) the portion of the Net Investment allocated to such
Tranche Period, and (iii) all other Aggregate Unpaids. On such day, the
Collection Agent shall deposit to its account, from the amounts set aside for
the Company and the Bank Investors pursuant to the preceding sentence which
remain after payment in full of the aforementioned amounts, the accrued
Servicing Fee for such Tranche Period. If there shall be insufficient funds on
deposit for the Collection Agent to distribute funds in payment in full of the
aforementioned amounts, the Collection Agent shall distribute funds FIRST, in
payment of the accrued Discount, SECOND, if the Transferor, the Seller or any
Affiliate of the Transferor or the Seller is not then the Collection Agent, to
the Collection Agent's account, in
<PAGE> 57
payment of the Servicing Fee payable to the Collection Agent, THIRD, in
reduction of the Net Investment allocated to any Tranche Period ending on such
date, FOURTH, in payment of all fees payable by the Transferor hereunder, FIFTH,
in payment of all other Aggregate Unpaids and SIXTH, if the Transferor, the
Seller or any Affiliate of the Transferor or the Seller is the Collection Agent,
to its account as Collection Agent, in payment of the Servicing Fee payable to
such Person as Collection Agent. The Agent, upon its receipt of such amounts in
the Agent's account, shall distribute such amounts to the Company and/or the
Bank Investors entitled thereto as set forth above; provided that if the Agent
shall have insufficient funds to pay all of the above amounts in full on any
such date, the Agent shall pay such amounts in the order of priority set forth
above and, with respect to any such category above for which the Agent shall
have insufficient funds to pay all amounts owing on such date, ratably (based on
the amounts in such categories owing to such Persons) among all such Persons
entitled to payment thereof.
Following the later to occur of the Termination Date and the date on
which the Net Investment has been reduced to zero, all accrued Discount and
Servicing Fees have been paid in full and all other Aggregate Unpaids have been
paid in full, (i) the Collection Agent shall recompute the Percentage Factor,
(ii) the Agent, on behalf of the Company and the Bank Investors, shall be
considered to have reconveyed to the Transferor all of the right, title and
interest in and to the Affected Assets (including the Transferred Interest)
without recourse, representation or warranty of any type or kind, (iii) the
Collection Agent shall pay to the Transferor any remaining Collections set aside
and held by the Collection Agent pursuant to the third sentence of this Section
2.6 and (iv) the Agent, on behalf of the Company and the Bank Investors, shall
execute and deliver to the Transferor, at the Transferor's expense, such
documents or instruments as are necessary to terminate the Agent's interests in
the Affected Assets. Any such documents shall be prepared by or on behalf of the
Transferor. On the last day of each Tranche Period, the Collection Agent shall
remit to the Transferor such portion of Collections set aside for the Transferor
pursuant to this Section 2.6.
<PAGE> 58
SECTION 2.7. FEES. Notwithstanding any limitation on recourse contained
in this Agreement, the Transferor shall pay the following non-refundable fees:
(a) On the last day of each month, to the Company solely for
its own account, the Program Fee and the Administrative Fee, and the Facility
Fee to the Agent for distribution to the Bank Investors.
(b) On the date of execution hereof, to the Administrative
Agent solely for its own account, the Arrangement Fee.
SECTION 2.8. PROTECTION OF OWNERSHIP INTEREST OF THE COMPANY AND THE
BANK INVESTORS; SPECIAL ACCOUNTS AND CONCENTRATION ACCOUNT. (a) The Transferor
agrees that it will, and will cause the Seller to, from time to time, at its
expense, promptly execute and deliver all instruments and documents and take all
actions as may be necessary or as the Agent may reasonably request in order to
perfect or protect the Transferred Interest or to enable the Agent, the Company
or the Bank Investors to exercise or enforce any of their respective rights
hereunder. Without limiting the foregoing, the Transferor will, and will cause
the Seller to, upon the request of the Agent, the Company or any of the Bank
Investors, in order to accurately reflect this purchase and sale transaction,
execute and file such financing or continuation statements or amendments thereto
or assignments thereof as permitted pursuant to Section 9.7 hereof as may be
requested by the Agent, the Company or any of the Bank Investors and (y) mark
its respective master data processing records and other documents with a legend
describing the conveyance to the Transferor of the Receivables (in the case of
the Seller) and to the Agent, for the benefit of the Company and the Bank
Investors, of the Transferred Interest. The Transferor shall, and will cause the
Seller to, upon request of the Agent, the Company or any of the Bank Investors
obtain such additional search reports as the Agent, the Company or any of the
Bank Investors shall request. To the fullest extent permitted by applicable law,
the Agent shall be permitted to sign and file continuation statements and
amendments thereto and assignments thereof without the Transferor's or the
Seller's signature. Carbon, photographic or other reproduction of this Agreement
or any financing statement shall be sufficient as a financing
<PAGE> 59
statement. The Transferor shall not, and shall not permit the Seller to, change
its respective name, identity or corporate structure (within the meaning of
Section 9-402(7) of the UCC as in effect in any applicable state) nor relocate
its respective chief executive office or any office where Records are kept
unless it shall have: (i) given the Agent at least thirty (30) days prior notice
thereof and (ii) prepared at Transferor's expense and delivered to the Agent all
financing statements, instruments and other documents necessary to preserve and
protect the Transferred Interest or requested by the Agent in connection with
such change or relocation. Any filings under the UCC or otherwise that are
occasioned by such change in name or location shall be made at the expense of
Transferor.
(b) The Agent is hereby authorized at any time to date, and
to deliver to the Concentration Account Bank, the Concentration Account Notice
delivered hereunder. The Transferor hereby, when the Agent shall deliver the
Concentration Account Notice to the Concentration Account Bank, transfers to the
Agent the exclusive ownership and control of the Concentration Account, and
shall take any further action that the Agent may reasonably request to effect
such transfer. In case any authorized signatory of the Transferor whose
signature shall appear on the Concentration Account Agreement shall cease to
have such authority before the delivery of the Concentration Account Notice,
such signature shall nevertheless be valid and sufficient for all purposes as if
such authority had remained in force at the time of such delivery. The Agent
shall, at the time it delivers the Concentration Account Notice to the
Concentration Account Bank, provide a copy thereof to the Transferor; PROVIDED
that the failure on the part of the Agent to provide such notice to the
Transferor shall not affect the validity or effectiveness of the Concentration
Account Notice or impair any rights of the Agent, the Company or any of the Bank
Investors hereunder.
(c) In addition and without limiting the authority of the
Agent set forth in subsection (b) above, but subject to subsection (d) below,
the Transferor shall cause each Originating Entity to instruct any or all of the
Special Account Banks (which instructions shall be maintained in full force and
effect at all times) to transfer directly to the Concentration Account all
<PAGE> 60
Collections from time to time on deposit in the applicable Special Accounts on a
daily basis in accordance with the terms set forth in the applicable Special
Account Letter. In the event the Transferor shall at any time determine, for any
of the reasons described in subsection (d) below, that the Transferor or any
Originating Entity shall be unable to comply fully with the requirements of this
subsection (c), the Transferor shall promptly so advise the Agent, and the
Transferor and the Agent shall commence discussions with a view toward
implementing an alternative arrangement therefor satisfactory to the Agent.
(d) Anything to the contrary herein notwithstanding, all
Medicare or Medicaid payments which are made by an Obligor with respect to any
Receivables shall be collected from such Obligor only by (i) the applicable
Originating Entity or (ii) an agent of such Originating Entity, EXCEPT to the
extent that an Obligor may be required to submit any such payments directly to a
Person other than such Originating Entity pursuant to a court-ordered assignment
which is valid, binding and enforceable under applicable federal and state
Medicare Regulations and Medicaid Regulations; and neither this Agreement nor
any other Transaction Document shall be construed to permit any other Person, in
violation of applicable Medicare Regulations or Medicaid Regulations to collect
or receive, or to be entitled to collect or receive, any such payments prior to
such Originating Entity's or such agent's receipt thereof.
SECTION 2.9. DEEMED COLLECTIONS; APPLICATION OF PAYMENTS. (a) If on any
day the Outstanding Balance of a Receivable is either (x) reduced as a result of
any defective, rejected or returned merchandise or services, any discount,
credit, Contractual Adjustment, rebate, dispute, warranty claim, repossessed or
returned goods, chargeback, allowance, any billing adjustment or other
adjustment, or (y) reduced or canceled as a result of a setoff or offset in
respect of any claim by any Person (whether such claim arises out of the same or
a related transaction or an unrelated transaction), the Transferor shall be
deemed to have received on such day a Collection of such Receivable in the
amount of such reduction or cancellation and the Transferor shall pay to the
Collection Agent an amount equal to such reduction or cancellation and such
amount shall be
<PAGE> 61
applied by the Collection Agent as a Collection in accordance with Section 2.5
or 2.6 hereof, as applicable. The Net Investment shall be reduced by the amount
of such payment applied to the reduction of the Net Investment and actually
received by the Agent.
(b) If on any day any of the representations or warranties
in Article III was or becomes untrue with respect to a Receivable (whether on or
after the date of any transfer of an interest therein to the Agent, the Company
or the Bank Investors as contemplated hereunder), the Transferor shall be deemed
to have received on such day a Collection on such Receivable in full and the
Transferor shall on such day pay to the Collection Agent an amount equal to the
Outstanding Balance of such Receivable and such amount shall be allocated and
applied by the Collection Agent as a Collection allocable to the Transferred
Interest in accordance with Section 2.5 or 2.6 hereof, as applicable. The Net
Investment shall be reduced by the amount of such payment applied to the
reduction of the Net Investment and actually received by the Agent.
(c) Any payment by an Obligor in respect of any indebtedness
owed by it to the Transferor or the Seller shall, except as otherwise specified
by such Obligor or otherwise required by contract or law and unless otherwise
instructed by the Agent, be applied as a Collection of any Receivable of such
Obligor included in the Transferred Interest (starting with the oldest such
Receivable) or the extent of any amounts then due and payable thereunder before
being applied to any other receivable or other indebtedness of such Obligor.
SECTION 2.10. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by the Transferor or the Collection Agent hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 a.m. (New York
City time) on the day when due in immediately available funds; if such amounts
are payable to the Agent (whether on behalf of the Company or any Bank Investor
or otherwise) they shall be paid or deposited in the account indicated in
Section 10.3 hereof, until otherwise notified by the Agent. The Transferor
shall, to the extent permitted by law, pay to the Agent, for the benefit of the
Company and the Bank Investors upon demand, interest on all amounts not
<PAGE> 62
paid or deposited when due hereunder at a rate equal to 2% per annum plus the
Base Rate. All computations of Discount, interest and all per annum fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed. Any
computations by the Agent of amounts payable by the Transferor hereunder shall
be binding upon all parties hereto absent manifest error.
SECTION 2.11. REPORTS. On or prior to the last Business Day of each
month, the Collection Agent shall prepare and forward to the Agent and the
Administrative Agent (i) an Investor Report as of the end of the last day of the
immediately preceding month, (ii) a listing by Primary Payor of all Receivables
together with an analysis as to the aging of such Receivables as of such last
day, (iii) written confirmation that all payments in cash, by way of credits to
intercompany accounts (in the case of purchases made by the Seller from any
Transferring Affiliate) or by way of application of proceeds of advances made
under the Subordinated Note (in the case of purchases made by the Transferor
from the Seller) have been made by the Transferor under the Receivables Purchase
Agreement or by the Seller under the Transferring Affiliate Letter or the BMA
Transfer Agreement, as applicable, in accordance with the respective terms of
such agreement, and (iv) such other information as the Agent or the
Administrative Agent may reasonably request.
SECTION 2.12. COLLECTION ACCOUNT. There shall be established on the day
of the initial Incremental Transfer hereunder and maintained with the Agent, a
segregated account (the "COLLECTION ACCOUNT"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Agent, on behalf of the Company and the Bank Investors. During the continuance
of a Collection Agent Default or a Termination Event or a Potential Termination
Event, the Collection Agent shall remit daily within forty-eight hours of
receipt to the Collection Account all Collections received with respect to any
Receivables. Funds on deposit in the Collection Account (other than investment
earnings) shall be invested by the Agent in Eligible Investments that will
mature so that such funds will be available prior to the last day of each
successive Tranche Period following such investment. On the
<PAGE> 63
last day of each Tranche Period, such funds on deposit, together with all
interest and earnings (net of losses and investment expenses) thereon, in the
Collection Account shall be made available for application in accordance with
the terms of Section 2.6 or otherwise for application toward payments required
to be made hereunder (including Discount) by the Transferor. On the date on
which the Net Investment is zero, all accrued Discount and Servicing Fees have
been paid in full and all other Aggregate Unpaids have been paid in full, any
funds remaining on deposit in the Collection Account shall be paid to the
Transferor.
SECTION 2.13. SHARING OF PAYMENTS, ETC. If the Company or any Bank
Investor (for purposes of this Section only, being a "NPRBI") shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of Transferred Interest owned by it (other than
pursuant to Section 2.7, or Article VIII and other than as a result of the
differences in the timing of the applications of Collections pursuant to Section
2.5 or 2.6) in excess of its ratable share of payments on account of Transferred
Interest obtained by the Company and/or the Bank Investors entitled thereto,
such NPRBI shall forthwith purchase from the Company and/or the Bank Investors
entitled to a share of such amount participations in the Transferred Interests
owned by such Persons the excess payment ratably with each such other Person
entitled thereto; PROVIDED, HOWEVER, that if all or any portion of such excess
payment is thereafter recovered from such NPRBI, such purchase from each such
other Person shall rescinded and each such other Person shall repay to the NPRBI
the purchase price paid by such NPRBI for such participation to the extent of
such recovery, together with an amount equal to such other Person's ratable
share (according to the proportion of (a) the amount of such other Person's
required payment to (b) the total amount so recovered from the NPRBI) of any
interest or other amount paid or payable by the NPRBI in respect of the total
amount so recovered.
SECTION 2.14. RIGHT OF SETOFF. Without in any way limiting the
provisions of Section 2.13, each of the Company and the Bank Investors is hereby
authorized (in addition to any other rights it may have) at any time after the
occurrence of the Termination Date or during the
<PAGE> 64
continuance of a Potential Termination Event to setoff, appropriate and apply
(without presentment, demand, protest or other notice which are hereby expressly
waived) any deposits (other than any deposits then being held in any Special
Account maintained by a Bank Investor as to which deposits the Bank Investors
waive their rights of set-off in request of the Aggregate Unpaid) and any other
indebtedness held or owing by the Company or such Bank Investor to, or for the
account of, the Transferor against the amount of the Aggregate Unpaids owing by
the Transferor to such Person or to the Agent on behalf of such Person (even if
contingent or unmatured).
SECTION 2.15. ADDITIONAL TRANSFERRING AFFILIATES. (a) If (i) one or more
direct or indirect wholly-owned subsidiaries of NMC (other than the Transferring
Affiliates) now owned or hereafter acquired, is primarily engaged in the same
business as is conducted on the date hereof by the Originating Entities or
(ii) NMC reorganizes its corporate structure such that facilities generating
Receivables on the date hereof (or acquired as contemplated by clause (i)) are
owned by one or more additional wholly-owned subsidiaries of NMC, any or all of
the wholly-owned subsidiaries referred to in clauses (i) and (ii) may,
following 30-days' prior written notice by the Transferor to the Agent and with
the prior written consent of the Agent (which consent shall not be unreasonably
withheld or delayed), become Transferring Affiliates under this Agreement upon
delivery to the Agent of (x) counterparts of the Transferring Affiliate Letter
duly executed by such subsidiary or subsidiaries and (y) the documents relating
to such subsidiary or subsidiaries of the kind delivered by or on behalf of the
Transferring Affiliates (other than BMA) pursuant to Section 4.1, together with
such other instruments, documents and agreements as the Agent may reasonably
request in connection therewith.
(b) Upon the addition of any wholly-owned subsidiary of NMC
as a Transferring Affiliate pursuant to subsection (a) above, the provisions of
this Agreement, including Exhibit Q, shall, without further act or
documentation, be deemed amended to apply to such subsidiary to the same extent
as the same apply to the Transferring Affiliates as of the date hereof and the
term "Transferring Affiliate" in this Agreement shall mean and refer to such
<PAGE> 65
subsidiary as well as each then existing Transferring Affiliate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor represents and warrants to the Agent, the Company and the Bank
Investors that:
(a) CORPORATE EXISTENCE AND POWER. The Transferor is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all corporate power and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is now
conducted. The Transferor is duly qualified to do business in, and is in good
standing in, every other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Transferor of this Agreement, the
Receivables Purchase Agreement, the Fee Letter, the Certificates, the Transfer
Certificates and the other Transaction Documents to which the Transferor is a
party are within the Transferor's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any Official Body or official thereof (except as contemplated by Section
2.8 hereof), and do not contravene, or constitute a default under, any provision
of applicable law, rule or regulation (including, without limitation, any
CHAMPUS/VA Regulation, any Medicaid Regulation or any Medicare Regulation) or of
the Certificate of Incorporation or Bylaws of the Transferor or of any
agreement, judgment, injunction, order, writ, decree or other instrument binding
upon the Transferor or result in the creation or imposition of any Adverse Claim
on the assets of the Transferor or any of its Subsidiaries (except as
contemplated by Section 2.8 hereof).
<PAGE> 66
(c) BINDING EFFECT. Each of this Agreement, the Receivables
Purchase Agreement, the Fee Letter, the Certificates and the other Transaction
Documents to which the Transferor is a party constitutes and the Transfer
Certificate upon payment of the Transfer Price set forth therein will constitute
the legal, valid and binding obligation of the Transferor, enforceable against
it in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally.
