<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
(AMENDMENT NO. )
------------------
ADVANCED MEDICAL, INC.
(Name of Issuer)
ADVANCED MEDICAL, INC.
(Name of Person(s) Filing Statement)
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2002
(Title of Class of Securities)
00754C AA 9
(CUSIP Number of Class of Securities)
DANIEL A. ETNA, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, N.Y. 10036
(212) 626-0872
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of Person(s) Filing Statement)
------------------------
APRIL 21, 1995
(Date Tender First Published,
Sent or Given to Security Holders)
------------------------
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Transaction Valuation: Amount of Filing Fee:
$31,755,000 $6,351*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Calculated as 1/50 of 1% of the Transaction Value.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number or the Form or
Schedule and the date of its filing.
Amount Previously Paid: _______________________________________________________
Form or Registration No.: _____________________________________________________
Filing Party: _________________________________________________________________
Date Filed: ___________________________________________________________________
Exhibit Index
Located on Page 6.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Advanced Medical, Inc., a Delaware corporation
(the "Issuer"). The principal executive offices of the Issuer are located at
9775 Businesspark Avenue, San Diego, California 92131.
(b) The title of the securities being sought is 7-1/4% Convertible
Subordinated Debentures Due 2002 ("Old Debentures"). As at April 21, 1995,
$31,755,000 aggregate principal amount of Old Debentures were outstanding. The
Issuer is seeking to acquire all of the outstanding principal amount of the Old
Debentures by offering (the "Exchange Offer"), upon the terms and subject to the
conditions stated in the Exchange Circular dated April 21, 1995 (the "Exchange
Circular"), a copy of which is attached hereto as Exhibit (a)(1), and the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
(a)(2), to exchange its 15% Subordinated Debentures Due July 15, 1999 ("New
Debentures") and shares of its common stock, $.01 par value per share ("Common
Stock"), for its Old Debentures in the ratio of $500 principal amount of New
Debentures and 47 shares of Common Stock for each $1,000 principal amount of Old
Debentures tendered. For further information concerning the Exchange Offer, see
the section of the Exchange Circular entitled "The Exchange Offer -- General"
which is incorporated herein by reference.
For information regarding the purchase of Old Debentures from any officer,
director or affiliate of the Issuer pursuant to the Exchange Offer, see the
sections of the Exchange Circular entitled "Special Factors -- Position of the
Board and -- Fairness of the Exchange Offer" which are incorporated herein by
reference.
(c) The section of the Exchange Circular entitled "Price Range of Old
Debentures and Common Stock," is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The sections of the Exchange Circular entitled "Description of New
Debentures," "Description of Capital Stock -- Common Stock" and "The Exchange
Offer -- Fees and Expenses" are incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The sections of the Exchange Circular entitled "Special Factors," "The
Exchange Offer -- General," "Subsequent Trading in Securities Exchanged,"
"Summary Selected Historical and Pro Forma Financial Data" and "Capitalization"
are incorporated herein by reference. Except as set forth therein, the Issuer
does not have any plans or proposals which relate to or would result in (a) the
acquisition by any person of additional securities of the Issuer or the
disposition of securities of the Issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount
of the assets of the Issuer or any of its subsidiaries; (d) any change in the
present board of directors or management of the Issuer, including, but not
limited to, any plans or proposals to change the number or the term of
directors, to fill any existing vacancy on the board of directors or to change
any material term of the employment contract of any executive officer of the
Issuer; (e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Issuer; (f) any other material change in
the Issuer's structure or business; (g) changes in the Issuer's certificate of
incorporation or bylaws, or other actions which may impede the acquisition of
control of the Issuer by any person; (h) a class of equity securities of the
Issuer being delisted from a national securities exchange or ceasing to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity security of the Issuer
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (j)
the suspension of the Issuer's obligation to file reports pursuant to Section
15(d) of the Exchange Act.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The section of the Exchange Circular entitled "Recent Transactions in Old
Debentures" is incorporated herein by reference. Except as set forth therein,
there has not been any transaction involving Old Debentures
2
<PAGE>
that was effected during the past 40 business days by the Issuer, any executive
officer or director of the Issuer, any person controlling the Issuer, any
executive officer or director of any corporation ultimately in control of the
Issuer or by any associate or subsidiary of any of the foregoing, including any
executive officer or director of any such subsidiary.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The Issuer and Mellon Securities Trust Company ("Mellon") have entered into
an agreement pursuant to which Mellon Securities Transfer Services will perform
services for the Issuer in connection with the tender and withdrawal of Old
Debentures pursuant to the Exchange Offer. The Issuer and D.F. King & Co., Inc.
("King") have entered into an agreement pursuant to which King will act as the
information agent in connection with the Exchange Offer. In such capacity, King
will provide holders of Old Debentures with materials relating to the Exchange
Offer and request brokers, dealers and other nominees to forward materials
relating to the Exchange Offer to beneficial owners of Old Debentures. Mellon
and King will receive reasonable and customary compensation for their services
in connection with the Exchange Offer, will be reimbursed for their reasonable
out-of-pocket expenses and may be indemnified against certain liabilities and
expenses in connection with the Exchange Offer. The sections of the Exchange
Circular entitled "Description of New Debentures," "Recent Transactions in Old
Debentures" and "The Exchange Offer -- Exchange Agent; -- Information Agent; and
- -- Fees and Expenses" are incorporated herein by reference. Except as set forth
in the preceding sentences of this Item 5, the Issuer does not know of any
contract, arrangement, understanding or relationship relating, directly or
indirectly, to the Exchange Offer (whether or not legally enforceable) between
the Issuer, any of the Issuer's executive officers or directors, any person
controlling the Issuer or any officer or director of any corporation ultimately
in control of the Issuer and any person with respect to any securities of the
Issuer (including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss, or the giving or withholding of proxies, consents or
authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No person has been employed, retained or is to be compensated by the Issuer,
or by any other person on behalf of the Issuer, to make solicitations or
recommendations in connection with the Exchange Offer.
ITEM 7. FINANCIAL INFORMATION.
(a) The sections of the Exchange Circular entitled "Summary Selected
Historical and Pro Forma Financial Data," "Capitalization" and "Index to
Financial Statements" are incorporated herein by reference.
(b) The section of the Exchange Circular entitled "Summary Selected
Historical and Pro Forma Financial Data" is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The section of the Exchange Circular entitled "The Exchange Offer --
Conditions" is incorporated herein by reference. The Issuer must comply with
various sections of the Securities Act of 1933, as amended, the Exchange Act and
the Trust Indenture Act of 1939, as amended, and certain of the rules
promulgated thereunder. The Issuer must also comply with the various
requirements of state "blue sky" laws.
(c) Not applicable.
(d) Not applicable.
(e) The text of the Exchange Circular is incorporated herein by reference in
its entirety.
3
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Exchange Circular dated April 21, 1995.
(a)(2) Letter of Transmittal (including Guidelines for Certification of Taxpayer
Identification Number).
(a)(3) Letter to Holders of Old Debentures.
(a)(4) Notice of Guaranteed Delivery.
(a)(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(b) Not applicable.
(c)(1) Agreement dated as of February 3, 1995 by and among the Issuer, Fidelity Select
Healthcare Fund and Fidelity Convertible Securities Fund.
(c)(2) Exchange Agreement dated April 19, 1995 between the Issuer and Mellon Securities
Trust Company.
(c)(3) Agreement between the Issuer and D.F. King & Co., Inc. dated April 17, 1995.
(c)(4) Form of New Debentures Indenture between the Issuer and United States Trust
Company of New York.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
ADVANCED MEDICAL, INC.
__________/s/_JOSEPH W. KUHN__________
Joseph W. Kuhn
PRESIDENT
April 21, 1995
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------ ---------
<S> <C> <C>
(a)(1) Exchange Circular dated April 21, 1995..........................................................
(a)(2) Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification
Number)........................................................................................
(a)(3) Letter to Holders of Old Debentures.............................................................
(a)(4) Notice of Guaranteed Delivery...................................................................
(a)(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees................
(a)(6) Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees...
(b) Not applicable..................................................................................
(c)(1) Agreement dated as of February 3, 1995, by and among the Issuer, Fidelity Select Healthcare Fund
and Fidelity Convertible Securities Fund.......................................................
(c)(2) Exchange Agreement dated April 19, 1995 between the Issuer and Mellon Securities Trust
Company........................................................................................
(c)(3) Agreement between the Issuer and D.F. King & Co., Inc. dated April 17, 1995.....................
(c)(4) Form of New Debentures Indenture between the Issuer and United States Trust Company of New
York...........................................................................................
(d) Not applicable..................................................................................
(e) Not applicable..................................................................................
(f) Not applicable..................................................................................
</TABLE>
6
<PAGE>
EXCHANGE CIRCULAR
ADVANCED MEDICAL, INC.