(d) PERFECTION. Immediately preceding each Transfer
hereunder, the Transferor shall be the owner of all of the Receivables, free and
clear of all Adverse Claims. On or prior to each Transfer and each recomputation
of the Transferred Interest, all financing statements and other documents
required to be recorded or filed, or notices to Obligors to be given, in order
to perfect and protect the Agent's Transferred Interest against all creditors of
and purchasers from the Transferor and the Seller will have been duly filed in
each filing office necessary for such purpose and all filing fees and taxes, if
any, payable in connection with such filings shall have been paid in full.
(e) ACCURACY OF INFORMATION. All information heretofore
furnished by the Transferor (including without limitation, the Investor Reports,
any reports delivered pursuant to Section 2.11 hereof and the Transferor's
financial statements) to the Company, any Bank Investors, the Agent or the
Administrative Agent for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by the Transferor to the Company, any Bank Investors, the Agent or the
Administrative Agent will be, true and accurate in every material respect, on
the date such information is stated or certified.
(f) TAX STATUS. The Transferor has filed all tax returns
(federal, state and local) required to be filed and has paid or made adequate
provision for the payment of all taxes, assessments and other governmental
charges.
<PAGE> 67
(g) ACTION, SUITS. Except as set forth in Exhibit H hereof,
there are no actions, suits or proceedings pending, or to the knowledge of the
Transferor threatened, in or before any court, arbitrator or other body, against
or affecting (i) the Transferor or any of its properties or (ii) any Affiliate
of the Transferor or its respective properties, which may, in the case of
proceedings against or affecting any such Affiliate, individually or in the
aggregate, have a Material Adverse Effect.
(h) USE OF PROCEEDS. No proceeds of any Transfer will be
used by the Transferor to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) PLACE OF BUSINESS. The principal place of business and
chief executive office of the Transferor are located at the address of the
Transferor indicated in Section 10.3 hereof and the offices where the Transferor
keeps substantially all its Records, are located at the address(es) described on
Exhibit I or such other locations notified to the Company in accordance with
Section 2.8 hereof in jurisdictions where all action required by Section 2.8
hereof has been taken and completed. The principal place of business and chief
executive office of each Originating Entity is located at the address of such
Originating Entity indicated in Exhibit I hereof and the offices where the each
Originating Entity keeps substantially all its Records are located at the
address(es) specified on Exhibit I with respect to such Originating Entity or
such other locations notified to the Agent in accordance with Section 2.8 hereof
in jurisdictions where all action required by Section 2.8 hereof has been taken
and completed.
(j) GOOD TITLE. Upon each Transfer and each recomputation of
the Transferred Interest, the Agent shall acquire a valid and perfected first
priority undivided percentage ownership interest to the extent of the
Transferred Interest or a first priority perfected security interest in each
Receivable that exists on the date of such Transfer and recomputation and in the
Related Security and Collections with respect thereto free and clear of any
Adverse Claim.
<PAGE> 68
(k) TRADENAMES, ETC. As of the date hereof: (i) the
Transferor's chief executive office is located at the address for notices set
forth in Section 10.3 hereof; (ii) the Transferor has no subsidiaries or
divisions; (iii) the Transferor has, within the last five (5) years, not
operated under any tradename, and, within the last five (5) years, has not
changed its name, merged with or into or consolidated with any other corporation
or been the subject of any proceeding under Title 11, United States Code
(Bankruptcy); and (iv) none of the Originating Entities has, within the last
five (5) years, operated under any tradename or, within the last five (5) years,
changed its name, merged with or into or consolidated with any other Person or
been the subject of any proceeding under Title 11, United States Code
(Bankruptcy), except in each case as described on Exhibit H.
(l) NATURE OF RECEIVABLES. Each Receivable (x) represented
by the Transferor or the Collection Agent to be an Eligible Receivable
(including in any Investor Report or other report delivered pursuant to Section
2.11 hereof) or (y) included in the calculation of the Net Receivables Balance
is an "eligible asset" as defined in Rule 3a-7 under the Investment Company Act,
of 1940, as amended and, in the case of clause (y) above, is not a Receivable of
the type described in clauses (i) through (iii) of the definition of "Net
Receivables Balance."
(m) COVERAGE REQUIREMENT; AMOUNT OF RECEIVABLES. The
Percentage Factor does not exceed the Maximum Percentage Factor. As of July 31,
1997, the aggregate Outstanding Balance of the Receivables in existence and the
Net Receivable Balance were not less than the respective amounts certified as
such in (i) the Investor Report dated as of the date hereof and provided to the
Agent or (ii) the Investor Report delivered after the date hereof in accordance
with Section 4.2(a).
(n) CREDIT AND COLLECTION POLICY. Since July 10, 1997, there
have been no material changes in the Credit and Collection Policy other than as
permitted hereunder. Since such date, no material adverse change has occurred in
the overall rate of collection of the Receivables.
<PAGE> 69
(o) COLLECTIONS AND SERVICING. Since July 10, 1997, there
has been no material adverse change in the ability of the Collection Agent (to
the extent it is the Seller, the Transferor or any Subsidiary or Affiliate of
any of the foregoing) to service and collect the Receivables.
(p) NO TERMINATION EVENT. No event has occurred and is
continuing and no condition exists which constitutes a Termination Event or a
Potential Termination Event.
(q) NOT AN INVESTMENT COMPANY. The Transferor is not, and is
not controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such Act.
(r) ERISA. Each of the Transferor and its ERISA Affiliates
is in compliance in all material respects with ERISA and no lien exists in favor
of the Pension Benefit Guaranty Corporation on any of the Receivables.
(s) SPECIAL ACCOUNT BANKS AND CONCENTRATION BANK. The names
and addresses of all the Special Account Banks (and, if applicable, the
Designated Account Agent in respect thereof) and the Concentration Account Bank,
together with the account numbers of the Special Accounts at such Special
Account Banks and the account number of the Concentration Account of the
Transferor at the Concentration Account Bank, are specified in Exhibit C hereto
(or at such other Special Account Banks or Concentration Account Bank, with such
other Special Accounts or Concentration Account or with such other Designated
Account Agents as have been notified to the Agent in accordance with Section
5.2(e)). This Agreement, together with the Concentration Account Agreement, is
effective to, and does, transfer to the Agent, for the benefit of the Company
and the Bank Investors, all right, title and interest of the Transferor in and
to the Concentration Account. The Transferor has not granted to any Person
(other than the Agent under the Concentration Account Agreement) dominion and
control over the Concentration Account, or the right to take dominion and
control over the Concentration Account at a future time or upon the occurrence
of a future event; neither the
<PAGE> 70
Transferor nor any other Parent Group Member has granted to any Person dominion
and control over any Special Account, or the right to take dominion or control
over any Special Account at a future time or upon the occurrence of a future
event; and the Concentration Account and each Special Account is otherwise free
and clear of any Adverse Clam.
(t) BULK SALES. No transaction contemplated hereby or by the
Receivables Purchase Agreement requires compliance with any bulk sales act or
similar law.
(u) TRANSFERS UNDER RECEIVABLES PURCHASE AGREEMENT. With
respect to each Receivable, and Related Security, if any, with respect thereto,
originally owed to the Seller or acquired by the Seller from any Transferring
Affiliate, the Transferor purchased such Receivable and Related Security from
the Seller under the Receivables Purchase Agreement, such purchase was deemed to
have been made on the date such Receivable was credited or acquired by the
Seller and such purchase was made strictly in accordance with the terms of the
Receivables Purchase Agreement.
(v) PREFERENCE; VOIDABILITY (RECEIVABLES PURCHASE
AGREEMENT). The Transferor shall have given reasonably equivalent value to the
Seller in consideration for the transfer to the Transferor of the Receivables
and Related Security from the Seller, and each such transfer shall not have been
made for or on account of an antecedent debt owed by the Seller to the
Transferor and no such transfer is or may be voidable under any Section of the
Bankruptcy Code.
(w) TRANSFERS BY TRANSFERRING AFFILIATES. With respect to
each Receivable, and Related Security, if any, with respect thereto, originally
owed to any Transferring Affiliate, the Seller (i) purchased such Receivable and
Related Security from such Transferring Affiliate under the Transferring
Affiliate Letter or from BMA under the BMA Transfer Agreement, such purchase
being deemed to have been made on the date such Receivable was created (or, in
the case of a Receivable outstanding on the Closing Date, on the Closing Date),
(ii) by the last Business Day of the month following the month in which such
purchase was so made, paid to the applicable Transferring Affiliate in cash or
by way of a credit to such Transferring
<PAGE> 71
Affiliate in the appropriate intercompany account, an amount equal to the face
amount of such Receivable and (iii) settled from time to time each such credit,
by way of payments in cash, or by way of credits in amounts equal to cash
expended, obligations incurred or the value of services or property provided by
or on behalf of the Seller, in each case for the benefit of such Transferring
Affiliate, to the account of such Transferring Affiliate in accordance with the
Seller's and such Transferring Affiliate's cash management and accounting
policies.
(x) PREFERENCE; VOIDABILITY (TRANSFERRING AFFILIATES). The
Seller shall have given reasonably equivalent value to each Transferring
Affiliate in consideration for the transfer to the Seller of the Receivables and
Related Security from such Transferring Affiliate, and each such transfer shall
not have been made for or on account of an antecedent debt owed by such
Transferring Affiliate to the Seller and no such transfer is or may be voidable
under any Section of the Bankruptcy Code.
(y) OWNERSHIP. FMC owns, directly or indirectly, all of the
issued and outstanding common stock of (and such stock comprises more than 80%
of the Voting Stock of) FMCH, free and clear of any Adverse Claim except to the
extent such stock is pledged in connection with the Bank Revolver. All of the
issued and outstanding stock of each Originating Entity is owned directly or
indirectly by FMCH, free and clear of any Adverse Claim except to the extent
such stock is pledged in connection with the Bank Revolver. All of the issued
and outstanding stock of the Transferor is owned by NMC, free and clear of any
Adverse Claim.
(z) REPRESENTATIONS AND WARRANTIES OF THE SELLER. Each of
the representations and warranties of the Seller set forth in Section 3.1 of the
Receivables Purchase Agreement are true and correct in all material respects and
the Transferor hereby remakes all such representations and warranties for the
benefit of the Agent, the Company, the Bank Investors and the Administrative
Agent.
Any document, instrument, certificate or notice delivered to the Company
hereunder shall be deemed a representation and warranty by the Transferor.
<PAGE> 72
SECTION 3.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES BY THE
TRANSFEROR. On each day that a Transfer is made hereunder, the Transferor, by
accepting the proceeds of such Transfer, whether delivered to the Transferor
pursuant to Section 2.2(a) or Section 2.5 hereof, shall be deemed to have
certified that all representations and warranties described in Section 3.1
hereof are correct on and as of such day as though made on and as of such day.
Each Incremental Transfer shall be subject to the further conditions precedent
that:
(a) prior to the date of such Incremental Transfer, the
Collection Agent shall have delivered to the Agent and the
Administrative Agent, in form and substance satisfactory to the Agent
and the Administrative Agent, a completed Investor Report dated within
ten (10) days prior to the date of such Incremental Transfer, together
with a listing by Primary Payor of all Receivables, and such additional
information as may be reasonably requested by the Administrative Agent
or the Agent;
(b) on date of such Incremental Transfer, either (i) FMCH's
long-term public senior debt securities are rated as least B- by
Standard & Poor's and B3 by Moody's, or if neither Standard & Poor's nor
Moody's shall rate such securities, FMCH's long-term senior debt shall
have a deemed rating of at least B as determined by the Agent using its
standard bond rating methodology, or (ii) FMC's long-term public senior
debt securities are rated as least B- by Standard & Poor's and B3 by
Moody's Investors Service, or if neither Standard & Poor's nor Moody's
shall rate such securities, FMC's long-term senior debt shall have
deemed rating of at least B as determined by the Agent using its
standard bond rating methodology,
and the Transferor shall be deemed to have represented and warranted that such
conditions precedent have been satisfied.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF THE COLLECTION AGENT. The
Collection Agent represents and warrants to the Company and the Bank Investors
that:
<PAGE> 73
(a) CORPORATE EXISTENCE AND POWER. The Collection Agent is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all corporate power and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is now
conducted. The Collection Agent is duly qualified to do business in, and is in
good standing in, every other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Collection Agent of this
Agreement are within the Collection Agent's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any Official Body or official thereof, and do not
contravene, or constitute a default under, any provision of applicable law, rule
or regulation (including, without limitation, any CHAMPUS/VA Regulation, any
Medicaid Regulation or any Medicare Regulation) or of the Certificate of
Incorporation or Bylaws of the Collection Agent or of any agreement, judgment,
injunction, order, writ, decree or other instrument binding upon the Collection
Agent or result in the creation or imposition of any Adverse Claim on the assets
of the Collection Agent or any of its Subsidiaries.
(c) BINDING EFFECT. This Agreement constitutes the legal,
valid and binding obligation of the Collection Agent, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditors.
(d) ACCURACY OF INFORMATION. All information heretofore
furnished by the Collection Agent to the Agent, the Company, any Bank Investor
or the Administrative Agent for the purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Collection Agent to the Agent, the Company, any Bank
Investor or the Administrative Agent will be, true and
<PAGE> 74
accurate in every material respect, on the date such information is stated or
certified.
(e) ACTION, SUITS. Except as set forth in Exhibit H, there
are no actions, suits or proceedings pending, or to the knowledge of the
Collection Agent threatened, against or affecting the Collection Agent or any
Affiliate of the Collection Agent or their respect properties, in or before any
court, arbitrator or other body, which may, individually or in the aggregate,
have a Material Adverse Effect.
(f) NATURE OF RECEIVABLES. Each Receivable included in the
calculation of the Net Receivables Balance is not a Receivable of the type
described in clauses (i) through (iii) of the definition of "Net Receivables
Balance".
(g) AMOUNT OF RECEIVABLES. The Percentage Factor does not
exceed the Maximum Percentage Factor. As of July 31, 1997, the aggregate
Outstanding Balance of the Receivables in existence and the Net Receivable
Balance were not less than the respective amounts certified as such in (i) the
Investor Report dated as of the date hereof and provided to the Agent or
(ii) the Investor Report delivered after the date hereof in accordance with
Section 4.2(a).
(h) CREDIT AND COLLECTION POLICY. Since July 10, 1997, there
have been no material changes in the Credit and Collection Policy other than as
permitted hereunder. Since such date, no material adverse change has occurred in
the overall rate of collection of the Receivables.
(i) COLLECTIONS AND SERVICING. Since July 10, 1997, there
has been no material adverse change in the ability of the Collection Agent to
service and collect the Receivables.
(j) NOT AN INVESTMENT COMPANY. The Collection Agent is not,
and is not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all provisions of
such Act.
<PAGE> 75
(k) SPECIAL ACCOUNTS AND CONCENTRATION ACCOUNT. The names
and addresses of all the Special Account Banks (and, if applicable, the
Designated Account Agent in respect thereof) and the Concentration Account Bank,
together with the account numbers of the Special Accounts at such Special
Account Banks and the account number of the Concentration Account of the
Transferor at the Concentration Account Bank, are specified in Exhibit C hereto
(or at such other Special Account Banks or Concentration Account Bank, with such
other Special Accounts or Concentration Account or with such other Designated
Account Agents as have been notified to the Agent in accordance with Section
5.2(e)).
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS TO CLOSING. On or prior to the date of execution
hereof, the Transferor shall deliver to the Agent the following documents,
instruments and fees all of which shall be in a form and substance acceptable to
the Agent:
(a) A copy of the resolutions of the Board of Directors of
the Transferor certified by its Secretary approving the execution, delivery and
performance by the Transferor of this Agreement, the Receivables Purchase
Agreement and the other Transaction Documents to be delivered by the Transferor
hereunder or thereunder.
(b) A copy of the resolutions of the Board of Directors of
the Collection Agent certified by its Secretary approving the execution,
delivery and performance by the Collection Agent of this Agreement and the other
Transaction Documents to be delivered by the Collection Agent hereunder or
thereunder.
(c) A copy of the resolutions of the Board of Directors of
each Originating Entity certified by its Secretary approving the execution,
delivery and performance by such Originating Entity of each Transaction Document
to which it is party.
<PAGE> 76
(d) The Articles of Incorporation of the Transferor
certified by the Secretary of State or other similar official of the
Transferor's jurisdiction of incorporation dated a date reasonably prior to the
Closing Date.
(e) The Articles of Incorporation of the Collection Agent
certified by the Secretary of State or other similar official of the Collection
Agent's jurisdiction of incorporation dated a date reasonably prior to the
Closing Date.
(f) A Good Standing Certificate for the Transferor issued by
the Secretary of State or a similar official of the Transferor's jurisdiction of
incorporation and certificates of qualification as a foreign corporation issued
by the Secretaries of State or other similar officials of each jurisdiction
where such qualification is material to the transactions contemplated by this
Agreement and the other Transaction Documents, in each case, dated a date
reasonably prior to the Closing Date.
(g) A Good Standing Certificate for the Collection Agent
issued by the Secretary of State or a similar official of the Collection Agent's
jurisdiction of incorporation and certificates of qualification as a foreign
corporation issued by the Secretaries of State or other similar officials of
each jurisdiction when such qualification is material to the transactions
contemplated by this Agreement and the Receivables Purchase Agreement and the
other Transaction Documents, in each case, dated a date reasonably prior to the
Closing Date.
(h) A Certificate of the Secretary of the Transferor
substantially in the form of Exhibit L attached hereto.
(i) A Certificate of the Secretary of the Collection Agent
substantially in the form of Exhibit L attached hereto.
(j) Copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the date of the initial Incremental Transfer
naming the Transferor as the debtor in favor of the Agent, for the benefit of
the
<PAGE> 77
Company and the Bank Investors, as the secured party or other similar
instruments or documents as may be necessary or in the reasonable opinion of the
Agent desirable under the UCC of all appropriate jurisdictions or any comparable
law to perfect the Agent's undivided percentage interest in all Receivables and
the Related Security and Collections relating thereto.
(k) Copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the date of the initial Incremental Transfer
naming each Originating Entity respectively as the debtor in favor of the Seller
or the Transferor, as applicable, as secured party and the Agent, for the
benefit of the Company and the Bank Investors, as assignee and secured party of
record or other similar instruments or documents as may be necessary or in the
reasonable opinion of the Agent desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the Transferor's ownership
interest in all Receivables, Related Security and Collections relating thereto
and the Agent's undivided percentage interest therein.
(l) Copies of proper financing statements (Form UCC-3), if
any, necessary to terminate all security interests and other rights of any
person in Receivables previously granted by any Originating Entity.
(m) Certified copies of request for information or copies
(Form UCC-11) (or a similar search report certified by parties acceptable to the
Agent) dated a date reasonably near the date of the initial Incremental Transfer
listing all effective financing statements which name the Transferor or any
Originating Entity (under their respective present names and any previous names)
as debtor and which are filed in jurisdictions in which the filings were made
pursuant to items (j) or (k) above together with copies of such financing
statements (none of which shall cover any Receivables, Contracts or Related
Security or Collection with respect thereto).
(n) Special Account Letters addressed to the Special Account
Banks, executed by the appropriate Originating Entity or Designated Account
Agent, together
<PAGE> 78
with the Concentration Account Agreement executed by the Concentration Account
Bank and the Transferor.
(o) An opinion of Douglas G. Kott, Associate General Counsel
for FMCH, NMC and each Transferring Affiliate, acting as counsel to FMC, FMCH,
the Transferor, the Collection Agent and the Originating Entities, in the
respective form attached in Exhibit K hereto.
(p) An opinion of Arent Fox Kintner Plotkin & Kahn, special
counsel to FMC, FMCH, the Transferor and the Seller, covering certain bankruptcy
and general corporate matters in the respective forms attached in Exhibit K
hereto.
(q) An opinion of Nutter, McClennen & Fish, LLP, special
Massachusetts counsel to the Transferor and the Originating Entities, in the
respective form attached in Exhibit K hereto.
(r) Computer tapes or digital records setting forth all
Receivables and the Outstanding Balances thereon and such other information as
the Agent may reasonably request.
(s) An executed copy of this Agreement, the Receivables
Purchase Agreement, the Transferring Affiliate Letter, the BMA Transfer
Agreement, the Fee Letter and each of the other Transaction Documents to be
executed by the Transferor, any Originating Entity or the Collection Agent.
(t) The Transfer Certificate, duly executed by the
Transferor.
(u) The Certificate, duly executed by the Transferor and
appropriately completed.
(v) The Parent Agreement, duly executed by each of FMCH and
FMC.
(w) A copy of the resolutions of the Board of Directors of
each of FMCH certified by its respective Secretary approving the execution,
delivery and performance
<PAGE> 79
by such Person of the Parent Agreement and the other Transaction Documents to be
delivered by it thereunder.
(x) The Articles of Incorporation of FMCH certified by the
Secretary of State or other similar official of such Person's jurisdiction of
incorporation dated a date reasonably prior to the Closing Date.
(y) A Good Standing Certificate for FMCH issued by the
Secretary of State or a similar official of such Person's jurisdiction of
incorporation.
(z) A Certificate of the Secretary of FMCH substantially in
the form of Exhibit L hereto.
(aa) The Arrangement Fee in accordance with Section 2.7(b).
(bb) An Investor Report for July 31, 1997.
(cc) Evidence of the appointment of Andrew L. Stidd as
independent director of the Transferor.
(dd) Evidence satisfactory to the Agent that each of the
requisite parties to the Bank Revolver shall have consented to the transactions
contemplated in the Transaction Documents.
(ee) The Account Agent Agreement, duly executed by each
Designated Account Agent.
(ff) Such other documents, instruments, certificates and
opinions as the Agent or the Administrative Agent shall reasonably request
including each of the documents, instruments, certificates and opinion
identified on the List of Closing Documents attached hereto as Exhibit S.
SECTION 4.2. CERTAIN POST-CLOSING DELIVERY. The Transferor shall deliver
to the Agent the following as soon as practiable following the Closing Date:
An opinion (the "German Opinion") of the General Counsel of FMC
(or such other lawyer or firm as shall be acceptable to the Agent) in
substantially the respective form attached in Exhibit K hereto.
<PAGE> 80
In the event the Transferor shall fail to deliver the German Opinion to the
Agent on or prior to September 12, 1997, such failure shall constitute a
Termination Event hereunder.
ARTICLE V
COVENANTS
SECTION 5.1. AFFIRMATIVE COVENANTS OF TRANSFEROR. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii) the date
on which the Net Investment has been reduced to zero, all accrued Discount and
Servicing Fees shall have been paid in full and all other Aggregate Unpaids
shall have been paid in full, in cash, unless the Agent shall otherwise consent
in writing:
(a) FINANCIAL REPORTING. The Transferor will, and will cause
the Seller and each of the Transferring Affiliates to, maintain, for itself and
each of its respective Subsidiaries, a system of accounting established and
administered in accordance with GAAP, and furnish to the Agent:
(i) ANNUAL REPORTING. As soon as available, but in any event
within ninety-five (95) days after the end of each fiscal year of the
Transferor, financial statements for the Transferor, including a balance
sheet as of the end of such period, the related statement of income,
retained earnings, shareholders'
<PAGE> 81
equity and cash flows for such year prepared by the Transferor in accordance
with GAAP and reviewed by a nationally recognized accounting firm accompanied by
a certificate of said accountants that, in the course of the foregoing, they
have obtained no knowledge of any Termination Event or Potential Termination
Event, or if, in the opinion of such accountants, any Termination Event or
Potential Termination Event shall exist, stating the nature and status thereof.
(ii) QUARTERLY REPORTING. As soon as available, but in any
event within fifty (50) days after the end of each of the first three
quarterly periods of the Transferor's fiscal years, financial statements
for the Transferor, including a balance sheet as at the close of each
such period and a related statement of income and retained earnings for
the period from the beginning of such fiscal year to the end of such
quarter, all certified by its chief executive officer or its senior
financial officer.
In the case of each of the financial statements required to be
delivered under clause (i) or (ii) above, such financial statement shall
set forth in comparative form the figures for the corresponding period
or periods of the preceding fiscal year or the portion of the fiscal
year ending with such period, as applicable (but not for any period
prior to the Closing Date), in each case subject to normal recurring
year-end audit adjustments. Each such financial statement shall be
prepared in accordance with GAAP consistently applied.
(iii) COMPLIANCE CERTIFICATE. Together with the financial
statements required hereunder, a compliance certificate signed by the
Transferor's chief executive officer or its senior financial officer
stating that (x) the attached financial statements have been prepared in
accordance with GAAP and accurately reflect the financial condition of
the Transferor and (y) to the best of such Person's knowledge, no
Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential
<PAGE> 82
Termination Event exists, stating the nature and status thereof.
(iv) NOTICE OF TERMINATION EVENTS OR POTENTIAL TERMINATION
EVENTS. As soon as possible and in any event within two (2) days (or the
next Business Day thereafter if such day is not a Business Day) after
the occurrence of each Termination Event or each Potential Termination
Event, a statement of the chief executive officer or the senior
financial officer of the Transferor setting forth details of such
Termination Event or Potential Termination Event and the action which
the Transferor proposes to take with respect thereto.
(v) CHANGE IN CREDIT AND COLLECTION POLICY AND DEBT RATINGS.
Within ten (10) days after the date any material change in or amendment
to the Credit and Collection Policy is made, a copy of the Credit and
Collection Policy then in effect indicating such change or amendment.
(vi) CREDIT AND COLLECTION POLICY. Within ninety (90) days
after the close of each of the Seller's and the Transferor's fiscal
years, a complete copy of the Credit and Collection Policy then in
effect.
(vii) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any Reportable Event
(as defined in Article IV of ERISA) which the Transferor, the Seller or
any ERISA Affiliate of the Transferor or the Seller files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Transferor, the
Seller or any ERISA Affiliates of the Transferor or the Seller receives
from the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor.
(viii) NOTICES UNDER TRANSACTION DOCUMENTS. Forthwith upon its
receipt thereof, a copy of each notice, report, financial statement,
certification, request for amendment, directive,
<PAGE> 83
consent, waiver or other modification or any other writing issued under
or in connection with any other Transaction Document by any party
thereto (including, without limitation, by the Transferor).
(ix) INVESTIGATIONS AND PROCEEDINGS. Unless prohibited by
either (i) the terms of the subpoena, request for information or other
document referred to below, (ii) law (including, without limitation,
rules and regulations) or (iii) restrictions imposed by the U.S. federal
or state government or any agency or instrumentality thereof and subject
to the Agent's execution of a confidentiality agreement in form and
substance satisfactory to both the Transferor and the Agent, as soon as
possible and in any event (A) within three Business Days after the
Transferor (or within five Business Days after any Originating Entity)
receives any subpoena, request for information, or any other document
relating to any possible violation by the Transferor or any Originating
Entity of, or failure by the Transferor or any Originating Entity to
comply with, any rule, regulation or statute from HHS or any other
governmental agency or instrumentality, notice of such receipt and, if
requested by the Agent, the information contained in, or copies of, such
subpoena, request or other document, and (B) periodic updates and other
management reports relating to the subpoenas, requests for information
and other documents referred to in clause (A) above as may be reasonably
requested by the Agent unless such updates or requests could reasonably
be deemed a contravention or waiver of any available claim of legal
privilege, or would otherwise materially impair available defenses, of
the Transferor or any Originating Entity.
(x) OTHER INFORMATION. Such other information (including
non-financial information) as the Agent or the Administrative Agent may
from time to time reasonably request with respect to the Seller, the
Transferor, any party to the Parent Agreement, any Transferring
Affiliate or any Subsidiary of any of the foregoing.
(b) CONDUCT OF BUSINESS. The Transferor (i) will carry on
and conduct its business in substantially the same manner and in substantially
the
<PAGE> 84
same fields of enterprise as it is presently conducted and do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted and (ii) will cause each Originating Entity to do each of
the foregoing in respect of such Originating Entity.
(c) COMPLIANCE WITH LAWS. The Transferor will, and will
cause each Originating Entity to, comply with all laws, rules and regulations
(including, without limitation, all CHAMPUS/VA Regulations, Medicaid Regulations
and Medicare Regulations), and all orders, writs, judgments, injunctions,
decrees or awards to which it or its respective properties may be subject.
(d) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Transferor will, and will cause each Originating Entity to, furnish to the Agent
from time to time such information with respect to the Receivables as the Agent
may reasonably request, including, without limitation, listings identifying the
Obligor and the Outstanding Balance for each Receivable. The Transferor will,
and will cause each Originating Entity to, at any time and from time to time
during regular business hours permit the Agent, or its agents or
representatives, (i) to examine and make copies of and take abstracts from
Records and (ii) to visit the offices and properties of the Transferor or such
Originating Entity, as applicable, for the purpose of examining such Records,
and to discuss matters relating to Receivables or the Transferor's or such
Originating Entity's performance hereunder and under the other Transaction
Documents to which such Person is a party with any of the officers, directors,
employees or independent public accountants of the Transferor or such
Originating Entity, as applicable, having knowledge of such matters; PROVIDED,
HOWEVER, that the Agent acknowledges that in exercising the rights and
privileges conferred in this Section 5.1(d) it or its agents or representatives
may, from time to time, obtain knowledge of information, practices, books,
correspondence and records ("Confidential Information") identified to it in
writing as being of a confidential nature or in which the Transferor or an
Originating Entity has a proprietary interest. The Agent
<PAGE> 85
agrees that all such Confidential Information so obtained by it is to be
regarded as confidential information and that such Confidential Information may
be subject to laws, rules and regulations regarding patient confidentiality, and
agrees that (x) it shall retain in confidence, and shall ensure that its agents
and representatives retain in confidence, and will not disclose, any of such
Confidential Information without the prior written consent of the Transferor and
(y) it will not, and will ensure that its agents and representatives will not,
make any use whatsoever (other than for purposes of this Agreement) of any of
such Confidential Information without the prior written consent of the
Transferor; PROVIDED, HOWEVER, that such Confidential Information may be
disclosed to the extent that such Confidential Information (i) may be or becomes
generally available to the public (other than as a breach of this Section
5.1(d)), (ii) is required or appropriate in response to any summons or subpoena
in connection with any litigation or (iii) is required by law to be disclosed;
and PROVIDED, FURTHER, HOWEVER, that such Confidential Information may be
disclosed to (A) the Company, any Bank Investor, the Credit Support Provider and
the Liquidity Provider, subject to the terms of this Section 5.1(d), (B) the
Agent's or any such Person's legal counsel, auditors and other business
advisors, (C) any such Person's government regulators and (D) the Company's
rating agencies, PROVIDED that the Person making such disclosure shall advise
each recipient thereof referred to in clauses (A), (B), (C) and (D) above that
such Confidential Information is to be regarded and maintained as confidential
information and that the Agent has agreed to keep confidential such Confidential
Information as provided in clauses (x) and (y) above.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Transferor
will, and will cause each Originating Entity to, maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Receivables in the event of the
destruction of the originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of each new Receivable and all Collections of
and adjustments to each existing Receivable). The
<PAGE> 86
Transferor will, and will cause each Originating Entity to, give the Agent
notice of any material change in the administrative and operating procedures of
the Transferor or such Originating Entity, as applicable, referred to in the
previous sentence.
(f) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CONTRACTS. The Transferor, at its expense, will, and will cause each Originating
Entity to, timely and fully perform and comply with all material provisions,
covenant and other promises required to be observed by the Transferor or such
Originating Entity under the Contracts related to the Receivables.
(g) CREDIT AND COLLECTION POLICIES. The Transferor will, and
will cause each Originating Entity to, comply in all material respects with the
Credit and Collection Policy in regard to each Receivable and the related
Contract.
(h) SPECIAL ACCOUNTS; CONCENTRATION ACCOUNT. The Transferor
shall (i) cause each Originating Entity to establish and maintain Special
Accounts with Special Account Banks, or to engage a Designated Account Agent to
maintain a Special Account with a Special Account Bank on its behalf,
(ii) instruct, and cause each Originating Entity to instruct, all Obligors to
cause all collections to be deposited directly into a Special Account,
(iii) report, and cause each Originating Entity to report, on each banking day
to the Concentration Account Bank, the amount of all Collections on deposit on
such banking day in the Special Accounts at each Special Account Bank,
(iv) establish and maintain a Concentration Account with the Concentration
Account Bank, (v) instruct, and cause each Originating Entity to instruct (or
to cause the applicable Designated Account Agent to instruct), each Special
Account Bank to transfer to the Concentration Account prior to the close of
business on such banking day all Collections on deposit during such banking day
in the Special Accounts at such Special Account Bank, and (vi) instruct the
Concentration Account Bank to give to each Special Account Bank on each banking
day notice to transfer to the Concentration Account all Collections on deposit
during such banking day in the Special Accounts at such Special Account Bank;
PROVIDED, HOWEVER, that if the Collections on deposit in any Special
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Account during such banking day shall be less than $5,000.00 (the "Minimum
Amount"), the Special Account Bank shall transfer such Collections to the
Concentration Account on the next succeeding banking day on which Collections in
such Special Account first exceed the Minimum Amount. With respect to any
Special Account that is located at or maintained by a Bank Investor hereunder,
the Transferor shall, by not later than the date that occurs six months after
the Closing Date, cause the applicable Originating Entity to close such Special
Account and shall instruct, and shall cause each applicable Originating Entity
to instruct, all Obligors theretofore remitting payments to such Special Account
to remit all future payments on Receivables and Related Security to a Special
Account located at and maintained by a financial institution that is not a Bank
Investor.
(i) COLLECTIONS RECEIVED. The Transferor shall, and shall
cause each Originating Entity to, segregate and hold in trust, and deposit,
immediately, but in any event not later than the day that occurs forty-eight
(48) hours thereafter (or, if such day is not a Business Day, the next Business
Day) after its receipt thereof, to the Concentration Account all Collections
received from time to time by the Transferor or such Originating Entity, as the
case may be.
(j) SALE TREATMENT. The Transferor will not (i) and will not
permit any Originating Entity to, account for (including for accounting and tax
purposes), or otherwise treat, the transactions contemplated by the Receivables
Purchase Agreement, the Transferring Affiliate Letter or the BMA Transfer
Agreement in any manner other than as a sale of Receivables by the applicable
Originating Entity to the Seller or Transferor, as applicable, or (ii) account
for (other than for tax purposes) or otherwise treat and transactions
contemplated hereby in any manner other than as a sale of Receivables by the
Transferor to the Agent on behalf of the Company or the Bank Investors, as
applicable. In addition, the Transferor shall, and shall cause each Originating
Entity to, disclose (in a footnote or otherwise) in all of its respective
financial statements (including any such financial statements consolidated with
any other Persons' financial statements) the existence and nature of the
transaction contemplated hereby, by the
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Receivables Purchase Agreement, by the Transferring Affiliate Letter and by the
BMA Transfer Agreement, and the interest of the Transferor (in the case of the
Seller's financial statements), and the Agent, on behalf of the Company and the
Bank Investors, in the Affected Assets.