OFFER TO EXCHANGE
15% SUBORDINATED DEBENTURES DUE JULY 15, 1999
AND
COMMON STOCK
FOR
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
IN THE RATIO OF
$500 PRINCIPAL AMOUNT OF 15% SUBORDINATED DEBENTURES AND 47 SHARES OF COMMON
STOCK
FOR EACH $1,000 PRINCIPAL AMOUNT OF 7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES
Advanced Medical, Inc. (the "Company") hereby offers, upon the terms and
subject to the conditions stated in this Exchange Circular and the accompanying
Letter of Transmittal, to exchange its 15% Subordinated Debentures due July 15,
1999 ("New Debentures") and shares of its common stock, $.01 par value ("Common
Stock"), for its 7 1/4% Convertible Subordinated Debentures due January 15, 2002
("Old Debentures") in the ratio of $500 principal amount of New Debentures and
47 shares of Common Stock for each $1,000 principal amount of Old Debentures
tendered (the "Exchange Offer"). Subject to the conditions of the Exchange
Offer, the Company will accept any and all Old Debentures tendered. See "The
Exchange Offer -- Conditions."
Interest on the New Debentures will accrue in cash at the rate of 15% per
annum from (and including) the date (the "Acceptance Date") on which Old
Debentures are accepted for payment in the Exchange Offer. The Company will not
make any payment on account of accrued interest on the Old Debentures accepted
for exchange.
SEE "CERTAIN CONSIDERATIONS" AND "SPECIAL FACTORS" FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME ON MAY 19,
1995, UNLESS EXTENDED AS SET FORTH HEREIN (SUCH DATE, AS EXTENDED FROM TIME TO
TIME, BEING THE "EXPIRATION DATE").
Subject to applicable law and the terms set forth in this Exchange Circular,
the Company reserves the right to waive any and all conditions to the Exchange
Offer, to extend or to terminate the Exchange Offer and otherwise amend the
Exchange Offer in any respect. See "The Exchange Offer -- Conditions."
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The Exchange Offer is being made by the Company in reliance on the exemption
from the registration requirements of the Securities Act of 1933, as amended,
afforded by Section 3(a)(9) thereof. The Company therefore, will not pay any
commission or other remuneration to any broker, dealer, salesperson or other
person for soliciting tenders of Old Debentures. However, regular employees of
the Company (who will not be additionally compensated therefor) may solicit
tenders and will answer inquiries concerning the Exchange Offer.
------------------------
THE DATE OF THIS EXCHANGE CIRCULAR IS APRIL 21, 1995.
<PAGE>
No person is authorized by the Company to give any information or to make
any representation in connection with the Exchange Offer, other than as
contained in this Exchange Circular, and, if given or made, such information or
representation must not be relied upon. This Exchange Circular does not
constitute an offer to exchange or a solicitation of an offer to exchange any
securities, other than the securities covered by this Exchange Circular, by the
Company or any other person or any offer to exchange or solicitation of an offer
to exchange such securities in any jurisdiction to or from any person to whom it
is unlawful to make such offer or solicitation. This Exchange Circular speaks as
of its date of issue. Neither the delivery of this Exchange Circular nor any
exchange made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company or in the
information set forth herein since the date hereof.
------------------------
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY OF THE EXCHANGE OFFER.............................................................................. 1
SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA................................................... 6
THE COMPANY................................................................................................ 13
AVAILABLE INFORMATION...................................................................................... 14
CERTAIN CONSIDERATIONS..................................................................................... 15
SPECIAL FACTORS............................................................................................ 17
RECENT TRANSACTIONS IN OLD DEBENTURES...................................................................... 19
THE EXCHANGE OFFER......................................................................................... 19
COMPARISON OF OLD DEBENTURES AND NEW DEBENTURES............................................................ 27
SUBSEQUENT TRADING IN SECURITIES EXCHANGED................................................................. 28
DESCRIPTION OF NEW DEBENTURES.............................................................................. 28
DESCRIPTION OF OLD DEBENTURES.............................................................................. 33
DESCRIPTION OF CAPITAL STOCK............................................................................... 38
PRICE RANGE OF OLD DEBENTURES AND COMMON STOCK............................................................. 40
CERTAIN INCOME TAX CONSEQUENCES............................................................................ 40
CAPITALIZATION............................................................................................. 47
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>
iii
<PAGE>
GLOSSARY
Set forth below is a list of certain defined terms used herein and the page
of this Exchange Circular on which each such term is defined.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Acceptance Date................................................................... cover
AMEX.............................................................................. 3
Board............................................................................. 13
Book-Entry Transfer Facility...................................................... 23
Code.............................................................................. 16
Commission........................................................................ 14
Common Stock...................................................................... cover
Company........................................................................... cover
CTC............................................................................... 13
Decisions......................................................................... 17
Decisions Notes................................................................... 29
Eligible Institution.............................................................. 22
Exchange.......................................................................... 40
Exchange Act...................................................................... 14
Exchange Agent.................................................................... 5
Exchange Consideration............................................................ 40
Exchange Offer.................................................................... cover
Exchanging Owners................................................................. 40
Expiration Date................................................................... cover
Fidelity Exchange................................................................. 3
Fidelity Funds.................................................................... 1
Fidelity Funds Agreement.......................................................... 3
Fidelity Funds Debentures......................................................... 3
Final OID Regulations............................................................. 42
Holder............................................................................ 4
IMED.............................................................................. 13
Information Agent................................................................. 5
IRS............................................................................... 16
New Debentures.................................................................... cover
New Indenture..................................................................... 28
New Trustee....................................................................... 28
OID............................................................................... 42
Old Debentures.................................................................... cover
Old Indenture..................................................................... 33
Old Trustee....................................................................... 20
Owners............................................................................ 40
Traded............................................................................ 42
Trust Indenture Act............................................................... 24
</TABLE>
iv
<PAGE>
SUMMARY OF THE EXCHANGE OFFER
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, AND PRO FORMA
FINANCIAL INFORMATION CONTAINED ELSEWHERE IN THIS EXCHANGE CIRCULAR. PLEASE READ
THIS EXCHANGE CIRCULAR CAREFULLY BEFORE TAKING ANY ACTION WITH RESPECT TO THE
EXCHANGE OFFER.
THE EXCHANGE OFFER
The Company is offering, upon the terms and subject to the conditions stated
in this Exchange Circular and the accompanying Letter of Transmittal, to
exchange New Debentures and shares of Common Stock for Old Debentures in the
ratio of $500 principal amount of New Debentures and 47 shares of Common Stock
for each $1,000 principal amount of Old Debentures. Subject to the conditions of
the Exchange Offer, the Company will accept any and all Old Debentures tendered.
See "The Exchange Offer -- Conditions."
Interest on the New Debentures will accrue in cash at the rate of 15% per
annum from (and including) the Acceptance Date. The Company will not make any
payment on account of accrued interest on the Old Debentures accepted for
exchange.
As at April 21, 1995, $31,755,000 aggregate principal amount of Old
Debentures were outstanding. If 100% of the outstanding Old Debentures are
accepted for exchange pursuant to the Exchange Offer, the Company will be
required to issue a total of (i) $15,877,500 aggregate principal amount of New
Debentures and (ii) 1,492,485 shares of Common Stock. Up to an additional
$14,122,500 aggregate principal amount of New Debentures are subject to issuance
by the Company in the event that various funds (the "Fidelity Funds") managed by
Fidelity Management & Research Company exercise a certain participation right
granted to them by the Company. See "Recent Transactions in Old Debentures."
COMPARISON OF OLD DEBENTURES AND NEW DEBENTURES
The following is a brief comparison of the principal features of the New
Debentures and the Old Debentures. These descriptions are summaries, do not
purport to be complete and are qualified in their entirety by reference to the
New Debentures, the New Indenture, the Old Debentures and the Old Indenture. For
further information with respect to the New Debentures and the Old Debentures,
see "Description of New Debentures" and "Description of Old Debentures."
Beneficial owners of Old Debentures considering whether to tender should also
review the matters set forth in "Certain Income Tax Consequences," "Certain
Considerations" and "Special Factors."
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
------------------------------------ ------------------------------------
<S> <C> <C>
Type................................ Subordinated Debentures Convertible Subordinated Debentures
Aggregate Principal Amount.......... Up to $30,000,000 $60,000,000 originally issued
($31,755,000 currently outstanding)
Interest Rate....................... 15% per annum 7 1/4% per annum
Maturity Date....................... July 15, 1999 January 15, 2002
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
NEW DEBENTURES OLD DEBENTURES
------------------------------------ ------------------------------------
<S> <C> <C>
Subordination Provisions............ Subordinated to all Senior Subordinated to all Senior
Indebtedness, as such term is Indebtedness, as such term is
defined in the New Indenture. The defined in the Old Indenture. The
indebtedness evidenced by the Old indebtedness evidenced by the New
Debentures and the Fidelity Funds Debentures and the Fidelity Funds
Debentures is not Senior Debentures is not Senior
Indebtedness and the indebtedness Indebtedness and the indebtedness
represented by the New Debentures represented by the Old Debentures
and the Fidelity Funds Debentures and the Fidelity Funds Debentures
ranks equally with and is not ranks equally with and is not
superior in right of payment to superior in right of payment to
that evidenced by the Old that evidenced by the New
Debentures. Debentures.