(k) SEPARATE BUSINESS. The Transferor shall at all times
(a) to the extent the Transferor's office is located in the offices of any
Parent Group Member, pay fair market rent for its executive office space
located in the offices of such Parent Group Member, (b) have at all times at
least one member of its board of directors which is not and has never been an
employee, officer or director of any Parent Group Member or of any major
creditor of any Parent Group Member and is a person who is and has experience
with asset securitization, (c) maintain the Transferor's books, financial
statements, accounting records and other corporate documents and records
separate from those of any Parent Group Member or any other entity, (d) not
commingle the Transferor's assets with those of any Parent Group Member or any
other entity, (e) act solely in its corporate name and through its own
authorized officers and agents, (f) make investments directly or by brokers
engaged and paid by the Transferor its agents (provided that if any such agent
is an Affiliate of the Transferor it shall be compensated at a fair market rate
for its services), (g) separately manage the Transferor's liabilities from
those of the Parent Group and pay its own liabilities, including all
administrative expenses, from its own separate assets, except that the Seller
may pay the organizational expenses of the Transferor, and (h) pay from the
Transferor's assets all obligations and indebtedness of any kind incurred by
the Transferor. The Transferor shall abide by all corporate formalities,
including the maintenance of current minute books, and the Transferor shall
cause its financial statements to be prepared in accordance with generally
accepted accounting principles in a manner that indicates the separate
existence of the Transferor and its assets and liabilities. The Transferor
shall (i) pay all its liabilities, (ii) not assume the liabilities of any
Parent Group Member, (iii) not lend funds or extend credit to any Parent Group
Member except pursuant to the Receivables Purchase Agreement in connection with
the purchase of Receivables thereunder and (iv) not guarantee the liabilities
of any Parent Group Member. The officers and
<PAGE> 89
directors of the Transferor (as appropriate) shall make decisions with respect
to the business and daily operations of the Transferor independent of and not
indicated by any controlling entity. The Transferor shall not engage in any
business not permitted by its Certificate of Incorporation as in effect on the
Closing Date. The Transferor shall, in addition to the foregoing, take such
other actions as are necessary on its part to ensure that the facts and
assumptions set forth in the opinions issued by Arent Fox Kintner Plotkin &
Kahn, as counsel for the Transferor, in connection with the closing or initial
Transfer under this Agreement and relating to "non-consolidation" issues and
"true sale" issues, and in the certificates accompanying such opinions, remain
true and correct in all material respects at all times.
(l) CORPORATE DOCUMENTS. The Transferor shall only amend,
alter, change or repeal any provision of the Third, Fifth, Seventh, Tenth,
Eleventh or Twelfth Article of its Certificate of Incorporation with the prior
written consent of the Agent.
(m) PAYMENT TO THE ORIGINATING ENTITIES. With respect to any
Receivable purchased by the Transferor from the Seller, such sale shall be
effected under, and in strict compliance with the terms of, the Receivables
Purchase Agreement, including, without limitation, the terms relating to the
amount and timing of payments to be made to the Seller by the Transferor in
respect of the purchase price for such Receivable. With respect to any
Receivable purchased by the Seller from any Transferring Affiliate, the
Transferor shall cause such sale to be effected under, and in strict compliance
with the terms of, the Transferring Affiliate Letter and the BMA Transfer
Agreement, as applicable, including, without limitation, the terms relating to
the amount and timing of payments to be made to each Transferring Affiliate in
respect of the purchase price for such Receivable.
(n) PERFORMANCE AND ENFORCEMENT OF THE RECEIVABLES PURCHASE
AGREEMENT, ETC. The Transferor shall timely perform the obligations required to
be performed by the Transferor, and shall vigorously enforce the rights and
remedies accorded to the Transferor, under the Receivables Purchase Agreement.
The Transferor shall cause the Seller
<PAGE> 90
to timely perform the obligations required to be performed by the Seller, and
shall cause the Seller to vigorously enforce the rights and remedies accorded to
the Seller, under each of the Transferring Affiliate Letter and the BMA Transfer
Agreement. The Transferor shall take all actions to perfect and enforce its
rights and interests (and the rights and interests of the Agent, the Company and
the Bank Investors, as assignees of the Transferor) under the Receivables
Purchase Agreement as the Agent may from time to time reasonably request,
including, without limitation, making claims to which it may be entitled under
any indemnity, reimbursement or similar provision contained in the Receivables
Purchase Agreement. The Transferor shall cause the Seller to take all actions to
perfect and enforce the Seller's rights and interests (and the rights and
interests of the Transferor, the Agent, the Company and the Bank Investors, as
assignees of the Seller) under the Transferring Affiliate Letter or the BMA
Transfer Agreement as the Agent may from time to time reasonably request,
including, without limitation, making claims to which it may be entitled under
any indemnity, reimbursement or similar provision contained in the Transferring
Affiliate Letter or the BMA Transfer Agreement.
SECTION 5.2. NEGATIVE COVENANTS OF THE TRANSFEROR. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii) the date
on which the Net Investment has been reduced to zero, all accrued Discount and
Servicing Fees shall have been paid in full and all other Aggregate Unpaids
shall have been paid in full, in cash, unless the Agent shall otherwise consent
in writing:
(a) NO SALES, LIENS, ETC. Except as otherwise provided
herein and in the Receivables Purchase Agreement, the Transferor will not, and
will not permit any Originating Entity to, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon (or the filing of any financing statement) or with respect to (x) any
of the Affected Assets, (y) any inventory or goods, the sale of which may give
rise to a Receivable or any Receivable or related Contract, or (z) any Special
Account or the Concentration Account or any other account to which any
Collections of any
<PAGE> 91
Receivable are sent, or assign any right to receive income in respect thereof.
(b) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in Section 6.2 hereof, the Transferor will not, and will not
permit any Originating Entity to, extend, amend or otherwise modify the terms of
any Receivable, or amend, modify or waive any term or condition of any Contract
related thereto.
(c) NO CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY.
The Transferor will not, and will not permit any Originating Entity to, make any
change in the character of its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectibility of any Receivable
or otherwise have a Material Adverse Effect.
(d) NO MERGERS, ETC. The Transferor will not, and will not
permit any Originating Entity to, merge with or into or consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially all of its
assets (whether now owned or hereafter acquired and except as contemplated in
the Transaction Documents) to any Person, except that (i) any Transferring
Affiliate may merge or consolidate with any other Transferring Affiliate if, but
only if, the Agent shall receive at least ten Business Days' prior written
notice of such merger or consolidation and (ii) the Seller may merge or
consolidate with any other Person if, but only if, (x) immediately after giving
effect to such merger or consolidation, no Termination Event or Potential
Termination Event would exist and (y) the Agent shall have received a written
agreement, in form and substance satisfactory to the Agent, executed by the
corporation resulting from such merger or consolidation, under which agreement
such corporation shall become the Seller and Collection Agent, and shall assume
the duties, obligations and liabilities of the Seller, under the Receivables
Purchase Agreement, this Agreement (in its capacity as Collection Agent
hereunder), the Special Account Letters and each other Transaction Document to
which the Seller is party (whether in its individual capacity or as Collection
Agent), together with the documents relating to the Seller of the kind delivered
by or on behalf of the Seller pursuant to Section 3.1.
(e) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS, SPECIAL
ACCOUNT BANKS, DESIGNATED ACCOUNT AGENTS AND CONCENTRATION ACCOUNT. The
Transferor will not, and will not permit any Originating Entity to:
(i) add or terminate any bank as a Special Account Bank from
those listed in Exhibit C hereto, or make any change in its instructions
to Obligors regarding payments to be made to any Special Account Bank;
PROVIDED that the Transferor may permit the (A) addition of any bank as
a Special Account Bank for purposes of this Agreement at any time
following delivery to the Agent of written notice of such addition and a
Special Account Letter duly executed by such bank, and (B) termination
of any Special Account Bank at any time following delivery to the Agent
of written notice of such termination and evidence satisfactory to the
Agent that the affected Obligors shall have been instructed to remit all
subsequent Collections to another Special Account; or
(ii) add, terminate or change the Concentration Account, or
any bank as the Concentration Account Bank, from that listed in Exhibit
C hereto, or make any change in the instructions contained in any
Special Account Letter or any change in the instructions to the
Concentration Account Bank; PROVIDED, HOWEVER, that the Transferor may
terminate the then existing Concentration Account Bank and appoint a new
Concentration Account Bank if, prior to such termination and
appointment, the Agent shall receive (i) ten Business Days' prior notice
of such termination and appointment and (ii) prior to the effective date
of such termination and appointment, (x) executed copies of Special
Account Letters (in each case, executed by the applicable Originating
Entity and the applicable Special Account Bank) instructing the Special
Account Banks to transfer to the new Concentration Account prior to the
close of business on each banking day all Collections on deposit during
such banking day in the Special Accounts at the Special Account Banks,
and (y)
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a copy of a Concentration Account Agreement executed by the new
Concentration Account Bank and the Transferor; or
(iii) add or terminate any Person as a Designated Account
Agent from those listed in Exhibit C hereto, or make any change in its
instructions to such Designated Account Agent regarding the handling of
the Collections in the applicable Special Account; PROVIDED that the
Transferor may permit the (A) addition of any Person that satisfies the
requirements set forth herein of a "Designated Account Agent" as a
Designated Account Agent for purposes of this Agreement at any time
following delivery to the Agent of written notice of such addition and
an Account Agent Agreement duly executed by such Person, and (B)
termination of any Designated Account Agent at any time following
delivery to the Agent of written notice of such termination and evidence
satisfactory to the Agent that either an Originating Entity or a new
Designated Account Agent shall have been added in accordance with the
terms of this Agreement to succeed such terminated Designated Account
Agent in respect of the applicable Special Account or the affected
Obligors shall have been instructed to remit all subsequent Collections
to another Special Account.
(f) DEPOSITS TO SPECIAL ACCOUNTS AND THE CONCENTRATION
ACCOUNT. The Transferor will not, and will not permit any of the Originating
Entities or Designated Account Agents to, deposit or otherwise credit, or cause
or permit to be so deposited or credited, to any Special Account or the
Concentration Account cash or cash proceeds other than Collections of
Receivables.
(g) CHANGE OF NAME, ETC. The Transferor will not, and will
not permit any Originating Entity to, change its name, identity or structure or
the location of its chief executive office, unless at least 10 days prior to the
effective date of any such change the Transferor delivers to the Agent (i) such
documents, instruments or agreements, executed by the Transferor and/or the
affected Originating Entities, as are necessary to reflect such change and to
continue the perfection of the Agent's ownership interests or security interest
in the Affected
<PAGE> 93
Assets and (ii) new or revised Special Account Letters executed by the Special
Account Banks which reflect such change and enable the Agent to continue to
exercise its rights contained in Section 2.8 hereof.
(h) AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, ETC.. The
Transferor will not, and will not permit any Originating Entity to, (i) amend,
modify, or supplement the Receivables Purchase Agreement, the Transferring
Affiliate Letter, the BMA Transfer Agreement or any instrument, document or
agreement executed in connection therewith (collectively the "Initial Transfer
Documents"), (ii) terminate or cancel any Initial Transfer Document, (iii) issue
any consent or directive under any Initial Transfer Document, (iv) undertake any
enforcement proceeding in respect of any of the Initial Transfer Documents, or
(v) waive, extend the time for performance or grant any indulgence in respect of
any provision of any Initial Transfer Document, in each case except with the
prior written consent of the Agent and the Administrative Agent; nor shall the
Transferor take, or permit any Originating Entity to take, any other action
under any of the Initial Transfer Documents that shall have a material adverse
affect on the Agent, the Company or any Bank Investor or which is inconsistent
with the terms of this Agreement.
(i) OTHER DEBT. Except as provided for herein, the
Transferor will not create, incur, assume or suffer to exist any indebtedness
whether current or funded, or any other liability other than (i) indebtedness of
the Transferor representing fees, expenses and indemnities arising hereunder or
under the Receivables Purchase Agreement for the purchase price of the
Receivables under the Receivables Purchase Agreement, and (ii) other
indebtedness incurred in the ordinary course of its business in an amount not to
exceed $50,000 at any time outstanding.
(j) ERISA MATTERS. The Transferor will not, and will not
permit any Originating Entity to, (i) engage or permit any of its respective
ERISA Affiliates to engage in any prohibited transaction (as defined in Section
4975 of the Code and Section 406 of ERISA) for which an exemption is not
available or has not previously been obtained from the U.S. Department of Labor;
(ii) permit to exist any accumulated funding deficiency (as defined in Section
302(a) of ERISA and Section 412(a) of the Code) or funding
<PAGE> 94
deficiency with respect to any Benefit Plan other than a Multiemployer Plan;
(iii) fail to make any payments to any Multiemployer Plan that the Transferor,
such Originating Entity or any ERISA Affiliate thereof is required to make under
the agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability to the Transferor, such
Originating Entity or any ERISA Affiliate thereof under ERISA or the Code, if
such prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events occurring within any fiscal year of the
Transferor, in the aggregate, involve a payment of money or an incurrence of
liability by the Transferor, any Originating Entity or any ERISA Affiliate
thereof, in an amount in excess of $500,000.
SECTION 5.3. AFFIRMATIVE COVENANTS OF THE COLLECTION AGENT. At all times
from the date hereof to the later to occur of (i) the Termination Date or
(ii) the date on which the Net Investment has been reduced to zero, all accrued
Discount and Servicing Fees shall have been paid in full and all other
Aggregate Unpaids shall have been paid in full, in cash, unless the Agent shall
otherwise consent in writing.
(a) CONDUCT OF BUSINESS. The Collection Agent will carry on
and conduct its business in substantially the same manner and in substantially
the same fields of enterprise as it is presently conducted and do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
(b) COMPLIANCE WITH LAWS. The Collection Agent will comply
with all laws, rules and regulations (including, without limitation, all
CHAMPUS/VA Regulations, Medicaid Regulations and Medicare Regulations), and all
orders, writs, judgments, injunctions, decrees or awards to which it or its
respective properties may be subject.
<PAGE> 95
(c) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Collection Agent will furnish to the Agent from time to time such information
with respect to the Receivables as the Agent may reasonably request, including,
without limitation, listings identifying the Obligor and the Outstanding Balance
for each Receivable. The Collection Agent will, at any time and from time to
time during regular business hours permit the Agent, or its agents or
representatives, (i) to examine and make copies of and take abstracts from all
Records and (ii) to visit the offices and properties of the Collection Agent for
the purpose of examining such records, and to discuss matters relating to
Receivables or the Transferor's, the Originating Entities' or the Collection
Agent's performance hereunder and under the other Transaction Documents to which
such Person is a party with any of the officers, directors, employees or
independent public accountants of the Collection Agent having knowledge of such
matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Collection
Agent will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing Receivable).
The Collection Agent will give the Agent notice of any material change in the
administrative and operating procedures of the Collection Agent referred to in
the previous sentence.
(e) NOTICE OF AGENT'S INTEREST. The Collection Agent shall
cause its master data processing records, computer tapes, files and other
documents or instruments provided to, developed by or otherwise maintained by
the Collection Agent in connection with any Transfer or otherwise for purposes
of the transactions contemplated in this Agreement to disclose conspicuously the
Transferor's ownership of the Receivables and the Agent's interest therein.
<PAGE> 96
(f) CREDIT AND COLLECTION POLICIES. The Collection Agent
will comply in all material respects with the Credit and Collection Policy in
regard to each Receivable and the related Contract.
(g) COLLECTIONS. The Collection Agent shall instruct all
Obligors to cause all Collections to be deposited directly to a Special Account
and shall take, or omit to take, all actions in respect of Obligors, the Special
Account Banks and the Concentration Account Bank solely in a manner that is
consistent with the terms of this Agreement, including, without limitation,
Sections 2.8, 5.1(h), 5.2(e) and 5.2(f) hereof.
(h) COLLECTIONS RECEIVED. The Collection Agent shall
segregate and hold in trust, and deposit, immediately, but in any event not
later than the day that occurs forty-eight (48) hours thereafter (or, if such
day is not a Business Day, the next Business Day) after its receipt thereof, to
the Concentration Account all Collections received from time to time by the
Collection Agent.
SECTION 5.4. NEGATIVE COVENANTS OF THE COLLECTION AGENT. At all times
from the date hereof to the later to occur of (i) the Termination Date or
(ii) the date on which the Net Investment has been reduced to zero, all accrued
Discount and Servicing Fees shall have been paid in full and all other
Aggregate Unpaids shall have been paid in full, in cash, unless the Agent shall
otherwise consent in writing:
(a) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in Section 6.2 hereof, the Collection Agent will not extend,
amend or otherwise modify the terms of any Receivable, or amend, modify or waive
any term or condition of any Contract related thereto.
(b) NO CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY.
The Collection Agent will not make any change in the character of its business
or in the Credit and Collection Policy, which change would, in either case,
impair the collectibility of any Receivable or otherwise have a Material Adverse
Effect.
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(c) NO MERGERS, ETC. Except as otherwise permitted under
Section 5.2(d), the Collection Agent will not (i) consolidate or merge with or
into any other Person, or (ii) sell, lease or transfer all or substantially all
of its assets to any other Person.
(d) DEPOSITS TO ACCOUNTS. The Collection Agent will not
deposit or otherwise credit, or cause or permit to be so deposited or credited,
to any Special Account or Concentration Account cash or cash proceeds other than
Collections of Receivables.
<PAGE> 98
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.1. APPOINTMENT OF COLLECTION AGENT. The servicing,
administering and collection of the Receivables shall be conducted by such
Person (the "COLLECTION AGENT") so designated from time to time in accordance
with this Section 6.1. Until the Company gives notice to the Transferor of the
designation of a new Collection Agent, NMC is hereby designated as, and hereby
agrees to perform the duties and obligations of, the Collection Agent pursuant
to the terms hereof. The Collection Agent may not delegate any of its rights,
duties or obligations hereunder, or designate a substitute Collection Agent,
without the prior written consent of the Agent; PROVIDED that the Collection
Agent may from time to time delegate to any Originating Entity such of its
rights, duties and obligations hereunder as relate to the servicing,
administering and collection of the Receivables originated by such Originating
Entity; PROVIDED FURTHER that (i) any such delegation shall be terminated upon
the replacement of the Collection Agent hereunder and (ii) the Collection Agent
shall continue to remain solely liable for the performance of the duties as
Collection Agent hereunder notwithstanding any such delegation hereunder. The
Agent may, and upon the direction of the Majority Investors the Agent shall,
after the occurrence of a Collection Agent Default or any other Termination
Event designate as Collection Agent any Person (including itself) to succeed NMC
or any successor Collection Agent, on the conditions in each case that any such
Person so designated shall agree to perform the duties and obligations of the
Collection Agent pursuant to the terms hereof and such designation of such
Person is permitted by applicable law (including, without limitation, applicable
CHAMPUS/VA Regulations, Medicaid Regulations and Medicare Regulations) or any
order of a court of competent jurisdiction. The Agent may notify any Obligor as
to the ownership interest therein that shall have been transferred to the
Transferor and, except as otherwise provided hereunder, as to the Transferred
Interest hereunder.