Conversion Provisions............... None Each $1,000 principal amount of the
Old Debentures is convertible into
shares of Common Stock at a
conversion price of $18.14 per
share, subject to adjustment under
certain circumstances.
Optional Redemption................. Redeemable by the Company at any Redeemable by the Company at
time after March 31, 1996 at 110% 105.075% of principal amount prior
of principal amount and at to January 15, 1996 and at
declining percentages thereafter. declining percentages thereafter.
Right to Require Repurchase......... Each holder of the New Debentures Each holder of the Old Debentures
has the right to require the has the right to require the
Company to repurchase the New Company to repurchase the Old
Debentures of such holder at 100% Debentures of such holder at 100%
of the principal amount plus of the principal amount plus
accrued and unpaid interest thereon accrued and unpaid interest thereon
upon the occurrence of certain upon the occurrence of certain
events (not involving Decisions and events constituting a Change in
its affiliates) constituting a Control under the Old Indenture.
Change in Control under the New
Indenture.
Sinking Fund........................ None None
Security............................ None None
Guarantees.......................... None None
Trustee............................. United States Trust Company of New U.S. Trust Company of California,
York N.A.
</TABLE>
2
<PAGE>
COMMON STOCK
As at March 31, 1995, 15,410,302 shares of Common Stock were issued and
outstanding. The shares of Common Stock to be issued pursuant to the Exchange
Offer will be fully paid and non-assessable when issued pursuant thereto. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders, except that stockholders may
cumulate their votes in the election of directors. See "Description of Capital
Stock -- Common Stock."
TRADING MARKETS
The Company intends to apply for listing of the New Debentures on the
American Stock Exchange (the "AMEX"). However, there is no assurance that the
minimum requirements for listing the New Debentures on the AMEX will be met. In
the event that the New Debentures are not so listed, the New Debentures may
trade in the over-the-counter market. No assurance can be given as to the
development or liquidity of any trading market for the New Debentures. See
"Certain Considerations -- Liquidity and Trading Market for New Debentures."
The Old Debentures are listed and traded on the AMEX under the symbol "AMA
A". If a substantial amount of the Old Debentures is accepted for exchange
pursuant to the Exchange Offer, it is likely that the Old Debentures will no
longer meet the minimum requirements for listing on the AMEX. If the Old
Debentures are delisted by the AMEX, the Old Debentures may trade in the
over-the-counter market. No assurance can be given as to the liquidity of any
trading market for the Old Debentures upon completion of the Exchange Offer. See
"Certain Considerations -- Trading Market Consequences for Untendered Old
Debentures."
The Common Stock is, and following the completion of the Exchange Offer will
continue to be, listed and traded on the AMEX under the symbol "AMA".
MARKET VALUE OF SECURITIES
On February 6, 1995, the Company publicly announced that it had entered into
an exchange agreement (the "Fidelity Funds Agreement") with the Fidelity Funds
which held a total of $28,245,000 principal amount of the Old Debentures.
Pursuant to the Fidelity Funds Agreement, the Fidelity Funds exchanged (the
"Fidelity Exchange") the Old Debentures held by them for $14,122,500 aggregate
principal amount of subordinated debentures (the "Fidelity Funds Debentures") of
the Company (which have the same principal features as those contained in the
New Debentures) and 1,340,441 shares of Common Stock. See "Recent Transactions
in Old Debentures." The closing price on the AMEX of the Old Debentures and the
Common Stock on February 3, 1995, the date preceding public announcement of the
exchange transaction with the Fidelity Funds, was $605 per $1,000 principal
amount and $3.9375 per share, respectively. On April 21, 1995, the Company
publicly announced its intention to pursue the Exchange Offer. The closing price
on the AMEX of the Old Debentures and the Common Stock on April 20, 1995, the
date preceding public announcement of the Exchange Offer, was $580 per $1,000
principal amount and $2.375 per share, respectively.
GENERAL INFORMATION REGARDING THE EXCHANGE OFFER
<TABLE>
<S> <C>
Conditions................. Consummation of the Exchange Offer is subject to certain
conditions as described in this Exchange Circular. Subject to
applicable law and the terms set forth in this Exchange
Circular, the Company reserves the right to waive any and all
conditions to the Exchange Offer, to extend or to terminate
the Exchange Offer and otherwise to amend the Exchange Offer
in any respect. See "The Exchange Offer -- Conditions."
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Expiration Date............ The "Expiration Date" for the Exchange Offer shall be 5:00
p.m., New York City time, on May 19, 1995, unless the Company,
in its sole discretion, extends the Exchange Offer, in which
case the term "Expiration Date" shall mean the latest date to
which the Exchange Offer is so extended.
Appraisal Rights........... No appraisal or other similar statutory rights are available in
connection with the Exchange Offer.
No Fractional Securities... No fractional securities will be issued pursuant to the
Exchange Offer. See "The Exchange Offer -- No Fractional
Securities."
Certain Income Tax
Consequences.............. For a summary of certain income tax consequences of the
Exchange Offer applicable to beneficial owners of Old
Debentures and the Company, see "Certain Income Tax
Consequences."
Holder..................... The term "Holder" with respect to the Exchange Offer means any
person in whose name Old Debentures are registered on the books
of the Company or any other person who has obtained a properly
completed bond power from the registered holder. In order for
a tender of Old Debentures to constitute a valid tender,
Holders should complete the Letter of Transmittal in
accordance with the instructions set forth therein and deliver
such Letter of Transmittal to the Exchange Agent on or prior
to the Expiration Date. See "The Exchange Offer -- How to
Tender."
How to Tender.............. A Holder electing to tender Old Debentures in the Exchange
Offer should (i) complete and sign the Letter of Transmittal or
a facsimile thereof and have the signature thereon guaranteed
if required by the instructions thereof and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with certificates representing the Old Debentures and
any other required documents, to the Exchange Agent at its
address set forth on the back cover of this Exchange Circular;
(ii) effect a tender of Old Debentures pursuant to the
procedures for book-entry transfer as set forth herein; or
(iii) request his broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such
Holder. See "The Exchange Offer -- How to Tender."
Withdrawal Rights.......... Tenders of Old Debentures may be withdrawn prior to the
Expiration Date. Holders who wish to withdraw previously
tendered Old Debentures must give notice of withdrawal in
writing or by telegram or facsimile transmission, which notice
must be received by the Exchange Agent at its address set
forth on the back cover page of this Exchange Circular prior
to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person who tendered the Old Debentures
to be withdrawn and (ii) identify the Old Debentures to be
withdrawn (including the certificate number or numbers and
principal amount of such Old Debentures). Any notice of
withdrawal must be signed by the Holder in the same manner as
the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the ownership of the
Old Debentures. If the Old Debentures have been tendered by
book-entry transfer, any notice of withdrawal must specify, in
lieu of certificate numbers, the name and account number at
the appropriate Book-Entry Transfer Facility to be credited
with the withdrawn Old Debentures. All questions as to the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
validity, form and eligibility (including time of receipt) of
the notice of withdrawal will be determined by the Company in
its sole discretion, which determination shall be final and
binding on all parties. Any permitted withdrawals of tenders
of Old Debentures may not be rescinded, and any Old Debentures
withdrawn will thereafter be deemed not validly tendered for
purposes of the Exchange Offer; however, withdrawn Old
Debentures may be retendered at any time on or prior to the
Expiration Date. See "The Exchange Offer -- Withdrawal of
Tenders."
Acceptance of Old
Debentures, Delivery of
New Debentures and Common
Stock..................... Subject to the satisfaction or waiver of all conditions to
consummation of the Exchange Offer, the Company will accept all
Old Debentures validly tendered (and not withdrawn) on or
prior to the Expiration Date. The New Debentures and Common
Stock will be distributed by the Company in exchange for the
Old Debentures accepted in the Exchange Offer promptly after
the Acceptance Date. See "The Exchange Offer -- General."
Special Procedure for
Beneficial Owners......... Any beneficial owner whose Old Debentures are registered in the
name of his broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact such
registered holder promptly and instruct such registered holder
to tender on behalf of the beneficial owner. If such
beneficial owner wishes to tender on his own behalf, such
beneficial owner must prior to completing and executing the
Letter of Transmittal and delivering Old Debentures, either
make appropriate arrangements to register ownership of the Old
Debentures in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Guaranteed Delivery
Procedures................ Holders who wish to tender their Old Debentures and (i) whose
Old Debentures are not immediately available; (ii) who cannot
deliver their Old Debentures and all other required documents
to the Exchange Agent on or prior to the Expiration Date; or
(iii) who cannot complete the procedures for book-entry
transfer on a timely basis, must tender their Old Debentures
according to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery Procedures."
Exchange Agent............. Mellon Securities Trust Company is serving as Exchange Agent in
connection with the Exchange Offer.
Information Agent.......... D.F. King & Co., Inc. is serving as Information Agent in
connection with the Exchange Offer.
</TABLE>
CERTAIN CONSIDERATIONS AND SPECIAL FACTORS
Prior to deciding whether to tender in the Exchange Offer, beneficial owners
of Old Debentures should consider carefully all of the information contained in
this Exchange Circular, especially the matters set forth in "Certain
Considerations" and "Special Factors."
5
<PAGE>
SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical consolidated financial data of the Company
at December 31, 1990, 1991, 1992, 1993 and 1994, and for the years then ended,
have been derived from the Company's annual financial statements including the
consolidated balance sheets at December 31, 1993 and 1994 and the related
consolidated statements of operations for the three years ended December 31,
1994 and notes thereto which appear elsewhere herein. See "Index to Financial
Statements." The following summary of consolidated historical financial data is
qualified in its entirety by, and should be read in conjunction with, such
audited consolidated financial statements and related notes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1990(1) 1991(3) 1992 1993 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales....................................................... $ 91,799 $ 127,131 $ 128,286 $ 119,417 $ 111,681
Cost of sales............................................... 50,765 71,008 72,952 72,209 65,590
---------- ---------- ---------- ---------- ----------
Gross margin................................................ 41,034 56,123 55,334 47,208 46,091
License fee revenue......................................... 91 356 441 441
Total operating expenses.................................... (46,091) (55,584) (44,918) (47,118) (33,941)
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............................... (5,057) 630 10,772 531 12,591
Interest expense............................................ (10,794) (16,951) (11,617) (10,880) (8,690)
Interest income............................................. 1,666 2,012 2,637 2,767 2,526
Other (expense) income, net................................. (909) 1,940 2,285 2,065 1,136
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes, minority interests,
extraordinary item and cumulative effect of change in
accounting principle (2)................................... (15,094) (12,369) 4,077 (5,517) 7,563
Provision for income taxes.................................. 2,172 2,204 1,956 926 1,886
---------- ---------- ---------- ---------- ----------
(17,266) (14,573) 2,121 (6,443) 5,677
Minority interests in consolidated subsidiaries............. (459) (1,781) (4,565) 3,755
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle................... (17,725) (16,354) (2,444) (2,688) 5,677
Dividends and accretion on mandatorily redeemable preferred
stock...................................................... 3,050 2,249 1,832 1,387 874
---------- ---------- ---------- ---------- ----------
Income (loss) applicable to common stock before
extraordinary item and cumulative effect of change in
accounting principle....................................... $ (20,775) $ (18,603) $ (4,276) $ (4,075) $ 4,803
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income (loss) per common share before extraordinary item and
cumulative effect of change in accounting principle
assuming no dilution....................................... $ (1.81) $ (1.55) $ (.30) $ (.29) $ .34
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income (loss) per common share before extraordinary item and
cumulative effect of change in accounting principle
assuming full dilution..................................... $ (1.81) $ (1.55) $ (.30) $ (.29) $ .22
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted average common shares outstanding assuming no
dilution................................................... 11,497 12,012 13,962 14,073 14,069
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted average common shares outstanding assuming full
dilution................................................... 11,497 12,012 13,962 14,073 24,099
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of earnings to fixed charges (8)...................... -- .40 1.25 .59 1.68
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------
PRO FORMA
REFLECTING
FIDELITY PRO FORMA
EXCHANGE AS ADJUSTED
1990 1991 1992 1993 1994 1994(6) 1994(7)
-------- -------- -------- -------- -------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 2,387 $ 3,039 $ 2,443 $ 1,762 $ 1,340 $ 1,040 $ 340
Working capital (deficit)............................ (1,752) (10,958) 4,246 (2,833) 29,576 28,629 27,115
Total assets......................................... 183,060 168,654 177,496 142,891 132,124 130,731 129,166
Short-term debt (5).................................. 25,119 29,569 34,382 35,815 1,214 1,214 1,214
Long-term debt (2) (4) (5)........................... 80,267 66,525 83,821 70,999 91,803 77,681 61,803
Mandatorily redeemable equity securities............. 18,947 18,187 9,451 6,478 6,567 6,567 6,567
Stockholders' equity (deficit) (10).................. (5,035) (18,093) (8,560) (8,274) (2,238) 9,844 23,343
Book value -- per common share assuming no dilution
(9)................................................. (.43) (1.44) (.61) (.59) (.16) .64 1.38
Book value -- per common share assuming full dilution
(9)................................................. (.43) (1.44) (.61) (.59) (.06) .32 .71
<FN>
- ------------------------------
(1) The Company consummated the IMED acquisition on April 2, 1990. Under the
purchase method of accounting, the Company's historical statement of
operations data for the year ended December 31, 1990 includes IMED's
results of operations commencing April 2, 1990. As a result, the Company's
historical consolidated statement of operations for the year ended December
31, 1990 is not directly comparable to subsequent years.
(2) On October 29, 1991, the Company repaid $13,000 of subordinated debt and
recorded a $1,236 extraordinary loss on this extinguishment of debt. On
January 31, 1992 the Company repaid and restructured its debt and recorded
a $8,632 extraordinary loss on this extinguishment of debt. For further
discussion see Note 6 to the Consolidated Financial Statements.
(3) In June 1991, CTC ceased operations and in October 1991 IMED sold its
European operations. These transactions affect the comparability of the
1991 data to 1990 and 1992.
(4) On January 31, 1992, the Company issued Old Debentures in the principal
amount of $60,000 and 500 shares of its common stock at $15.375 per share.
For further discussion, see Note 6 to the Consolidated Financial
Statements.
(5) On August 12, 1994, IMED amended its loan agreement. For further
discussion, see Note 6 to the Consolidated Financial Statements.
(6) On March 31, 1995, the Company completed the Fidelity Exchange wherein
$28,245 of Old Debentures were exchanged for an aggregate of $14,122.5 of
Fidelity Funds Debentures and 1,340,441 shares of Common Stock. For further
discussion, see Note 1 to the Pro Forma Condensed Balance Sheet and Note 16
to the Consolidated Financial Statements.
(7) The pro forma as adjusted balance sheet data as of December 31, 1994,
reflect the financial position of the Company as if the Exchange Offer had
been consummated on that date. See Note 2 to the Pro Forma Condensed
Balance Sheet.
(8) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings have been calculated by subtracting fixed charges from the income
before income tax provision, (ii) fixed charges comprise (A) interest
charges, (B) amortization of debt expense, (C) a portion of rentals
determined to be representative of the interest factor and (D) IMED's
preferred stock dividends and accretion to IMED's redeemable common stock
warrant in respect of interests held by minority stockholders. As a result
of losses, earnings were inadequate to cover combined fixed charges by $345
for the year ended December 31, 1990.
(9) Book value per common share assuming no dilution is computed by dividing
stockholders' equity (deficit) by the number of common shares outstanding
for the respective period. Book value assuming no dilution does not include
common stock equivalents (options and warrants) because the effect would be
antidilutive. Book value per common share assuming full dilution is
computed by dividing stockholders' equity (deficit) by the sum of (i) the
number of common shares outstanding, plus (ii) for the year ended December
31, 1994, the shares that would be outstanding assuming conversion of the
Decisions Notes. Stockholders' equity (deficit) for the year ended December
31, 1994 has been increased by $386 for the interest expense (net of tax)
on the Decisions Notes since conversion on the respective issue dates of
the Decisions Notes was assumed. The calculation of book value per common
share assuming full dilution excludes common stock equivalents and
convertible securities that are antidilutive.
(10) The Company has never paid dividends on the Common Stock.
</TABLE>
7
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
INTRODUCTION
The unaudited pro forma financial data presented herein reflects the audited
historical condensed consolidated balance sheet of the Company as at December
31, 1994 and the audited historical condensed consolidated statement of
operations of the Company for the year ended December 31, 1994 as adjusted to
give effect to the Fidelity Exchange using a Common Stock per share price of
$2.4375. In the Company's Consolidated Financial Statements, Note 16 was
prepared using $2.75 as an estimate of the Common Stock per share price.
PRO FORMA CONDENSED BALANCE SHEET
The unaudited Pro Forma Condensed Balance Sheet presented herein reflects
the audited historical condensed consolidated balance sheet of the Company as at
December 31, 1994, as adjusted to give effect to (i) the Fidelity Exchange (see
"Recent Transactions in Old Debentures") and (ii) the exchange of $31,755
principal amount of Old Debentures pursuant to the Exchange Offer for 1,492,485
shares of Common Stock and $15,877.5 principal amount of New Debentures, as if
such transactions had occurred on December 31, 1994.