<PAGE> 99
SECTION 6.2. DUTIES OF COLLECTION AGENT.
<PAGE> 100
(a) The Collection Agent shall take or cause to be taken all
such action as may be necessary or advisable to collect each Receivable from
time to time, all in accordance with applicable laws, rules and regulations
(including, without limitation, all CHAMPUS/VA Regulations, Medicaid Regulations
and Medicare Regulations), with reasonable care and diligence, and in accordance
with the Credit and Collection Policy. Each of the Transferor, the Company, the
Agent and the Bank Investors hereby appoints as its agent the Collection Agent,
from time to time designated pursuant to Section 6.1 hereof, to enforce its
respective rights and interests in and under the Affected Assets. To the extent
permitted by applicable law, the Transferor hereby grants to any Collection
Agent appointed hereunder an irrevocable power of attorney to take any and all
steps in the Transferor's and/or any Originating Entity's name and on behalf of
the Transferor necessary or desirable, in the reasonable determination of the
Collection Agent, to collect all amounts due under any and all Receivables,
including, without limitation, endorsing the Transferor's and/or any Originating
Entity's name on checks and other instruments representing Collections and
enforcing such Receivables and the related Contracts. The Transferor represents
and warrants that the foregoing power of attorney, in the case of any
Originating Entity, has been duly granted to the Transferor under the
Receivables Purchase Agreement and the Transferor is authorized under the
Receivables Purchase Agreement, to the extent permitted by applicable law, to
authorize the Collection Agent hereunder to exercise such power. The Collection
Agent shall set aside for the account of the Transferor and the Agent their
respective allocable shares of the Collections of Receivables in accordance with
Sections 2.5 and 2.6 hereof. The Collection Agent shall segregate and deposit to
the Agent's account the Agent's allocable share of Collections of Receivables
when required pursuant to Article II hereof. So long as no Termination Event
shall have occurred and be continuing, the Collection Agent may, in accordance
with the Credit and Collection Policy, extend the maturity or adjust the
Outstanding Balance of any Defaulted Receivable as the Collection Agent may
determine to be appropriate to maximize Collections thereof; PROVIDED, HOWEVER,
that such extension or adjustment shall not alter the status of such Receivable
as a Defaulted Receivable. The Transferor shall deliver to the Collection Agent
and the Collection Agent shall hold in
<PAGE> 101
trust for the Transferor, and the Agent, on behalf of the Company and the Bank
Investors, in accordance with their respective interests, all Records which
evidence or relate to Receivables or Related Security. Notwithstanding anything
to the contrary contained herein, the Agent shall have the absolute and
unlimited right to direct the Collection Agent (whether the Collection Agent is
NMC or any other Person) to commence or settle any legal action to enforce
collection of any Receivable or to foreclose upon or repossess any Related
Security. The Collection Agent shall not make the Agent, the Company or any of
the Bank Investors a party to any litigation without the prior written consent
of such Person.
(b) The Collection Agent shall, as soon as practicable
following receipt thereof, turn over to the Transferor any collections of any
indebtedness of any Person which is not on account of a Receivable. If the
Collection Agent is not NMC or an Affiliate thereof, the Collection Agent, by
giving three Business Days' prior written notice to the Agent, may revise the
percentage used to calculate the Servicing Fee so long as the revised percentage
will not result in a Servicing Fee that exceeds 110% of the reasonable and
appropriate out-of pocket costs and expenses of such Collection Agent incurred
in connection with the performance of its obligations hereunder as documented to
the reasonable satisfaction of the Agent, PROVIDED, HOWEVER, that at any time
after the Percentage Factor equals or exceeds 98%, any compensation to the
Collection Agent in excess of the Servicing Fee initially provided for herein
shall be an obligation of the Transferor and shall not be payable, in whole or
in part, from the Collections allocated to the Company or the Bank Investors, as
applicable. The Collection Agent, if other than NMC, shall as soon as
practicable upon demand, deliver to the Transferor all Records in its possession
which evidence or relate to indebtedness of an Obligor which is not a
Receivable.
(c) On or before 90 days after the end of each fiscal year
of the Collection Agent, beginning with the fiscal year ending December 31,
1997, the Collection Agent shall cause a firm of independent public accountants
(who may also render other services to the Collection Agent, the Transferor, the
Seller or any Affiliates of any of the foregoing), the Business Credit Field
Exam Group of
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NationsBank, N.A. or such other Person as may be approved by the Agent, to
furnish a report to the Agent to the effect that they have (any of the foregoing
being an "Auditor"): (i) compared the information contained in the Investor
Reports delivered during such fiscal year then ended with the information
contained in the Contracts and the Collection Agent's records and computer
systems for such period, and that, on the basis of such examination and
comparison, such Auditor is of the opinion that the information contained in the
Investor Reports reconciles with the information contained in the Contracts and
the Collection Agent's records and computer system and that the servicing of the
Receivables has been conducted in compliance with this Agreement, (ii) confirmed
the Net Receivables Balance as of the end of each Tranche Period during such
fiscal year, and (iii) verified that the Receivables treated by the Collection
Agent as Eligible Receivables in fact satisfied the requirements of the
definition thereof contained herein except, in each case, for (a) such
exceptions as such Auditor shall believe to be immaterial (which exceptions need
not be enumerated) and (b) such other exceptions as shall be set forth in such
statement.
(d) Notwithstanding anything to the contrary contained in
this Article VI, the Collection Agent, if not the Transferor or NMC, shall have
no obligation to collect, enforce or take any other action described in this
Article VI with respect to any indebtedness that is not included in the
Transferred Interest other than to deliver to the Transferor the collections and
documents with respect to any such indebtedness as described in Section 6.2 (b)
hereof.
SECTION 6.3. RIGHT AFTER DESIGNATION OF NEW COLLECTION AGENT. At any
time following the designation of a Collection Agent (other than the Transferor,
the Seller or any Affiliate of the Transferor or the Seller) pursuant to Section
6.1 hereof:
(i) The Agent may direct that payment of all amounts
payable under any Receivable be made directly to the Agent or its
designee.
(ii) The Transferor shall, at the Agent's request and
at the Transferor's expense, give
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notice of the Agent's, the Transferor's and/or the Bank Investors'
ownership of Receivables to each Obligor and direct that payments be
made directly to the Agent or its designee.
(iii) The Transferor shall, at the Agent's request,
(A) assemble all of the Records, and shall make the same available to
the Agent or its designee at a place selected by the Agent or its
designee, and (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections of Receivables
in a manner acceptable to the Agent and shall, promptly upon receipt,
remit all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Agent or its designee.
(iv) The Transferor hereby authorizes the Agent to
take, to the extent permitted by applicable law, any and all steps in
the Transferor's or any Originating Entity's name (which power, in the
case of each Originating Entity, the Transferor is authorized to grant
pursuant to authority granted to the Transferor under the Receivables
Purchase Agreement) and on behalf of the Transferor and such Originating
Entity necessary or desirable, in the determination of the Agent, to
collect all amounts due under any and all Receivables, including,
without limitation, endorsing the Transferor's or such Originating
Entity's name on checks and other instruments representing Collections
and enforcing such Receivables and the related Contracts.
Notwithstanding the foregoing clauses (i), (ii), (iii) and (iv), the Agent shall
not at any time direct, or cause the Transferor or any Originating Entity to
direct, Obligors of Receivables or Related Security payable under the Medicare
or Medicaid program to make payment of amounts due or to become due to the
Transferor or any Originating Entity in respect of such Receivables or Related
Security directly to the Concentration Account or to the Agent or its designee,
EXCEPT for any such payment in respect of such Receivables or Related Security
or any assignment thereof that is established by, or made pursuant to, the order
of a court of competent jurisdiction.
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SECTION 6.4. COLLECTION AGENT DEFAULT. The occurrence of any one or more
of the following events shall constitute a Collection Agent Default:
(a) (i) the Collection Agent or, to the extent that the
Transferor, the Seller or any Affiliate of the Transferor or the Seller is then
acting as Collection Agent, the Transferor, the Seller or such Affiliate, as
applicable, shall fail to observe or perform any term, covenant or agreement to
be observed or performed (A) under Section 5.3(d), 5.3(g) or 5.3(h) or Section
5.4, or (B) under Section 5.3 (other than subsection (d), (g) or (h) thereof)
and such failure shall continue for five (5) days, or (ii) the Collection Agent
or, to the extent that the Transferor, the Seller or any Affiliate of the
Transferor, or the Seller is then acting as Collection Agent, the Transferor,
the Seller or such Affiliate, as applicable, shall fail to observe or perform
any term, covenant or agreement hereunder (other than as referred to in clause
(i) or (iii) of this Section 6.4(a)) or under any of the other Transaction
Documents to which such Person is a party or by which such Person is bound, and
such failure shall remain unremedied for ten (10) days, or (iii) the Collection
Agent or, the extent that the Transferor, the Seller or any Affiliate of the
Transferor, or the Seller is then acting as Collection Agent, the Transferor,
the Seller or such Affiliate, as applicable, shall fail to make any payment or
deposit required to be made by it hereunder when due or the Collection Agent
shall fail to observe or perform any term, covenant or agreement on the
Collection Agent's part to be performed under Section 2.8(b) hereof; or
(b) any representation, warranty, certification or statement
made by the Collection Agent or the Transferor, the Seller or any Affiliate of
the Transferor or the Seller (in the event that the Transferor, the Seller or
such Affiliate is then acting as the Collection Agent) in this Agreement, the
Receivables Purchase Agreement, the Transferring Affiliate Letter, the BMA
Transfer Agreement or in any of the other Transaction Documents or in any
certificate or report delivered by it pursuant to any of the foregoing shall
prove to have been incorrect in any material respect when made or deemed made;
or
<PAGE> 105
(c) failure of the Collection Agent or any of its
Subsidiaries, FMC, or FMCH to pay when due any amounts due under any agreement
under which any Indebtedness greater that $5,000,000 is governed; or the default
by the Collection Agent or any of its Subsidiaries, FMC or FMCH in the
performance of any term, provision of condition contained in any agreement under
which any Indebtedness greater than $5,000,000 was created or is governed,
regardless of whether such event is an "event of default" or "default" under any
such agreement; or any Indebtedness of the Collection Agent or any of its
Subsidiaries, FMC or FMCH greater than $5,000,000 shall be declared to be due
and payable or required to be prepaid (other than by a regularly scheduled
payment and other than in the case of an instrument stated to be payable on
demand) prior to the scheduled date of maturity thereof; or
(d) any Event of Bankruptcy shall occur with respect to the
Collection Agent or any of its Subsidiaries; PROVIDED that in the case of any
immaterial Subsidiary of the Collection Agent, if an Event of Bankruptcy shall
have occurred by reason of any institution of an involuntary proceeding against
such Subsidiary, such Event of Bankruptcy shall not constitute a Collection
Agent Default unless such proceeding shall have remained undismissed or unstayed
for a period of 60 days; or
(e) there shall have occurred any material adverse change in
the operations of the Collection Agent since the end of the last fiscal year
ending prior to the date of its appointment as Collection Agent hereunder or any
other event shall have occurred which, in the commercially reasonably judgment
of the Agent, materially and adversely affects the Collection Agent's ability to
either collect the Receivables or to perform under this Agreement.
SECTION 6.5. RESPONSIBILITIES OF THE TRANSFEROR. Anything herein to the
contrary notwithstanding, the Transferor shall, and/or shall cause each
Originating Entity to, (i) perform all of each Originating Entity's obligations
under the Contracts related to the Receivables to the same extent as if
interests in such Receivables had not been sold hereunder and under the
Transferring Affiliate Letter, the BMA Transfer Agreement and/or the Receivables
Purchase
<PAGE> 106
Agreement, as applicable, and the exercise by the Agent, the Company and the
Bank Investors of their rights hereunder and under the Transferring Affiliate
Letter, the BMA Transfer Agreement and the Receivables Purchase Agreement shall
not relieve the Transferor or the Seller from such obligations and (ii) pay when
due any taxes, including without limitation, any sales taxes payable in
connection with the Receivables and their creation and satisfaction. Neither the
Agent, the Company nor any of the Bank Investors shall have any obligation or
liability with respect to any Receivable or related Contracts, nor shall it be
obligated to perform any of the obligations of the Seller thereunder.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. TERMINATION EVENTS. The occurrence of any one or more of
the following events shall constitute a Termination Event:
(a) the Transferor or the Collection Agent shall fail to
make any payment or deposit to be made by it hereunder or under the Receivables
Purchase Agreement when due hereunder or thereunder; or
(b) any representation, warranty, certification or statement
made or deemed made by the Transferor in this Agreement, by FMC or FMCH under
the Parent Agreement, or by the Transferor, FMC, FMCH or any other Parent Group
Member in any other Transaction Document to which it is a party or in any other
document certificate or other writing delivered pursuant hereto or thereto,
shall prove to have been incorrect in any material respect when made or deemed
made; or
(c) the Transferor or the Collection Agent shall default in
the performance of any payment or undertaking (other than those covered by
clause (a) above) to be performed or observed under:
(i) Section 5.1(a)(iv); PROVIDED that, in the case of any
failure to provide any such notice relating to a Potential Termination
Event that
<PAGE> 107
shall have ceased to exist prior to the date such notice was required to
have been given under Section 5.1(a)(iv), the failure to give such
notice shall not constitute a Termination Event unless a senior officer
of the Seller or the Transferor (including, in each case, the Treasurer,
any Assistant Treasurer, General Counsel or any assistant or associate
general counsel of such Person) shall have known of the occurrence of
such Potential Termination Event during such period; or
(ii) any of Sections 5.1(a)(v), 5.1 (a)(x), 5.1 (a)(ix),
5.1(b)(i), 5.1(f), 5.1(g), 5.1(h), 5.1(i), 5.1(k), 5.1(l), 5.2(a),
5.2(c), 5.2(d), 5.2(e), 5.2(f), 5.2(g), 5.2(h), 5.2(i) or 6.3; or
(iii) Section 5.1(b)(ii), and such default shall continue for
2 Business Days; or
(iv) any other provision hereof and such default in the case
of this clause (iv) shall continue for ten (10) days;
(d) (i) failure of the Transferor to pay when due any
amounts due under any agreement relating to Indebtedness to which it is a party;
or the default by the Transferor in the performance of any term, provision or
condition contained in any agreement relating to Indebtedness to which it is a
party regardless of whether such event is an "event of default" or "default"
under any such agreement; or any Indebtedness owing by the Transferor shall be
declared to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the date of maturity thereof; or
(ii) failure of the Seller, FMCH, FMC or any Transferring Affiliate to pay when
due any amounts due under any agreement to which any such Person is a party and
under which any Indebtedness greater than $5,000,000 is governed; or the
default by the Seller, FMCH, FMC or any Transferring Affiliate in the
performance of any term, provision or condition contained in any agreement to
which any such Person is a party and under which any Indebtedness owing by the
Seller, FMCH, FMC or any Transferring Affiliate greater than $5,000,000 was
created or is governed, regardless of
<PAGE> 108
whether such event is an "event of default" or "default" under any such
agreement; or any Indebtedness owing by the Seller, FMCH, FMC or any
Transferring Affiliate greater than $5,000,000 shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment
and other than in the case of an instrument stated to be payable on demand)
prior to the date of maturity thereof; or
(e) any Event of Bankruptcy shall occur with respect to the
Transferor, any Originating Entity, FMC, FMCH or NMC; PROVIDED that, in the case
of any Event of Bankruptcy relating to any Transferring Affiliate, such Event of
Bankruptcy shall not constitute a Termination Event hereunder if at such time
the Percentage Factor does not exceed the Maximum Percentage Factor after
reducing the Net Receivables Balance by an amount equal to the aggregate
Outstanding Balance of all Receivables otherwise included in the calculation of
Net Receivables Balance which either (i) have been originated by such
Transferring Affiliate or (ii) are owing from any Obligor that shall have been
directed to remit payments thereon to a Special Account that is a Special
Account to which Obligors in respect of the Transferring Affiliate that is the
subject of such Event of Bankruptcy shall have been directed to remit payments;
or
(f) the Agent, on behalf of the Company and the Bank
Investors, shall, for any reason, fail or cease to have a valid and perfected
first priority ownership or security interest in the Affected Assets free and
clear of any Adverse Claims; or the Transferor shall, for any reason, fail or
cease to have all right, title and interest in and to all Receivables, Related
Security and Collections, free and clear of any Adverse Claim, subject only to
the interests therein of the Agent, on behalf of the Company and the Bank
Investors; or
(g) a Collection Agent Default shall have occurred; or
(h) the Transferring Affiliate Letter, the BMA Transfer
Agreement, the Receivables Purchase Agreement or any other Transaction Document
shall have terminated; or any material provision thereof shall cease for any
reason to be valid and binding on any party thereto or any party shall
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so state in writing; or any party to any Transaction Document (other than the
Agent, the Company or any Bank Investor) shall fail to perform any material
term, provision or condition contained in any Transaction Document on its part
to be performed or a default shall otherwise occur thereunder; or
(i) any of FMCH, NMC, the Transferor or the Seller shall
enter into any transaction or merger whereby it is not the surviving entity; or
(j) there shall have occurred any material adverse change in
the operations of any of FMCH, NMC, the Transferor or the Seller since December
31, 1996 or any other Material Adverse Effect shall have occurred; or
(k) the Liquidity Provider or the Credit Support Provider
shall have given notice that an event of default has occurred and is continuing
under any of its respective agreements with the Company; or
(l) the Commercial Paper issued by the Company shall not be
rated at least "A-2" by Standard & Poor's and at least "P-2" by Moody's, unless
any rating of such Commercial Paper shall be lower than such level solely as a
result of the correspondingly lower rating of the Credit Support Provider; or
(m) (i) the Percentage Factor exceeds the Maximum Percentage
Factor unless the Transferor reduces the Net Investment or increases the balance
of the Affected Assets on the next Business Day so as to reduce the Percentage
Factor to less than or equal to 98%; (ii) the Percentage Factor equals or
exceeds 100% at any time; or (iii) the Net Investment plus, in the case where
the Transferred Interest is held by the Company, the Interest Component of all
outstanding Related Commercial Paper, shall exceed the Facility Limit at any
time; or
(n) the Dilution Ratio for any month exceeds 12%; or
(o) the Loss-to-Liquidation Ratio for any month exceeds 8%;
or
<PAGE> 110
(p) the Default Ratio for any month exceeds 12%; or
(q) a default shall occur under the Parent Agreement; or the
Parent Agreement shall for any reason terminate; or any material provision
thereof shall cease to be valid and binding on any party thereto or any party
thereto shall so state in writing; or
(r) (i) the Seller shall cease to own, free and clear of any
Adverse Claim all of the outstanding shares of capital stock of the Transferor
on a fully diluted basis; or (ii) FMCH shall cease to own, directly or
indirectly, free and clear of any Adverse Claim all of the outstanding shares of
capital stock of any of the Originating Entities or the Collection Agent on a
fully diluted basis; or (iii) FMC shall cease to own, directly or indirectly,
free and clear of any Adverse Claim other than a pledge made pursuant to the
Bank Revolver, all of the Voting Stock of FMCH other than the preferred stock of
FMCH outstanding as of the date hereof (which preferred stock outstanding as of
the date hereof shall not represent more than 20% of the total Voting Stock of
FMCH); or (iv) Fresenius AG, a corporation organized under the laws of the
Federal Republic of Germany, shall cease to own, directly or indirectly, free
and clear of any Adverse Claim at least a majority of the Voting Stock of FMC;
or
(s) both (i) FMCH's long-term public senior debt securities
shall be rated lower than B- by Standard & Poor's or B3 by Moody's, or if
neither Standard & Poor's nor Moody's shall rate such securities, FMCH's
long-term senior debt shall have a deemed rating of lower than B as determined
by the Agent using its standard bond rating methodology, and (ii) FMC's
long-term public senior debt securities shall be rated lower than B- by Standard
& Poor's or B3 by Moody's, or if neither Standard & Poor's nor Moody's shall
rate such securities, FMC's long-term senior debt shall have a deemed rating of
lower than B as determined by the Agent using its standard bond rating
methodology.