The pro forma adjustments described herein are based upon currently
available information and upon certain assumptions that the Company believes are
reasonable under current circumstances and which are described herein. The
unaudited Pro Forma Condensed Balance Sheet should be read in conjunction with
the Company's audited historical consolidated financial statements and
accompanying notes thereto. See "Index to Financial Statements." Due to the fact
that the Fidelity Exchange occurred subsequent to December 31, 1994 and the
Exchange Offer has not yet been consummated, the pro forma financial information
presented herein is not necessarily indicative of the results or balances that
would have been attained had the Fidelity Exchange and the Exchange Offer
actually taken place prior to December 31, 1994 and the actual adjustments and
balances may vary from those presented in the unaudited Pro Forma Condensed
Balance Sheet. However, the Company believes that any differences between actual
adjustments and pro forma adjustments will not have a material impact on the pro
forma financial statements.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
The unaudited Pro Forma Condensed Statement of Operations for the year ended
December 31, 1994 is based upon the audited historical condensed statement of
operations of the Company for the year ended December 31, 1994, after giving
effect to the pro forma adjustments described in the footnotes thereto as if the
Fidelity Exchange and the Exchange Offer had been consummated on January 1,
1994.
The pro forma adjustments described herein are based upon currently
available information and upon certain assumptions that the Company believes are
reasonable under current circumstances and which are described herein. The
unaudited Pro Forma Condensed Statement of Operations should be read in
conjunction with the Company's audited historical consolidated financial
statements and footnotes thereto. See "Index to Financial Statements." The Pro
Forma Condensed Statement of Operations is not necessarily indicative of what
actual results of operations would have been for the respective periods
presented had the Fidelity Exchange and the Exchange Offer actually taken place
on January 1, 1994 and does not purport to project the Company's results of
operations for any future period.
8
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEETS
DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
FIDELITY
EXCHANGE PRO FORMA EXCHANGE OFFER DECEMBER 31,
PRO FORMA REFLECTING PRO FORMA 1994
ACTUAL ADJUSTMENTS FIDELITY ADJUSTMENTS PRO FORMA AS
1994 DEBIT/(CREDIT) EXCHANGE DEBIT/(CREDIT) ADJUSTED
---------- --------------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................. $ 1,340 $ (300)(B) $ 1,040 $ (700)(D) $ 340
Receivables, net.......................... 24,841 24,841 24,841
Inventories............................... 20,347 20,347 20,347
Restricted cash and investment securities,
securities available for sale, prepaid
expenses and other current assets........ 6,755 6,755 6,755
---------- ---------- ------------
Total current assets.................... 53,283 52,983 52,283
Net investment in sales-type and direct
financing leases........................... 14,807 14,807 14,807
Property, plant and equipment, net.......... 11,595 11,595 11,595
Other non-current assets.................... 4,921 (1,393)(A) 3,828 (1,565)(C) 2,963
300(B) 700(D)
Intangible assets, net...................... 47,518 47,518 47,518
---------- ---------- ------------
$ 132,124 $ 130,731 $ 129,166
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt and
accounts payable......................... $ 9,641 $ 9,641 $ 9,641
Accrued expenses and other current
liabilities.............................. 14,066 (647)(A) 14,713 (814)(C) 15,527
---------- ---------- ------------
Total current liabilities............. 23,707 24,354 25,168
---------- ---------- ------------
Long-term debt.............................. 91,803 28,245(A) 77,681 31,755(C) 61,803
(14,123)(A) (15,877)(C)
Other non-current liabilities............... 7,285 7,285 7,285
---------- ---------- ------------
99,088 84,966 69,088
---------- ---------- ------------
Minority interests in consolidated
subsidiaries and mandatorily redeemable
equity securities.......................... 11,567 11,567 11,567
---------- ---------- ------------
Common stock and other stockholders' equity
(deficit):
Preferred Stock...........................
Common Stock.............................. 142 (13)(A) 155 (15)(C) 170
Capital in excess of par value............ 58,703 (3,254)(A) 61,957 (4,090)(C) 66,047
Accumulated deficit....................... (61,922) (8,815)(A) (53,107) (9,394)(C) (43,713)
Treasury stock, unrealized holding gains
from securities available for sale and
other equity............................. 839 839 839
---------- ---------- ------------
Total non-redeemable preferred stock,
common stock and other stockholders'
equity (deficit)....................... (2,238) 9,844 23,343
---------- ---------- ------------
$ 132,124 $ 130,731 $ 129,166
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
9
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Note 1 -- The Fidelity Exchange pro forma adjustments assume the exchange of
$28,245 principal amount of Old Debentures for 1,340,441 shares of Common Stock
and $14,122.5 principal amount of Fidelity Funds Debentures. The Fidelity
Exchange pro forma adjustments are made as follows:
(A) Reflects the exchange of $28,245 of Old Debentures for 1,340,441 shares of
the Common Stock ($2.4375/share) and $14,122.5 principal amount of Fidelity
Funds Debentures and corresponding extraordinary gain of $10,855. The gain
is net of the write-off of approximately 47% of unamortized debt issue costs
of $1,393 related to the exchange of Old Debentures and net of $647, the
effective tax applicable to the Fidelity Exchange.
(B) Reflects the use of cash to pay $300 of debt issue costs in connection with
the Fidelity Exchange.
Note 2 -- The Exchange Offer pro forma adjustments assume the exchange of
$31,755 principal amount of Old Debentures for 1,492,485 shares of Common Stock
(assumed value of $2.75/share) and $15,877.5 principal amount of New Debentures.
The Exchange Offer pro forma adjustments are made as follows:
(C) Reflects the exchange of $31,755 of Old Debentures for 1,492,485 shares of
Common Stock (assumed value of $2.75/share) and $15,877.5 principal amount
of New Debentures and the corresponding extraordinary gain of $11,773. The
gain is net of the write-off of the remaining unamortized debt issue costs
of $1,565 related to the Old Debentures and net of $814, the effective tax
rate applicable to the Exchange Offer.
(D) Reflects the use of cash to pay $700 of debt issue costs in connection with
the Exchange Offer.
10
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIDELITY
EXCHANGE PRO PRO FORMA EXCHANGE OFFER DECEMBER 31,
FORMA REFLECTING PRO FORMA 1994
ACTUAL ADJUSTMENTS FIDELITY ADJUSTMENTS PRO FORMA
1994 DEBIT/(CREDIT) EXCHANGE DEBIT/(CREDIT) AS ADJUSTED
--------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Income from operations........................... $ 12,591 $ 12,591 $ 12,591
--------- ----------- ------------
Other income (expenses):
Interest income................................ 2,526 2,526 2,526
Interest expense............................... (8,690) $ (122)(F) (8,638) $ (46)(J) (8,672)
70(G) 80(K)
Other, net..................................... 1,136 1,136 1,136
--------- ----------- ------------
(5,028) (4,976) (5,010)
--------- ----------- ------------
Income before income taxes and extraordinary
item............................................ 7,563 7,615 7,581
Provision for income taxes....................... 1,886 20(H) 1,906 (13)(L) 1,893
--------- ----------- ------------
Income before extraordinary item................. 5,677 5,709 5,688
Extraordinary item -- gain on early retirement of
debt............................................ (8,618)(E) 8,618 (9,173)(I) 17,791
--------- ----------- ------------
Net income....................................... 5,677 14,327 23,479
Dividends on mandatorily redeemable preferred
stock........................................... 874 874 874
--------- ----------- ------------
Net income applicable to common stock............ $ 4,803 $ 13,453 $ 22,605
--------- ----------- ------------
--------- ----------- ------------
Income per common share assuming no dilution:
Income before extraordinary item............... $ .34 $ .31 $ .29
Extraordinary item............................. .56 1.05
--------- ----------- ------------
Net income per common share assuming no
dilution.................................... $ .34 $ .87 $ 1.34
--------- ----------- ------------
--------- ----------- ------------
Income per common share assuming full dilution:
Income before extraordinary item and cumulative
effect of accounting change................... $ .22 $ .20 $ .19
Extraordinary item............................. .34 .66
--------- ----------- ------------
Net income per common share assuming full
dilution...................................... $ .22 $ .54 $ .85
--------- ----------- ------------
--------- ----------- ------------
Weighted average common shares outstanding
assuming no dilution............................ 14,069 15,409 16,902
--------- ----------- ------------
--------- ----------- ------------
Weighted average common shares outstanding
assuming full dilution.......................... 24,099 25,439 26,932
--------- ----------- ------------
--------- ----------- ------------
</TABLE>
11
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Note 1 -- The Fidelity Exchange pro forma adjustments assume the exchange of
$28,245 principal amount of Old Debentures for $14,122.5 principal amount of
Fidelity Funds Debentures and 1,340,441 shares of Common Stock. The Fidelity
Exchange pro forma adjustments are made as follows:
(E) Reflects the extraordinary gain of $10,855 on the extinguishment of debt due
to the Fidelity Exchange of $28,245 principal amount of Old Debentures for
$14,122.5 principal amount of Fidelity Funds Debentures and 1,340,441 shares
of the Common Stock ($2.4375/share). The gain is recorded net of $1,590,
comprising the write-off of approximately 47% of the unamortized Old
Debenture debt issue costs and net of $647, the effective tax applicable to
the Fidelity Exchange.
(F) Reflects the elimination of approximately 47% of the amortization of Old
Debenture debt issue costs of $197, net of additional amortization of debt
issue costs of $75 incurred with the Fidelity Exchange.
(G) Reflects additional interest expense of $2,118 incurred on the $14,122.5 of
Fidelity Funds Debentures, net of the elimination of interest expense of
$2,048 related to the $28,245 of Old Debentures which is assumed to have
been retired in connection with the Fidelity Exchange.
(H) Reflects the tax effect on items (F) and (G) above, calculated at the
statutory rate.
Note 2 -- The Exchange Offer pro forma adjustments assume the exchange of
$31,755 principal amount of Old Debentures for 1,492,485 shares of Common Stock
(assumed value of $2.75/share) and $15,877.5 principal amount of New Debentures.
The Exchange Offer pro forma adjustments are made as follows:
(I) Reflects the extraordinary gain of $11,773 on the extinguishment of debt due
to the Exchange Offer of $31,755 principal amount of Old Debentures for
$15,877.5 principal amount of New Debentures and 1,492,485 shares of Common
Stock (assumed value $2.75/share). The gain is recorded net of $1,786,
comprising the write-off of the remaining unamortized Old Debentures debt
issue costs and net of $814, the effective tax rate applicable to the
Exchange Offer.
(J) Reflects elimination of the amortization of Old Debentures debt issue costs
of $221, net of additional amortization of debt issue costs of $175 incurred
with the Exchange Offer.
(K) Reflects additional interest expense of $2,382 incurred on the $15,877.5 of
New Debentures, net of the elimination of interest expense of $2,302 related
to the $31,755 of Old Debentures which are assumed to have been retired in
connection with the Exchange Offer.
(L) Reflects the tax effect on items (J) and (K) above, calculated at the
statutory rate.
12
<PAGE>
THE COMPANY
BUSINESS
The Company through its major operating subsidiary, IMED Corporation
("IMED"), is a leading developer and manufacturer of infusion systems and
related technologies for the health care industry. IMED is one of the largest
manufacturers of intravenous infusion instruments (which consist of pumps and
controllers) and disposable administration sets in the United States. The
Company owns 90% of IMED's common stock (on a fully diluted basis).
MANAGEMENT
The executive officers and directors of the Company, and the executive
officers of IMED are set forth below. All such individuals are citizens of the
United States whose business address is c/o Advanced Medical, Inc., 9775
Businesspark Avenue, San Diego, California 92131.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY AND IMED
- --------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Jeffry M. Picower 52 Director, Chairman of the Board and Chief Executive Officer; Chairman
of the Board -- IMED
Joseph W. Kuhn 35 President, Chief Financial Officer, Treasurer and Secretary;
President, Treasurer and Secretary -- IMED
Anthony Cerami 54 Director
Norman M. Dean 74 Director
Henry Green 52 Director
Richard B. Kelsky 39 Director
</TABLE>
JEFFRY M. PICOWER -- Mr. Picower was a director, Vice President and
Assistant Treasurer of the Company from September 1988 to March 1989 and Vice
Chairman from December 1988 to June 1989. Mr. Picower was re-elected as a
director and Co-Chairman of the Board on March 8, 1993 and became Chairman of
the Board on May 4, 1993. Mr. Picower has been Chief Executive Officer since
September 7, 1993. He has, since 1984, been Chairman of the Board and Chief
Executive Officer of Monroe Systems for Business, Inc. ("Monroe"), a world-wide
office equipment, distribution and service organization. Monroe's business
address is 1000 The American Road, Morris Plains, New Jersey 07950. Mr. Picower
has been a director of Physician Computer Network, Inc. ("PCN") since January
1994 and Chairman of the Board since June 1994. PCN, a corporation whose
principal shareholder is Mr. Picower, operates a computer network linking its
office-based physician members to health care organizations. PCN's business
address is 1200 The American Road, Morris Plains, New Jersey 07950. Mr. Picower
is the largest beneficial owner of the Common Stock. See "Certain Considerations
- -- Control of the Company."
JOSEPH W. KUHN -- Mr. Kuhn was appointed President of the Company and IMED
in January 1995. Since August 1993, Mr. Kuhn has been Chief Financial Officer,
Treasurer and Secretary of the Company and Treasurer and Secretary of IMED. From
August 1993 to January 1995, Mr. Kuhn was Vice President of the Company and
Executive Vice President of IMED. Mr. Kuhn was Corporate Controller of the
Company from January 1990 to August 1993. Mr. Kuhn joined Controlled
Therapeutics Corporation ("CTC") (a development stage pharmaceutical company and
a former subsidiary of the Company) in September 1989 and was its Corporate
Controller through December 1991. From 1983 to 1989, Mr. Kuhn held positions of
increasing responsibility, including senior manager, with Price Waterhouse, a
public accounting firm. From 1982 to September 1983, Mr. Kuhn was employed by
Main Hurdman, a public accounting firm. Mr. Kuhn holds a B.A. degree from
Rutgers University and is a Certified Public Accountant.
ANTHONY CERAMI, PH.D. -- Dr. Cerami was first elected to the board of
directors (the "Board") of the Company in March 1989. He has been President of
The Picower Institute for Medical Research since October 1991. The business
address of The Picower Institute for Medical Research is 350 Community Drive,
Manhasset, N.Y. 11030. Dr. Cerami was Dean, Graduate and Postgraduate Studies at
The Rockefeller University from 1986 through January 1991 and was a Professor at
The Rockefeller University from 1978 until October 1991. He is an editor of the
JOURNAL -- MOLECULAR MEDICINE and is on the editorial boards of several
biomedical journals. He has been an author of numerous publications covering
many aspects of
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medical biochemistry. He holds a B.S. from Rutgers University and a Ph.D. from
The Rockefeller University. Dr. Cerami is Chairman of the Scientific Advisory
Board and a director of Alteon, Inc., a development stage pharmaceutical company
engaged in the discovery and development of novel therapeutic and diagnostic
products for the complications associated with diabetes and aging. As at
December 31, 1994, the Company owned 512,600 shares of Alteon, Inc.'s common
stock, which represented less than 5% of the then-issued and outstanding shares
on a fully diluted basis.
NORMAN M. DEAN -- Mr. Dean was first elected to the Board in March 1989. Mr.
Dean has been a director and President of Foothills Financial Corporation
("Foothills"), a venture capital company, since January 1985 and Chairman of the
Board of Miller Diversified Corp., an agricultural company, since May 1990. The
business address of Foothills is 1100 Tenth Street, Suite 401, Greeley, Colorado
80631.
HENRY GREEN -- Mr. Green was President and Chief Operating Officer of the
Company from September 1990 to March 1993 and has been a director of the Company
since 1991. Mr. Green was also President and Chief Executive Officer of CTC from
February 1991 to December 1992. Mr. Green became an employee of PCN in March
1993. Mr. Green was elected President of PCN in May 1993 and Chief Executive
Officer in June 1994. He was elected as a director of PCN in July 1993. From
1988 to September 1990, Mr. Green was Vice President of Johnson & Johnson
International. From 1981 to 1988, Mr. Green was President of Vistakon, Inc., a
subsidiary of Johnson & Johnson. Mr. Green holds a B.S. and an M.B.A. from
Drexel University.
RICHARD B. KELSKY -- Mr. Kelsky has been a director of the Company since
June 1989. Since 1984, Mr. Kelsky has been Vice President and General Counsel of
Monroe. Mr. Kelsky has been a director of PCN since January 1992.
AVAILABLE INFORMATION
The Company is subject to information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
therewith, the Company files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed with the Commission can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Suite 1400, 500
West Madison Street, Chicago, Illinois 60661, and Suite 1300, 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
by mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Old Debentures and the
Common Stock are listed and traded on the AMEX. As a result, such reports and
other information also can be inspected at the AMEX offices at 86 Trinity Place,
New York, New York 10006. Such reports and other information may also be
obtained from the Company, 9775 Businesspark Avenue, San Diego, California
92131, Attention: Corporate Secretary. In order to ensure timely delivery of the
documents, any request for such documents made to the Company should be made at
least five business days prior to the Expiration Date.