SECTION 7.2. TERMINATION. (a) Upon the occurrence of any Termination
Event, the Agent may, or at the direction of the Majority Investors shall, by
notice to the Transferor and the Collection Agent declare the
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Termination Date to have occurred; PROVIDED, HOWEVER, that in the case of any
event described in Section 7.1(e), 7.1(f), 7.1(m)(ii), 7.1(m)(iii) or 7.1(r)
above, the Termination Date shall be deemed to have occurred automatically upon
the occurrence of such event. Upon any such declaration or automatic occurrence,
the Agent shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the UCC of
the applicable jurisdiction and other applicable laws, all of which rights shall
be cumulative.
(b) At all times after the declaration or automatic
occurrence of the Termination Date pursuant to Section 7.2(a), the Base Rate
plus 2.00% shall be the Tranche Rate applicable to the Net Investment for all
existing and future Tranches.
<PAGE> 112
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. INDEMNITIES BY THE TRANSFEROR. Without limiting any other
rights which the Agent, the Company or the Bank Investors may have hereunder or
under applicable law, the Transferor hereby agrees to indemnify the Company, the
Bank Investors, the Agent, the Administrative Agent, the Collateral Agent, the
Liquidity Provider and the Credit Support Provider and any successors and
permitted assigns and their respective any officers, directors and employees
(collectively, " INDEMNIFIED PARTIES") from and against any and all damages,
losses, claims, liabilities, costs and expenses, including, without limitation,
reasonable attorneys' fees (which such attorneys may be employees of the
Liquidity Provider, the Credit Support Provider, the Agent, the Administrative
Agent or the Collateral Agent, as applicable) and disbursements (all of the
foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") awarded
against or incurred by any of them in any action or proceeding between the
Transferor or any Parent Group Member (including any Parent Group Member, in its
capacity as the Collection Agent) and any of the Indemnified Parties or between
any of the Indemnified Parties and any third party or otherwise arising out of
or as a result of this Agreement, the other Transaction Documents, the ownership
or maintenance, either directly or indirectly, by the Agent, the Company or any
Bank Investor of the Transferred Interest or any of the other transactions
contemplated hereby or thereby, excluding, however, (i) Indemnified Amounts to
the extent resulting from gross negligence or willful misconduct on the part of
an Indemnified Party or (ii) recourse (except as otherwise specifically provided
in this Agreement) for uncollectible Receivables. Without limiting the
generality of the foregoing, the Transferor shall indemnify each Indemnified
Party for Indemnified Amounts relating to or resulting from:
(i) any representation or warranty made by any Parent Group
Member (including any Parent Group Member, in its capacity as the
Collection Agent) or any officers of any Parent Group Member (including
any Parent Group Member, in its capacity as the Collection Agent) under
or in connection with this Agreement, the
<PAGE> 113
Receivable Purchase Agreement, the Parent Agreement, the Transferring
Affiliate Letter, the BMA Transfer Agreement, any of the other
Transaction Documents, any Investor Report or any other information or
report delivered by any Parent Group Member pursuant to or in connection
with any Transaction Document, which shall have been false or incorrect
in any material respect when made or deemed made;
(ii) the failure by any Parent Group Member (including any
Parent Group Member, in its capacity as the Collection Agent) to comply
with any applicable law, rule or regulation (including, without
limitation, any CHAMPUS/VA Regulation, any Medicaid Regulation or any
Medicare Regulation), including with respect to any Receivable or the
related Contract, or the nonconformity of any Receivable or the related
Contract with any such applicable law, rule or regulation;
(iii) the failure (x) to vest and maintain vested in the
Agent, on behalf of the Company and the Bank Investors, an undivided
first priority, perfected percentage ownership interest (to the extent
of the Transferred Interest) in the Affected Assets free and clear of
any Adverse Claim or (y) to create or maintain a valid and perfected
first priority security interest in favor of the Agent, for the benefit
of the Company and the Bank Investors, in the Affected Assets as
contemplated pursuant to Section 10.11, free and clear of any Adverse
Claim;
(iv) the failure to file, or any delay in filing, financing
statements, continuation statements, or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any of the Affected Assets;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable or
the related Contract not being the legal, valid and binding obligation
of such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of merchandise or services
<PAGE> 114
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(vi) any failure of the Collection Agent to perform its
duties or obligations in accordance with the provisions hereof; or
(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable;
(viii) the transfer of an ownership interest in any Receivable
other than an Eligible Receivable;
(ix) the failure by any Parent Group Member (individually or
as Collection Agent) to comply with any term, provision or covenant
contained in this Agreement or any of the other Transaction Documents to
which it is a party or to perform any of its respective duties under the
Contracts;
(x) the Percentage Factor exceeding the Maximum Percentage
Factor at any time;
(xi) the failure of any Originating Entity to pay when due
any taxes, including without limitation, sales, excise or personal
property taxes payable in connection with any of the Receivables;
(xii) any repayment by any Indemnified Party of any amount
previously distributed in reduction on Net Investment which such
Indemnified Party believes in good faith is required to be made;
(xiii) the commingling by the Transferor, any Originating
Entity or the Collection Agent of Collections of Receivables at any time
with other funds;
(xiv) any investigation, litigation or proceeding related to
this Agreement, any of the other Transaction Documents, the use of
proceeds of Transfers by the Transferor or any Originating Entity, the
<PAGE> 115
ownership of Transferred Interests, or any Receivable, Related Security
or Contract;
(xv) the failure of any Special Account Bank, Designated
Account Agent or the Concentration Account Bank to remit any amounts
held by it pursuant to the instructions set forth in the applicable
Special Account Letter or Concentration Account Agreement or any
instruction of the Collection Agent, the Transferor, any Originating
Entity or the Agent (to the extent such Person is entitled to give such
instructions in accordance with the terms hereof and of any applicable
Special Account Letter or Concentration Account Agreement) whether by
reason of the exercise of set-off rights or otherwise;
(xvi) any inability to obtain any judgment in or utilize the
court or other adjudication system of, any state in which an Obligor may
be located as a result of the failure of the Transferor or the Seller to
qualify to do business or file any notice of business activity report or
any similar report;
(xvii) any failure of the Transferor to give reasonably
equivalent value to the Seller in consideration of the purchase by the
Transferor from the Seller of any Receivable, any failure of the Seller
to give reasonably equivalent value to any Transferring Affiliate in
consideration of the purchase by the Seller from such Transferring
Affiliate of any Receivable, or any attempt by any Person to void,
rescind or set-aside any such transfer under statutory provisions or
common law or equitable action, including, without limitation, any
provision of the Bankruptcy Code;
(xviii) any action taken by the Transferor, any Originating
Entity or the Collection Agent (if a Parent Group Member or designee
thereof) in the enforcement or collection of any Receivable; PROVIDED,
HOWEVER, that if the Company enters into agreements for the purchase of
interests in receivables from one or more Other Transferors, the Company
shall allocate such Indemnified Amounts which are in connection with the
Liquidity Provider Agreement, the Credit Support
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Agreement or the credit support furnished by the Credit Support Provider
to the Transferor and each Other Transferor; and PROVIDED, FURTHER, that
if such Indemnified Amounts are attributable to any Parent Group Member
and not attributable to any Other Transferor, the Transferor shall be
solely liable for such Indemnified Amounts or if such Indemnified
Amounts are attributable to Other Transferors and not attributable to
any Parent Group Member, such Other Transferors shall be solely liable
for such Indemnified Amounts;
(xix) any reduction or extinguishment of, or any failure by
any Obligor to pay (in whole or in part), any Receivable or any Related
Security with respect thereto as a result of or on account of any
violation of or prohibition under any law, rule or regulation now or
hereafter in effect from time to time, including without limitation and
CHAMPUS/VA Regulation, any Medicaid Regulation or any Medicare
Regulation, or as a result of or on account of the entering of any
judicial or regulatory order or agreement adversely affecting the
Transferor or any Parent Group Member; or
(xx) any failure by the Transferor or any Parent Group Member
to maintain all governmental and other authorization and approvals
necessary to render the services, or sell the merchandise, resulting in
Receivables.
SECTION 8.2. INDEMNITY FOR TAXES, RESERVES AND EXPENSES. (a) If after
the date hereof, the adoption of any Law or bank regulatory guideline or any
amendment or change in the interpretation of any existing or future Law or bank
regulatory guideline by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any directive of
any Official Body (in the case of any bank regulatory guideline, whether or not
having the force of Law):
(i) shall subject any Indemnified Party to any tax, duty or
other charge (other than Excluded Taxes) with respect to this Agreement,
the other Transaction Documents, the ownership, maintenance or
<PAGE> 117
financing of the Transferred Interest, the Receivables or payments of
amounts due hereunder, or shall change the basis of taxation of payments
to any Indemnified Party of amounts payable in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance funds hereunder,
under the Liquidity Provider Agreement or the credit support furnished
by the Credit Support Provider or otherwise in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest or the Receivables (except for
changes in the rate of general corporate, franchise, net income or other
income tax imposed on such Indemnified Party by the jurisdiction in
which such Indemnified Party's principal executive office is located);
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System) against assets of, deposits with or for the account of,
or credit extended by, any Indemnified Party or shall impose on any
Indemnified Party or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interest, the Receivables or
payments of amounts due hereunder or its obligation to advance funds
hereunder under the Liquidity Provider Agreement or the credit support
provided by the Credit Support Provider or otherwise in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest or the Receivables; or
(iii) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and expenses,
and expenses of litigation or preparation therefor in contesting any of
the foregoing) with respect to this Agreement, the other Transaction
Documents, the ownership, maintenance
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or financing of the Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance funds hereunder under
the Liquidity Provider Agreement or the credit support furnished by the
Credit Support Provider or otherwise in respect to this Agreement, the
other Transaction Documents, the ownership, maintenance or financing of
the Transferred Interests or the Receivables, and the result of any of
the foregoing is to increase the cost to such Indemnified Party with
respect to this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the
Receivables, the obligations hereunder, the funding of any purchases
hereunder, the Liquidity Provider Agreement or the Credit Support
Agreement, by an amount deemed by such Indemnified Party to be material,
then, within ten (10) days after demand by such Indemnified Party through the
Agent, the Transferor shall pay to the Agent, for the benefit of such
Indemnified Party, such additional amount or amounts as will compensate such
Indemnified Party for such tax, increased cost or reduction.
(b) If any Indemnified Party shall have determined that
after the date hereof, the adoption of any applicable Law or bank regulatory
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation thereof by any Official Body, or any directive regarding
capital adequacy (in the case of any bank regulatory guideline, whether or not
having the force of law) of any such Official Body, has or would have the effect
of reducing the rate of return on capital of such Indemnified Party (or its
parent) as a consequence of such Indemnified Party's obligations hereunder or
with respect hereto to a level below that which such Indemnified Party (or its
parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Indemnified Party to be material, then from time to time,
within ten (10) days after demand by such Indemnified Party through the Agent,
the Transferor shall pay to the Agent, for the benefit of such Indemnified
Party, such additional amount or amounts as will compensate such Indemnified
Party (or its parent) for such reduction.
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(c) The Agent will promptly notify the Transferor of any
event of which it has knowledge, occurring after the date hereof, which will
entitle an Indemnified Party to compensation pursuant to this Section 8.2. A
notice by the Agent or the applicable Indemnified Party claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, the Agent or any applicable Indemnified Party may use
any reasonable averaging and attributing methods.
(d) Anything in this Section 8.2 to the contrary
notwithstanding, if the Company enters into agreements for the acquisition of
interests in receivables from one or more Other Transferors, the Company shall
allocate the liability for any amounts under this Section 8.2 which are in
connection with the Liquidity Provider Agreement, the Credit Support Agreement
or the credit support provided by the Credit Support Provider ("SECTION 8.2
COSTS") to the Transferor and each Other Transferor; PROVIDED, HOWEVER, that if
such Section 8.2 Costs are attributable to any Parent Group Member and not
attributable to any Other Transferor, the Transferor shall be solely liable for
such Section 8.2 Costs or if such Section 8.2 Costs are attributable to Other
Transferors and not attributable to any Parent Group Member, such Other
Transferors shall be solely liable for such Section 8.2 Costs.
SECTION 8.3. TAXES. (a) All payments made hereunder by the Transferor or
the Collection Agent (each, a "Payor") to the Company, any Bank Investor or the
Agent (each, a "Recipient") shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
any other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority on any recipient (or any assignee of
such parties) (such non-excluded items being called "Taxes"), but excluding
franchise taxes and taxes imposed on or measured by the recipient's net income
or gross receipts ("Excluded Taxes"). In the event that any withholding or
deduction from any payment made by the Payor
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hereunder is required in respect of any Taxes, then such Payor shall:
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment to such
authority; and
(iii) pay to the Recipient such additional amount or amounts
as is necessary to ensure that the net amount actually received by the Recipient
will equal the full amount such Recipient would have received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any Recipient with respect
to any payment received by such Recipient hereunder, the Recipient may pay such
Taxes and the Payor will promptly pay such additional amounts (including any
penalties, interest or expenses) as shall be necessary in order that the net
amount received by the Recipient after the payment of such Taxes (including any
Taxes on such additional amount) shall equal the amount such Recipient would
have received had such Taxes not been asserted. Notwithstanding the foregoing,
the Payor shall not be obligated to pay any such additional amounts pursuant to
clause (iii) above or pursuant to the immediately preceding sentence to a Bank
Investor that is not organized under the laws of the United States of America or
a state thereof if such Bank Investor shall have failed to comply with the
requirements of paragraph (b) of this Section 8.3 as of the time such Taxes are
due and payable.
If the Payor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Recipient the required receipts or other
required documentary evidence, the Payor shall indemnify the Recipient for any
incremental Taxes, interest, or penalties that may become payable by any
Recipient as a result of any such failure.
(b) Each Bank Investor that is not incorporated under the
laws of the United States of America or a state thereof shall:
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(X) (i) on or before the date of any payment by a Payor to
such Bank Investor, deliver to such Payor and the Agent (A) two (2) duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, certifying that
it is entitled to receive payments hereunder without deduction or
withholding of any United States federal income taxes and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be, certifying that it is entitled to an exemption from
United States backup withholding tax;
(ii) deliver to each Payor and the Agent two (2) further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to such Payor; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by either
Payor or the Agent; or
(Y) Each Bank Investor or transferee that is not a "bank"
under Section 881(c)(3)(A) of the Internal Revenue Code thereof shall:
(i) on or before the date it becomes a party hereto (or, in
the case of a participant, on or before the date such participant
becomes a participant hereunder), deliver to each Payor and the Agent
(i) a statement under penalties of perjury that such Bank Investor or
transferee (x) is not a "bank" under Section 881(c)(3)(A) of the
Internal Revenue Code, is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been treated as
a bank for purposes of any tax, securities law or other filing or
submission made to any governmental authority, any application made to a
rating agency or qualification for any exemption from tax, securities
law or other legal requirements, (y) is not a 10-percent shareholder
within the meaning of Section
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811(c)(3)(B) of the Internal Revenue Code and (z) is not a controlled
foreign corporation receiving interest from a related person within the
meaning of Section 881(c)(3)(C) of the Internal Revenue Code and (ii) a
properly completed and duly executed Internal Revenue Service Form W-8
or applicable successor form;
(ii) deliver to each Payor and the Agent two further properly
completed and duly executed copies of such Form W-8 expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent form previously delivered by it to such Payor or upon the
request of such Payor; and
(iii) obtain such extensions of time for filing and completing
such forms or certifications as may be reasonably requested by either
Payor or the Agent;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Bank Investor hereunder which renders all
such forms inapplicable or which would prevent such Bank Investor from duly
completing and delivering any such form with respect to it and such Bank
Investor so advises each payor and the Agent. Each Person that shall become a
Bank Investor or a participant of a Bank Investor pursuant to subsection 10.6
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms, certifications and statements required pursuant to this
subsection, PROVIDED that in the case of a participant of a Bank Investor the
obligations of such participant of a Bank Investor pursuant to this subsection
(b) shall be determined as if the participant of a Bank Investor were a Bank
Investor except that such participant of a Bank Investor shall furnish all such
required forms, certifications and statements to the Bank Investor from which
the related participation shall have been purchased.
SECTION 8.4. OTHER COSTS, EXPENSES AND RELATED MATTERS. (a) The
Transferor agrees, upon receipt of a written invoice, to pay or cause to be
paid, and to save the Company, the Bank Investors and the Agent harmless against
liability for the payment of, all reasonable out-of-pocket expenses (including,
without limitation, attorneys', accountants' and other third parties' fees and
expenses, any
<PAGE> 123
filing fees and expenses incurred by officers or employees of the Company, the
Bank Investors and/or the Agent) or intangible, documentary or recording taxes
incurred by or on behalf of the Company, any Bank Investor and the Agent (i) in
connection with the negotiation, execution, delivery and preparation of this
Agreement, the other Transaction Documents and any documents or instruments
delivered pursuant hereto and thereto and the transactions contemplated hereby
or thereby (including, without limitation, the perfection or protection of the
Transferred Interest) and (ii) from time to time (a) relating to any amendments,
waivers or consents under this Agreement and the other Transaction Documents,
(b) arising in connection with the Company's, any Bank Investor's, the Agent's
or the Collateral Agent's enforcement or preservation of rights (including,
without limitation, the perfection and protection of the Transferred Interest
under this Agreement), or (c) arising in connection with any audit, dispute,
disagreement, litigation or preparation for litigation involving this Agreement
or any of the other Transaction Documents (all of such amounts, collectively,
"Transaction Costs").
(b) The Transferor shall pay the Agent, for the account of
the Company and the Bank Investors, as applicable, on demand any Early
Collection Fee due on account of the reduction of a Tranche on a day prior to
the last day of its Tranche Period.
SECTION 8.5. RECONVEYANCE UNDER CERTAIN CIRCUMSTANCES. The Transferor
agrees to accept the reconveyance from the Agent, on behalf of the Company
and/or the Bank Investors, of the Transferred Interest if the Agent notifies
Transferor of a material breach of any representation or warranty made or deemed
made pursuant to Article III of this Agreement and Transferor shall fail to cure
such breach within 15 days (or, in the case of the representations and
warranties in Sections 3.1(d) and 3.1(j), 3 days) of such notice. The
reconveyance price shall be paid by the Transferor to the Agent, for the account
of the Company and the Bank Investors, as applicable, in immediately available
funds on such 15th day (or 3rd day, if applicable) in an amount equal to the
Aggregate Unpaids; PROVIDED that if such 15th day (or 3rd day) is not a Business
Day, such reconveyance and the
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related payment shall be made on the next following Business Day.
<PAGE> 125
ARTICLE IX
THE AGENT; BANK COMMITMENT
<PAGE> 126
SECTION 9.1. AUTHORIZATION AND ACTION. (a) The Company and each Bank
Investor hereby appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the other
Transaction Documents as are delegated to the Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto. In
furtherance, and without limiting the generality, of the foregoing, the Company
and each Bank Investor hereby appoints the Agent as its agent to execute and
deliver all further instruments and documents, and take all further action that
the Agent may deem necessary or appropriate or that the Company or a Bank
Investor may reasonably request in order to perfect, protect or more fully
evidence the interests transferred or to be transferred from time to time by the
Transferor hereunder, or to enable any of them to exercise or enforce any of
their respective rights hereunder, including, without limitation, the execution
by the Agent as secured party/assignee of such financing or continuation
statements, or amendments thereto or assignments thereof, relative to all or any
of the Receivables now existing or hereafter arising, and such other instruments
or notices, as may be necessary or appropriate for the purposes stated
hereinabove. The Company and the Majority Investors may direct the Agent to take
any such incidental action hereunder. With respect to other actions which are
incidental to the actions specifically delegated to the Agent hereunder, the
Agent shall not be required to take any such incidental action hereunder, but
shall be required to act or to refrain from acting (and shall be fully protected
in acting or refraining from acting) upon the direction of the Majority
Investors; PROVIDED, HOWEVER, the Agent shall not be required to take any action
hereunder if the taking of such action, in the reasonable determination of the
Agent, shall be in violation of any applicable law, rule or regulation or
contrary to any provision of this Agreement or shall expose the Agent to
liability hereunder or otherwise. Upon the occurrence and during the continuance
of any Termination Event or Potential Termination Event, the Agent shall take no
action hereunder (other than ministerial actions or such actions as are
specifically provided for herein) without the prior consent of the Majority
Investors (which consent shall not be unreasonably withheld or delayed). The
Agent shall not, without the prior written consent of all Bank Investors,
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agree to (i) amend, modify or waive any provision of this Agreement in any way
which would (A) reduce or impair Collections or the payment of Discount or fees
payable hereunder to the Bank Investors or delay the scheduled dates for payment
of such amounts, (B) increase the Servicing Fee (other than as permitted
pursuant to Section 6.2(b)), (C) modify any provisions of this Agreement or the
Receivables Purchase Agreement or the Parent Agreement relating to the timing of
payments required to be made by the Transferor, any Originating Entity, FMC or
FMCH or the application of the proceeds of such payments, (D) permit the
appointment of any Person (other than the Agent) as successor Collection Agent,
(E) release any property from the lien provided by this Agreement (other than as
expressly contemplated herein) or (F) extend or permit the extension of the
Commitment Termination Date without the consent of each Bank Investor. The Agent
shall not agree to any amendment of this Agreement which increases the dollar
amount of a Bank Investor's Commitment without the prior consent of such Bank
Investor. In addition, the Agent shall not agree to any amendment of this
Agreement not specifically described in the two preceding sentences without the
consent of the related Majority Investors (which consent shall not be
unreasonably withheld or delayed). In the event the Agent requests the Company's
or a Bank Investor's consent pursuant to the foregoing provisions and the Agent
does not receive a consent (either positive or negative) from the Company of
such Bank Investor within 10 Business Days of the Company's or Bank Investor's
receipt of such request, then the Company or such Bank Investor (and its
percentage interest hereunder) shall be disregarded in determining whether the
Agent shall have obtained sufficient consent hereunder.
(b) The Agent shall exercise such rights and powers vested
in it by this Agreement and the other Transaction Documents, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
SECTION 9.2. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with this
Agreement or any of the other Transaction Documents,
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except for its or their own gross negligence or willful misconduct. Without
limiting the foregoing, the Agent: (i) may consult with legal counsel (including
counsel for any Parent Group Member), 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; (ii) makes no warranty or representation to the Company
or any Bank Investor and shall not be responsible to the Company or any Bank
Investor for any statements, warranties or representations made in or in
connection with this Agreement; (iii) 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 this Agreement or any of the other Transaction Documents on the
part of any Parent Group Member or the Collection Agent or to inspect the
property (including the books and records) of any Parent Group Member or the
Collection Agent; (iv) shall not be responsible to the Company or any Bank
Investor for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any of the other Transaction Documents
or any other instrument or document furnished pursuant hereto or thereto; and
(v) shall incur no liability under or in respect of this Agreement or any of the
other Transaction Documents by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by
telex) believed by it to be genuine and signed or sent by the proper party or
parties. SECTION 9.3. CREDIT DECISION. The Company and each Bank Investor
acknowledges that it has, independently and without reliance upon the Agent, any
of the Agent's Affiliates, any other Bank Investor or the Company (in the case
of any Bank Investor) and based upon such documents and information as it has
deemed appropriate, made its own evaluation and decision to enter into this
Agreement and the other Transaction Documents to which it is a party and, if it
so determines, to accept the transfer to the Agent on its behalf of any
undivided ownership interest in the Affected Assets hereunder. The Company and
each Bank Investor also acknowledges that it will, independently and without
reliance upon the Agent, any of the Agent's Affiliates, any other Bank Investor
or the Company (in the case of any Bank Investor) and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own
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decisions in taking or not taking action under this Agreement and the other
Transaction Documents to which it is a party.
SECTION 9.4. INDEMNIFICATION OF THE AGENT. The Bank Investors agree to
indemnify the Agent (to the extent not reimbursed by the Transferor), ratably in
accordance with their Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Agent, any of the
other Transaction Documents hereunder or thereunder, provided that the Bank
Investors shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful misconduct.
Without limitation of the foregoing, the Bank Investors agree to reimburse the
Agent, ratably in accordance with their Pro Rata Shares, promptly upon demand
for any out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and the
other Transaction Documents, to the extent that such expenses are incurred in
the interests of or otherwise in respect of the Bank Investors hereunder and/or
thereunder and to the extent that the Agent is not reimbursed for such expenses
by the Transferor.
SECTION 9.5. SUCCESSOR AGENT. The Agent may resign at any time by giving
written notice thereof to each Bank Investor, the Company and the Transferor and
may be removed at any time with cause by the Majority Investors. Upon any such
resignation or removal, the Company and the Majority Investors shall appoint a
successor Agent. The Company and each Bank Investor agrees that it shall not
unreasonably withhold or delay its approval of the appointment of a successor
Agent. If no such successor Agent shall have been so appointed, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Majority Investors'
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removal of the retiring Agent, then the retiring Agent may, on behalf of the
Company and the Bank Investors, appoint a successor Agent which successor Agent
shall be either (i) a commercial bank organized under the laws of the United
States or of any state thereof and have a combined capital and surplus of at
least $50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article IX shall continue to inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
SECTION 9.6. PAYMENTS BY THE AGENT. Unless specifically allocated to a
Bank Investor pursuant to the terms of this Agreement, all amounts received by
the Agent on behalf of the Bank Investors shall be paid by the Agent to the Bank
Investors (at their respective accounts specified in their respective Assignment
and Assumption Agreements) in accordance with their respective related pro rata
interests in the Net Investment on the Business Day received by the Agent,
unless such amounts are received after 12:00 noon on such Business Day, in which
case the Agent shall use its reasonable efforts to pay such amounts to the Bank
Investors on such Business Day, but, in any event, shall pay such amounts to the
Bank Investors in accordance with their respective related pro rata interests in
the Net Investment not later than the following Business Day.
SECTION 9.7. BANK COMMITMENT; ASSIGNMENT TO BANK INVESTORS.
(a) BANK COMMITMENT. At any time on or prior to the
Commitment Termination Date, in the event that the Company does not effect an
Incremental Transfer as requested under Section 2.2(a), then at any time, the
Transferor shall have the right to require the Company to assign its interest in
the Net Investment in whole to the Bank Investors pursuant to this Section 9.7.
In addition, at any time on or prior to the Commitment Termination Date,
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(i) upon the occurrence of a Termination Event that results in the Termination
Date or (ii) the Company elects to give notice to the Transferor of a
Reinvestment Termination Date, the Transferor hereby requests and directs that
the Company assign its interest in the Net Investment in whole to the Bank
Investors pursuant to this Section 9.7 and the Transferor hereby agrees to pay
the amounts described in Section 9.7(d) below. Provided that the Net Asset Test
is satisfied, upon any such election by the Company or any such request by the
Transferor, the Company shall make such assignment and the Bank Investors shall
accept such assignment and shall assume all of the Company's obligations
hereunder. In connection with any assignment from the Company to the Bank
Investors pursuant to this Section 9.7, each Bank Investor shall, on the date of
such assignment, pay to the Company an amount equal to its Assignment Amount.
Upon any assignment by the Company to the Bank Investors contemplated hereunder,
the Company shall cease to make any additional Incremental Transfers hereunder.
(b) ASSIGNMENT. No Bank Investor may assign all or a portion
of its interests in the Net Investment, the Receivables, and Collections,
Related Security and Proceeds with respect thereto and its rights and
obligations hereunder to any Person unless approved in writing by the
Administrative Agent, on behalf of the Company, and the Agent. In the case of an
assignment by the Company to the Bank Investors or by a Bank Investor to another
Person, the assignor shall deliver to the assignee(s) an Assignment and
Assumption Agreement in substantially the form of Exhibit G attached hereto,
duly executed, assigning to the assignee a pro rata interest in the Net
Investment, the Receivables, and Collections, Related Security and Proceeds with
respect thereto and the assignor's rights and obligations hereunder and the
assignor shall promptly execute and deliver all further instruments and
documents, and take all further action, that the assignee may reasonably
request, in order to protect, or more fully evidence the assignee's right, title
and interest in and to such interest and to enable the Agent, on behalf of such
assignee, to exercise or enforce any rights hereunder and under the other
Transaction Documents to which such assignor is or, immediately prior to such
assignment, was a party. Upon any such assignment, (i) the assignee shall have
all of the rights and obligations of the assignor hereunder and under the other
Transaction
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Documents to which such assignor is or, immediately prior to such assignment,
was a party with respect to such interest for all purposes, it being understood
that the Bank Investors, as assignees, shall (x) be obligated to fund
Incremental Transfers under Section 2.2(a) in accordance with the terms thereof,
notwithstanding that the Company was not so obligated and (y) not have the right
to elect the commencement of the amortization of the Net Investment pursuant to
the definition of "Reinvestment Termination Date", notwithstanding that the
Company had such right) and (ii) the assignor shall relinquish its rights with
respect to such interest for all purposes of this Agreement and under the other
Transaction Documents to which such assignor is or, immediately prior to such
assignment, was a party. No such assignment shall be effective unless a fully
executed copy of the related Assignment and Assumption Agreement shall be
delivered to the Agent and the Transferor. All costs and expenses of the Agent
and the assignor and assignee incurred in connection with any assignment
hereunder shall be borne by the Transferor and not by the assignor or any such
assignee. No Bank Investor shall assign any portion of its Commitment hereunder
without also simultaneously assigning an equal portion of its interest in the
Liquidity Provider Agreement.
(c) EFFECTS OF ASSIGNMENT. By executing and delivering an
Assignment and Assumption Agreement, the assignor and 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 Assumption Agreement, the
assignor 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, the other Transaction Documents or any other
instrument or document furnished pursuant hereto or thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, the other Transaction Documents or any such other instrument or
document; (ii) the assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Transferor, any
Parent Group Member or the Collection Agent or the performance or observance by
the Transferor, any Parent Group Member or the Collection Agent of any of their
respective obligations under this Agreement, the Receivables Purchase Agreement,
the Transferring Affiliate Letter, the BMA Transfer Agreement, the Parent
Agreement, the other Transaction Documents or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, the Receivables
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Purchase Agreement, the Transferring Affiliate Letter, the BMA Transfer
Agreement, the Parent Agreement, and such other instruments, documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption Agreement and to purchase
such interest; (iv) such assignee will, independently and without reliance upon
the Agent, or any of its Affiliates, or the assignor and based on such
agreements, documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Transaction Documents; (v) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement, the other Transaction Documents and
any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto and to enforce its respective rights and
interests in and under this Agreement, the other Transaction Documents, the
Receivables, the Contracts and the Related Security; (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement and the other Transaction Documents are required
to be performed by it as the assignee of the assignor; and (vii) such assignee
agrees that it will not institute against the Company any proceeding of the type
referred to in Section 10.9 prior to the date which is one year and one day
after the payment in full of all Commercial Paper issued by the Company.
(d) TRANSFEROR'S OBLIGATION TO PAY CERTAIN AMOUNTS;
ADDITIONAL ASSIGNMENT AMOUNT. The Transferor shall pay to the Agent, for the
account of the Company, in connection with any assignment by the Company to the
Bank Investors pursuant to this Section 9.7, an aggregate amount equal to all
Discount to accrue through the end of each outstanding Tranche Period plus all
other Aggregate Unpaids (other than the Net Investment). To the extent that such
Discount relates to interest or discount on Related
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Commercial Paper, if the Transferor fails to make payment of such amounts at or
prior to the time of assignment by the Company to the Bank Investors, such
amount shall be paid by the Bank Investors (in accordance with their respective
Pro Rata Shares) to the Company as additional consideration for the interests
assigned to the Bank Investors and the amount of the "Net Investment" hereunder
held by the Bank Investors shall be increased by an amount equal to the
additional amount so paid by the Bank Investors.
(e) ADMINISTRATION OF AGREEMENT AFTER ASSIGNMENT. After any
assignment by the Company to the Bank Investors pursuant to this Section 9.7
(and the payment of all amounts owing to the Company in connection therewith),
all rights of the Administrative Agent and the Collateral Agent set forth herein
shall be deemed to be afforded to the Agent on behalf of the Bank Investors
instead of either such party.
(f) PAYMENTS. After any assignment by the Company to the
Bank Investors pursuant to this Section 9.7, all payments to be made hereunder
by the Transferor or the Collection Agent to the Company shall be made to the
Agent's account as such account shall have been notified to the Transferor and
the Collection Agent.