The Company has also filed with the Commission a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (the "13e-3 Statement") and an Issuer Tender Offer
Statement on Schedule 13E-4 (the "Issuer Tender Offer Statement") pursuant to
the regulations adopted by the Commission under the Exchange Act, furnishing
certain additional information with respect to the Exchange Offer. The 13e-3
Statement and the Issuer Tender Offer Statement and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the
Commission and the Company in the manner set forth above.
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CERTAIN CONSIDERATIONS
Beneficial owners considering whether to tender Old Debentures pursuant to
the Exchange Offer should carefully consider the following matters, together
with all other information set forth in this Exchange Circular.
CONSIDERATIONS PARTICULAR TO BENEFICIAL OWNERS ELECTING TO TENDER OLD DEBENTURES
For each $1,000 principal amount of Old Debentures accepted for exchange
pursuant to the Exchange Offer, the beneficial owner thereof will receive, in
exchange therefor, New Debentures with a face value equal to $500 (I.E., 50% of
the original principal amount of the Old Debentures so exchanged) plus 47 shares
of Common Stock. To the extent such beneficial owners receive Common Stock in
exchange for tendered Old Debentures, such beneficial owners will give up (i)
the right to a fixed return on their investment, (ii) the right to a return of
capital at a stated time, and (iii) their priority over the Company's equity
holders in the event of the future liquidation or bankruptcy of the Company. The
market value of the Common Stock may be expected to be dictated by factors
different from those that affect debt securities, including the Company's
long-term prospects and industry conditions.
LIQUIDITY AND TRADING MARKET FOR NEW DEBENTURES
The Company intends to apply for listing of the New Debentures on the AMEX.
However, there is no assurance that the minimum requirements for listing the New
Debentures on the AMEX will be met. In the event that the New Debentures are not
so listed, the New Debentures may trade in the over-the-counter market. In
general, securities traded in the over-the-counter market may be subject to
greater uncertainty with respect to such matters as marketability, eligibility
for margin and the cost of executing trades than is the case with securities
listed on the AMEX. In addition, the liquidity of and the market prices for the
New Debentures can be expected to vary with changes in market and economic
conditions, the financial condition and prospects of the Company and other
factors that generally influence the market prices of securities, including in
particular, fluctuations in the market for high-yield securities. Such
fluctuations in the high-yield market may significantly affect liquidity and
market prices independent of the financial performance of and prospects for the
Company. In addition, no assurance can be given as to the relationship that the
market price of the New Debentures will bear to the market price of the Old
Debentures.
TRADING MARKET CONSEQUENCES FOR UNTENDERED OLD DEBENTURES
The Old Debentures are listed and traded on the AMEX. If a substantial
amount of the Old Debentures is accepted for exchange pursuant to the Exchange
Offer, it is likely that the Old Debentures will no longer meet the minimum
requirements for listing on the AMEX. If the Old Debentures are delisted by the
AMEX, the Old Debentures may trade in the over-the-counter market. In general,
securities traded in the over-the-counter market may be subject to greater
uncertainty with respect to such matters as marketability, eligibility for
margin and the cost of executing trades than is the case with securities on the
AMEX. In addition, to the extent that Old Debentures are tendered and accepted
in the Exchange Offer, a smaller outstanding principal amount of the Old
Debentures will be available for trading (a smaller "float"). A security with a
smaller float may command a lower price than would a comparable security with a
greater float. Therefore, the price for untendered Old Debentures may be
affected adversely to the extent that the amount of Old Debentures exchanged
pursuant to the Exchange Offer reduces the float. The reduced float may also
tend to make the trading price of such remaining Old Debentures more volatile.
ABSENCE OF FINANCIAL ADVISER
The Company has not retained any investment banker or financial adviser to
assist it in structuring the terms of the Exchange Offer. See "Special Factors
- -- Fairness of the Exchange Offer."
CERTAIN INCOME TAX CONSIDERATIONS
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO BENEFICIAL OWNERS OF OLD
DEBENTURES
Beneficial owners of Old Debentures who exchange Old Debentures for the New
Debentures and Common Stock pursuant to the Exchange Offer would recognize gain
as a result of such transaction to the extent of the lesser of (i) the excess of
(A) the "issue price" of the New Debentures plus the fair market value
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of the Common Stock received over (B) the adjusted basis of the Old Debentures
surrendered, or (ii) the "issue price" of the New Debentures. Further, it is
possible that the New Debentures will be issued with original issue discount, in
which case beneficial owners of the New Debentures would include the amount of
such original issue discount in gross income prior to the receipt of cash
attributable to such amounts. See "Certain Income Tax Consequences -- Certain
Federal Income Tax Consequences to Exchanging Owners."
CERTAIN INCOME TAX CONSEQUENCES OF THE EXCHANGE TO THE COMPANY
The Company is expected to recognize cancellation of indebtedness income as
a result of the exchange of Old Debentures for New Debentures and Common Stock
pursuant to the Exchange Offer, all or most of which income is, subject to the
results of operations for 1995, expected to be offset for regular income tax
purposes by the Company's net operating loss carryforwards. However, for
alternative minimum tax purposes only 90% of such cancellation of indebtedness
income may be offset by alternative tax net operating loss carryforwards. The
Company anticipates that all or a substantial portion of its net operating loss
carryforwards (estimated to be in the amount of approximately $29 million as of
December 31, 1995) will be utilized to offset cancellation of indebtedness
income resulting from consummation of the Exchange Offer and the Fidelity
Exchange. Accordingly, such net operating loss carryforwards will not be
available to offset future taxable income of the Company, if any. Further, a
substantial portion of cancellation of indebtedness income recognized as a
result of the consummation of the Exchange Offer will be subject to California
corporate income tax at the rate of 9.3%.
Additionally, under Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company's ability to offset its taxable income,
including possibly cancellation of indebtedness income resulting from the
consummation of the Exchange Offer and the Fidelity Exchange, may be
significantly impaired if an "ownership change" of the Company were to occur.
While the Company does not believe that it has experienced or will experience as
a result of the consummation of the Exchange Offer, an ownership change, due to
substantial uncertainties inherent in the determination of whether or not an
ownership change has occurred, no assurance can be given that the Internal
Revenue Service ("IRS") would not assert that an ownership change has occurred
or will occur as a result of the consummation of the Exchange Offer or that the
IRS would not ultimately prevail with respect to such assertion. See "Certain
Income Tax Consequences -- Certain Tax Consequences to the Company."
SECURITIES LAW PROVISIONS APPLICABLE TO CERTAIN BENEFICIAL OWNERS FOLLOWING THE
EXCHANGE OFFER
Upon completion of the Exchange Offer, certain beneficial owners who receive
Common Stock pursuant thereto may become subject to certain disclosure and other
requirements and restrictions under the federal securities laws, including,
without limitation, the reporting provisions of Section 13(d) or 13(g) of the
Exchange Act.
DIVIDEND RESTRICTIONS
The Company has not paid any dividends on the Common Stock since its
organization, and it is not contemplated that the Company will pay dividends on
the Common Stock in the foreseeable future. The Company is prohibited from
declaring and paying cash dividends on the Common Stock under the Decisions
Notes and pursuant to the terms of its Convertible Preferred Stock. See
"Description of Capital Stock -- Preferred Stock -- Convertible Preferred
Stock."
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK
The Company currently has 329,928 shares of 10% Preferred Stock and 333,000
shares of Convertible Preferred Stock outstanding. See "Description of Capital
Stock -- Preferred Stock." The Company's Certificate of Incorporation, as
amended, authorizes the issuance of additional shares of "blank check" Preferred
Stock in amounts and with such designations, rights and preferences as may be
determined by the Board. Accordingly, the Board is empowered, subject only to
the existing rights of the holders of the 10% Preferred Stock and Convertible
Preferred Stock, to issue Preferred Stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of the Common Stock. Although the Company has no
present intention to issue any additional shares of its Preferred Stock, there
can be no assurance that the Company will not do so in the future.
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SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS; DILUTION OF COMMON STOCK
If 100% of the Old Debentures are accepted for exchange pursuant to the
Exchange Offer, 16,902,787 shares of Common Stock will be outstanding. In
addition, 1,878,680 shares of Common Stock are reserved for issuance under the
Company's option plans (the "Option Plans"), of which 1,169,305 are subject to
outstanding options, and 16,483,870 shares of Common Stock are issuable in the
aggregate upon conversion of the Convertible Preferred Stock (see "Description
of Capital Stock -- Preferred Stock -- Convertible Preferred Stock) and the
Decisions Notes. The Company has an effective S-8 Registration Statement under
the Securities Act with respect to the shares of Common Stock issuable under the
Option Plans. Shares of Common Stock issued under the Option Plans, other than
shares held by affiliates of the Company, will be eligible for resale in the
public market without restriction. All of the shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock and the Decisions Notes are
entitled to demand and piggy-back registration rights under certain
circumstances. Future sales of shares of Common Stock by existing stockholders
or the issuance of shares of Common Stock upon the exercise of options or
conversion of the Convertible Preferred Stock or the Decisions Notes could have
a negative impact on the market price of the Common Stock.