(g) DOWNGRADE OF BANK INVESTOR. If (at any time prior to any
assignment by the Company to the Bank Investors as contemplated pursuant to this
Section 9.7) the short term debt rating of any Bank Investor shall be "A-2" or
"P-2" from Standard & Poor's or Moody's, respectively, with negative credit
implications, such Bank Investor, upon request of the Agent, shall, within 30
days of such request, assign its rights and obligations hereunder to another
financial institution (which institution's short term debt shall be rated at
least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively, and
which shall not be so rated with negative credit implications). If the short
term debt rating of a Bank Investor shall be "A-3" or "P-3", or lower, from
Standard & Poor's or Moody's, respectively (or such rating shall have been
withdrawn by Standard & Poor's or Moody's), such Bank Investor, upon request of
the Agent, shall, within five (5) Business Days of such request, assign its
rights and obligations hereunder to another financial institution (which
institution's short term debt shall be
<PAGE> 135
rated at least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively,
and which shall not be so rated with negative credit implications). In either
such case, if any such Bank Investor shall not have assigned its rights and
obligations under this Agreement within the applicable time period described
above, the Company shall have the right to require such Bank Investor to accept
the assignment of such Bank Investor's Pro Rata Share of the Net Investment;
such assignment shall occur in accordance with the applicable provisions of this
Section 9.7. Such Bank Investor shall be obligated to pay to the Company, in
connection with such assignment, in addition to the Pro Rata Share of the Net
Investment, an amount equal to the Interest Component of the outstanding
Commercial Paper issued to fund the portion of the Net Investment being assigned
to such Bank Investor, as reasonably determined by the Agent. Notwithstanding
anything contained herein to the contrary, upon any such assignment to a
downgraded Bank Investor as contemplated pursuant to the immediately preceding
sentence, the aggregate available amount of the Facility Limit, solely as it
relates to new Incremental Transfers by the Company, shall be reduced by the
amount of unused Commitment of such downgraded Bank Investor; it being
understood and agreed, that nothing in this sentence or the two preceding
sentences shall affect or diminish in any way any such downgraded Bank
Investor's Commitment to the Transferor or such downgraded Bank Investor's other
obligations and liabilities hereunder and under the other Transaction Documents.
<PAGE> 136
ARTICLE X
MISCELLANEOUS
SECTION 10.1. TERM OF AGREEMENT. This Agreement shall terminate on the
date following the Termination Date upon which the Net Investment has been
reduced to zero, all accrued Discount and Servicing Fees have been paid in full
and all other Aggregate Unpaids have been paid in full, in each case, in cash;
PROVIDED, HOWEVER, that (i) the rights and remedies of the Agent, the Company,
the Bank Investors and the Administrative Agent with respect to any
representation and warranty made or deemed to be made by the Transferor pursuant
to this Agreement, (ii) the indemnification and payment provisions of Article
VIII, and (iii) the agreement set forth in Section 10.9 hereof, shall be
continuing and shall survive any termination of this Agreement.
SECTION 10.2. WAIVERS; AMENDMENTS. No failure or delay on the part of
the Agent, the Company, the Administrative Agent or any Bank Investor in
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other further exercise thereof or the exercise of
any other power, right or remedy. The rights and remedies herein provided shall
be cumulative and nonexclusive of any rights or remedies provided by law. Any
provision of this Agreement may be amended or waived if, but only if, in the
case of any amendment, such amendment is in writing and is signed by the
Transferor, the Company, the Agent and the Majority Investors and in the case of
any waiver, such waiver is granted in writing by the Agent.
SECTION 10.3. NOTICES. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address or telecopy number set forth below or at such other
address or telecopy number as such party may hereafter specify for the purposes
of notice to such party. Each such notice or other communication shall be
effective (i) if given by telecopy when such telecopy is transmitted to the
telecopy number specified in this Section
<PAGE> 137
10.3 and confirmation is received, (ii) if given by mail 3 Business Days
following such posting, postage prepaid, U.S. certified or registered, (iii) if
given by overnight courier, one (1) Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other means, when
received at the address specified in this Section 10.3. However, anything in
this Section to the contrary notwithstanding, the Transferor hereby authorizes
the Company and the Agent to effect Transfers, Tranche Period and Tranche Rate
selections based on telephonic notices made by any Person which the Company or
the Agent in good faith believes to be acting on behalf of the Transferor. The
Transferor agrees to deliver promptly to the Company and the Agent a written
confirmation of each telephonic notice signed by an authorized officer of
Transferor. However, the absence of such confirmation shall not affect the
validity of such notice. If the written confirmation differs in any material
respect from the action taken by the Company or the Agent, the records of the
Company or the Agent, as applicable shall govern absent manifest error.
If to the Company:
Enterprise Funding Corporation
c/o Merrill Lynch Money Market, Inc.
World Financial Center
South Tower, 8th Floor
225 Liberty Street
New York, New York 10080
Attention: Gerard Haugh
Telephone: (212) 236-7200
Telecopy: (212) 236-7584
(with a copy to the Administrative Agent)
If to the Transferor:
<PAGE> 138
(NMC Funding Corporation)
Two Ledgemont Center
95 Hayden Avenue
Lexington, Massachusetts 02173
Telephone: (617) 402-9000
Telecopy: (617) 860-9357
Attn: James V. Luther
Payment Information:
Chase Manhattan Bank, N.A.
ABA 021-000-021
Account 115-0-62615
If to the Collection Agent:
National Medical Care, Inc.
Two Ledgemont Center
95 Hayden Avenue
Lexington, Massachusetts 02173
Telephone: (617)402-9000
Telecopy: (617)860-9357
If to the Collateral Agent:
NationsBank, N.A.
NationsBank, Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
for the account of NationsBank Charlotte
Account No. 1093601650000
<PAGE> 139
Attn.: Camille Zerbinos
If to the Administrative Agent:
NationsBank, N.A.
NationsBank Corporate Center--10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Bank Investors, at their respective addresses set forth on the
signature pages hereto or of the Assignment and Assumption Agreement pursuant to
which it became a party hereto.
SECTION 10.4. GOVERNING LAW; SUBMISSION TO JURISDICTION; INTEGRATION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE TRANSFEROR HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE
CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Each of the
Transferor and the Collection Agent hereby irrevocably waives, to the fullest
extent it may effectively do so, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. Nothing in this Section 10.4 shall affect the right of
the Company to bring any action or proceeding against the Transferor or the
Collection Agent or any of their respective properties in the courts of other
jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO
OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
<PAGE> 140
CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement contains the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(d) The Transferor and NMC each hereby appoint John B.
Madden, Jr., of Arent Fox Kintner Plotkin & Kahn, located at 1675 Broadway, New
York, New York 10019 as the authorized agent upon whom process may be served in
any action arising out of or based upon this Agreement, the other Transaction
Documents to which such Person is a party or the transactions contemplated
hereby or thereby that may be instituted in the United States District Court for
the Southern District of New York and of any New York State Court sitting in the
City of New York by the Company, the Agent, any Bank Investor, the Collateral
Agent or any assignee of any of them.
SECTION 10.5. SEVERABILITY; 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 when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10.6. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding on the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that neither the Transferor nor the Collection Agent may
assign any of its rights or delegate any of its duties hereunder or under any of
the other Transaction Documents to which it is a party without the prior written
consent of the Agent. No provision of this Agreement shall in any manner
restrict the
<PAGE> 141
ability of the Company or any Bank Investor to assign, participate, grant
security interests in, or otherwise transfer any portion of the Transferred
Interest.
(b) Each of the Transferor and the Collection Agent hereby
agrees and consents to the assignment by the Company from time to time of all or
any part of its rights under, interest in and title to this Agreement and the
Transferred Interest to any Liquidity Provider. In addition, each of the
Transferor and the Collection Agent hereby consents to and acknowledges the
assignment by the Company of all of its rights under, interest in and title to
this Agreement and the Transferred Interest to the Collateral Agent.
SECTION 10.7. WAIVER OF CONFIDENTIALITY. The Transferor hereby consents
to the disclosure of any non-public information with respect to it received by
the Company, the Agent, any Bank Investor or the Administrative Agent to any of
the Company, the Agent, any nationally recognized rating agency rating the
Company's Commercial Paper, the Administrative Agent, the Collateral Agent, any
Bank Investor or potential Bank Investor, the Liquidity Provider or the Credit
Support Provider in relation to this Agreement.
SECTION 10.8. CONFIDENTIALITY AGREEMENT. Each of the Transferor and the
Collection Agent hereby agrees that it will not disclose, and the Transferor
will cause each Parent Group Member to refrain from disclosing, the contents of
this Agreement or any other proprietary or confidential information of the
Company, the Agent, the Administrative Agent, the Collateral Agent, any
Liquidity Provider or any Bank Investor to any other Person except (i) its
auditors and attorneys, employees or financial advisors (other than any
commercial bank) and any nationally recognized rating agency PROVIDED such
auditors, attorneys, employees financial advisors or rating agencies are
informed of the highly confidential nature of such information or (ii) following
notice thereof to the Agent, as otherwise required by applicable law (including
the federal securities laws) or order of a court of competent jurisdiction.
SECTION 10.9. NO BANKRUPTCY PETITION AGAINST THE COMPANY. Each of the
Transferor and the Collection Agent
<PAGE> 142
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all outstanding Commercial Paper or other
indebtedness of the Company, it will not, and the Transferor will cause each
Parent Group Member to not, institute against, or join any other Person in
instituting against, the Company any bankruptcy, reorganization, arrangement
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
SECTION 10.10. NO RECOURSE AGAINST STOCKHOLDERS, OFFICERS OR DIRECTORS.
No recourse under any obligation, covenant or agreement of the Company contained
in this Agreement shall be had against Merrill Lynch Money Markets Inc. (nor any
affiliate thereof), or any stockholder, officer or director of the Company, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise; it being expressly agreed and
understood that this Agreement is solely a corporate obligation of the Company,
and that no personal liability whatsoever shall attach to or be incurred by
Merrill Lynch Money Markets Inc. or any affiliate thereof), or the stockholders,
officers, or directors of the buyer, as such, or any of them, under or by reason
of any of the obligations, covenants or agreements of the Company contained in
this Agreement, or implied therefrom, and that any and all personal liability
for breaches by the Company of any of such obligations, covenants or agreements,
either at common law or at equity, or by statute or constitution, of Merrill
Lynch Money Markets Inc. (or any affiliate thereof) and every such stockholder,
officer or director of the Company is hereby expressly waived as a condition of
and consideration for the execution of this Agreement.
SECTION 10.11. CHARACTERIZATION OF THE TRANSACTIONS CONTEMPLATED BY THE
AGREEMENT. It is the intention of the parties that the transactions contemplated
hereby constitute the sale of the Transferred Interest, conveying good title
thereto free and clear of any Adverse Claims to the Agent, on behalf of the
Company and the Bank Investors, and that the Transferred Interest not be part of
the Transferor's estate in the event of an insolvency. If, notwithstanding the
foregoing, the transactions contemplated hereby should be deemed a financing,
the parties intend that
<PAGE> 143
the Transferor shall be deemed to have granted to the Agent, on behalf of the
Company and the Bank Investors, and the Transferor hereby grants to the Agent,
on behalf of the Company and the Bank Investors, a first priority perfected and
continuing security interest in all of the Transferor's right, title and
interest in, to and under the Receivables, together with Related Security,
Collections and Proceeds with respect thereto, and together with all of the
Transferor's rights under the Receivables Purchase Agreement, the Transferring
Affiliate Letter, the BMA Transfer Agreement and all other Transaction Documents
with respect to the Receivables and with respect to any obligations thereunder
of any Originating Entity with respect to the Receivables, and that this
Agreement shall constitute a security agreement under applicable law. The
Transferror hereby assigns to the Agent, on behalf of the Company and the Bank
Investors, all of its rights and remedies under the Receivables Purchase
Agreement, the Transferring Affiliate Letter and the BMA Transfer Agreement (and
all instruments, documents and agreements executed in connection therewith) with
respect to the Receivables and with respect to any obligations thereunder of any
Originating Entity with respect to the Receivables.
[Remainder of page intentionally left blank]
<PAGE> 144
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Transfer and Administration Agreement as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By: /s/ STEPHEN NEWMAN
----------------------------------------
Name: Stephen Newman
Title: Authorized Signatory
NMC FUNDING CORPORATION,
as Transferor
By: /s/ JAMES V. LUTHER
----------------------------------------
Name: James V. Luther
Title: President
NATIONAL MEDICAL CARE, INC., as
Collection Agent
By: /s/ JAMES V. LUTHER
----------------------------------------
Name: James V. Luther
Title: Assistant Treasurer
COMMITMENT NATIONSBANK, N.A., as Agent
$204,000,000 and a Bank Investor
By: /s/ MICHELLE N. HEATH
----------------------------------------
Name: Michelle N. Heath
Title: Senior Vice President
<PAGE> 145
Signature Page to Transfer and Administration
Agreement dated as of August 28, 1997.
EXHIBIT A
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORMS OF CONTRACTS
<PAGE> 146
EXHIBIT B
to
TRANSFER AND ADMINISTRATION AGREEMENT
CREDIT AND COLLECTION POLICIES AND PRACTICES
<PAGE> 147
EXHIBIT C
to
TRANSFER AND ADMINISTRATION AGREEMENT
LIST OF SPECIAL ACCOUNT BANKS, DESIGNATED
ACCOUNT AGENTS AND CONCENTRATION BANK
<PAGE> 148
EXHIBIT D-1
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF SPECIAL ACCOUNT LETTER
<PAGE> 149
EXHIBIT D-2
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF CONCENTRATION ACCOUNT AGREEMENT
<PAGE> 150
EXHIBIT E
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF INVESTOR REPORT
<PAGE> 151
EXHIBIT F
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF TRANSFER CERTIFICATE
<PAGE> 152
EXHIBIT G
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE> 153
EXHIBIT H
to
TRANSFER AND ADMINISTRATION AGREEMENT
LIST OF ACTIONS AND SUITS
SECTIONS 3.1(G), 3.1(K) AND 3.3(E)
<PAGE> 154
EXHIBIT I
to
TRANSFER AND ADMINISTRATION AGREEMENT
LOCATION OF RECORDS
<PAGE> 155
EXHIBIT J
to
TRANSFER AND ADMINISTRATION AGREEMENT
[RESERVED]
<PAGE> 156
EXHIBIT K
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORMS OF OPINIONS OF COUNSEL
<PAGE> 157
EXHIBIT L
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORMS OF SECRETARY'S CERTIFICATE
<PAGE> 158
EXHIBIT M
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF CERTIFICATE
<PAGE> 159
EXHIBIT N
to
TRANSFER AND ADMINISTRATION AGREEMENT
LIST OF APPROVED FISCAL INTERMEDIARIES
<PAGE> 160
EXHIBIT O
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF TRANSFERRING AFFILIATE LETTER
<PAGE> 161
EXHIBIT P
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF PARENT AGREEMENT
<PAGE> 162
EXHIBIT Q
to
TRANSFER AND ADMINISTRATION AGREEMENT
LIST OF TRANSFERRING AFFILIATES
<PAGE> 163
EXHIBIT R
to
TRANSFER AND ADMINISTRATION AGREEMENT
FORM OF ACCOUNT AGENT AGREEMENT
<PAGE> 1
EXHIBIT 11
FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATION
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
--------- ----------- --------- -----------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------------
<S> <C> <C> <C> <C>
The weighted average number of shares of
Common Stock were as follows .................... 90,000 91,092 90,000 95,188
====== ====== ====== ======
</TABLE>
Income used in the computation of earnings per share were as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
--------- ----------- --------- -----------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net Income ......................................... $5,129 $2,518 $22,300 $62,881
Dividends paid on preferred stocks ................. (130) (130) (390) (393)
------ ------ ------- -------
Income used in per share computation
of earnings .................................. $4,999 $2,388 $21,910 $62,488
====== ====== ======= =======
Earnings per share ................................. $ 0.05 $ 0.04 $ 0.24 $ 0.66
====== ====== ======= =======
</TABLE>
49
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 17,958
<SECURITIES> 0
<RECEIVABLES> 544,964
<ALLOWANCES> 0
<INVENTORY> 156,910
<CURRENT-ASSETS> 953,288
<PP&E> 756,111
<DEPRECIATION> 121,058
<TOTAL-ASSETS> 4,960,499
<CURRENT-LIABILITIES> 585,167
<BONDS> 1,611,778
0
16,318
<COMMON> 90,000
<OTHER-SE> 1,842,620
<TOTAL-LIABILITY-AND-EQUITY> 4,960,499
<SALES> 114,043
<TOTAL-REVENUES> 656,927
<CGS> 82,642
<TOTAL-COSTS> 411,506
<OTHER-EXPENSES> 155,003
<LOSS-PROVISION> 28,853
<INTEREST-EXPENSE> 49,182
<INCOME-PRETAX> 12,383
<INCOME-TAX> 7,254
<INCOME-CONTINUING> 5,129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,129
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 17,958
<SECURITIES> 0
<RECEIVABLES> 544,964
<ALLOWANCES> 0
<INVENTORY> 156,910
<CURRENT-ASSETS> 953,288
<PP&E> 756,111
<DEPRECIATION> 121,058
<TOTAL-ASSETS> 4,960,499
<CURRENT-LIABILITIES> 585,167
<BONDS> 1,611,778
0
16,318
<COMMON> 90,000
<OTHER-SE> 1,842,620
<TOTAL-LIABILITY-AND-EQUITY> 4,960,499
<SALES> 344,398
<TOTAL-REVENUES> 1,926,845
<CGS> 247,720
<TOTAL-COSTS> 1,201,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 71,285
<INTEREST-EXPENSE> 136,373
<INCOME-PRETAX> 55,813
<INCOME-TAX> 33,513
<INCOME-CONTINUING> 22,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,300
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0
</TABLE>