CONTROL OF THE COMPANY
Jeffry M. Picower is the Chairman of the Board, the Chief Executive Officer
and a director of the Company. Mr. Picower is also the sole stockholder and sole
director of Decisions Incorporated, a Delaware corporation ("Decisions"), and
the sole general partner of JA Special Partnership Limited, a Delaware limited
partnership ("JA Special"). Mr. Picower beneficially owns, directly and
indirectly through Decisions and JA Special, 20,655,510 shares of Common Stock
(approximately 64% of the Common Stock, without giving effect to the shares of
Common Stock issuable pursuant to the Exchange Offer and assuming for such
purpose that all shares of Common Stock issuable upon the conversion of all
convertible securities held beneficially by Mr. Picower have been issued and
added to the Common Stock outstanding), which total includes: (i) 3,873,063
shares of Common Stock currently issued and outstanding (approximately 25% of
the shares of Common Stock currently issued and outstanding); (ii) 267,099
shares of Common Stock issuable upon conversion of an aggregate of 333,000
shares of the Convertible Preferred Stock; (iii) 16,483,870 shares of Common
Stock issuable upon conversion of the Decisions Notes; and (iv) 31,477 shares of
Common Stock issuable upon conversion of $571,000 principal amount of Old
Debentures owned by Decisions. For further information concerning Mr. Picower,
see "The Company -- Management." In light of the fact that stockholders of the
Company are entitled to cumulative voting rights with respect to the election of
directors, if fully converted, such ownership would vest in Mr. Picower the
voting power to elect a majority of the directors of the Company (subject to
certain rights of the holders of the 10% Preferred Stock). See "Description of
Capital Stock -- Preferred Stock -- 10% Preferred Stock."
SPECIAL FACTORS
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being undertaken at this time to offer beneficial
owners of Old Debentures the opportunity recently afforded to the Fidelity Funds
to retain interest-bearing securities of the Company and acquire shares of
Common Stock. See "Recent Transaction in Old Debentures." The Exchange Offer is
designed to revise the Company's consolidated capitalization by reducing the
principal amount of the Company's outstanding subordinated indebtedness and
increasing the amount of its stockholders' equity. Pursuant to the Exchange
Offer, the Company will retire $500 principal amount of its outstanding
subordinated indebtedness for each $1,000 principal amount of Old Debentures
accepted for exchange pursuant to the Exchange Offer. If 100% of the outstanding
Old Debentures are accepted for exchange pursuant to the Exchange Offer, the
Company will reduce the amount of its outstanding subordinated indebtedness by
$15,877,500. Such reduction, together with the previous $14,122,500 reduction in
subordinated indebtedness realized by the Company from the Fidelity Exchange,
would constitute an aggregate reduction of $30,000,000 to the amount of the
Company's subordinated indebtedness and an increase in the Company's
stockholders' equity (deficit) of $25,581,000. As at December 31, 1994, the book
value per common share
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assuming no dilution increases from ($0.16) to $1.38 and the book value per
common share assuming full dilution increases from ($0.06) to $0.71, as a result
of the Fidelity Exchange and assuming the exchange of 100% of the Old Debentures
pursuant to the Exchange Offer.
The Company has received no firm offer made by any unaffiliated person,
during the preceding 18 months for (i) the merger or consolidation of the
Company into or with such person or of such person into or with the Company,
(ii) the sale or other transfer of all or any substantial part of the assets of
the Company, or (iii) securities of the Company which would enable the holder
thereof to exercise control of the Company.
POSITION OF THE BOARD
Other than Mr. Picower, no director of the Company dissented to or abstained
from voting on the Exchange Offer. For information concerning the directors of
the Company, see "The Company -- Management." Mr. Picower has advised the
Company that he abstained from voting on the Exchange Offer because he is the
beneficial owner of $571,000 principal amount of Old Debentures (such amount
representing approximately 1.8% of the outstanding principal amount of Old
Debentures). Mr. Picower has further advised the Company that he will tender all
of the Old Debentures beneficially owned by him pursuant to the Exchange Offer.
The Board believes that the Exchange Offer is in the best interest of the
Company because it will improve the Company's consolidated capitalization. The
Board further believes that if a substantial amount of the Old Debentures is
accepted for exchange pursuant to the Exchange Offer, the financial structure of
the Company will be better suited to the Company's expected level of operations
and profitability, and the Company will have greater flexibility to move forward
with the growth of its business.
The decision to tender Old Debentures pursuant to the Exchange Offer should
be made by beneficial owners based upon individual investment objectives and
other factors affecting such beneficial owners individually, including any
federal, state, local or foreign tax consequences of tendering Old Debentures
pursuant to the Exchange Offer. Consequently, the Board is not making any
recommendation to beneficial owners with respect to the Exchange Offer and has
not authorized any person to make any such recommendations. Beneficial owners
are urged to evaluate carefully all information contained in this Exchange
Circular and to consult their own financial and tax advisers in order to make
their own decisions concerning whether to tender Old Debentures in the Exchange
Offer. See "Certain Income Tax Consequences."
FAIRNESS OF THE EXCHANGE OFFER
The Company believes that the Exchange Offer is fair to the beneficial
owners of Old Debentures, all of whom, other than Mr. Picower, are unaffiliated
with the Company. The Exchange Offer was approved by all of the directors of the
Company, other than Mr. Picower who abstained. The Board based the Exchange
Offer upon the terms of the Fidelity Exchange which were arrived at as a result
of arm's-length negotiations between the Company and the Fidelity Funds. See
"Recent Transactions in Old Debentures." The terms of the Exchange Offer are
substantially equivalent to the terms of the Fidelity Exchange, other than to
the extent of rounding with respect to the number of shares of Common Stock. On
a per $1,000 principal amount of Old Debentures basis, the Fidelity Funds
received approximately 47.46 shares of Common Stock while Holders will receive
47 shares of Common Stock.
Other factors considered by the Board in connection with the structuring of
the Fidelity Exchange and the Exchange Offer were (i) the degree to which the
conversion feature of the Old Debentures is "out-of-the-money"; (ii) estimated
new issue rates for the Company for non-convertible fixed-rate financing based
upon recent market prices for Old Debentures and issues of high-yield debt
securities; (iii) the historical trading pattern of the Old Debentures and the
Common Stock; (iv) recent market prices for Old Debentures and Common Stock; (v)
the Company's ability to pay the stated interest on the New Debentures; (vi) the
difference in the principal amount of New Debentures to be issued for Old
Debentures; (vii) the difference in the maturities of the Old Debentures and the
New Debentures; (viii) the difference in the interest payable on the Old
Debentures and the New Debentures; (ix) the pro forma effect of acceptance of
the Exchange Offer on the Company's consolidated capitalization; and (x) the
federal income tax consequences of the Exchange Offer on the Company and the
beneficial owners of Old Debentures. In light of its consideration of the
foregoing factors, the Board concluded that the Exchange Offer is fair to
beneficial owners of Old Debentures.
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The Company has not requested a fairness opinion, appraisal or similar
report relating to the Exchange Offer from any investment banker or financial
adviser. A fairness opinion, appraisal or similar report is sometimes requested
by a company in order to obtain an opinion on whether a transaction is fair from
a financial point of view to a particular group of persons. Based on the cost of
obtaining such an opinion, appraisal or similar report and on the fact that the
Board was not making any recommendation to beneficial owners of Old Debentures
concerning the Exchange Offer, the Board believes it is appropriate not to seek
a fairness opinion, appraisal or similar report relating to the Exchange Offer.
In addition, a majority of the non-employee directors of the Company have not
retained an unaffiliated representative to act solely on behalf of unaffiliated
beneficial owners of Old Debentures to negotiate the terms of the Exchange Offer
or prepare a report concerning the fairness thereof.
The Old Debentures have no voting rights and the approval of a majority of
the beneficial owners of Old Debentures is not required in order for the Company
to consummate the Exchange Offer. Nonetheless, if a beneficial owner of Old
Debentures does not approve of the terms of the Exchange Offer, such beneficial
owner can elect not to tender Old Debentures.
For a summary of certain federal income tax consequences of the Exchange
Offer applicable to beneficial owners of the Old Debentures and the Company, see
"Certain Income Tax Consequences."
RECENT TRANSACTIONS IN OLD DEBENTURES
On February 3, 1995, the Company entered into the Fidelity Funds Agreement,
the terms of which were arrived at as a result of arm's-length negotiations
between the Company and the Fidelity Funds. The closing price on the AMEX of the
Old Debentures and the Common Stock on February 3, 1995, the date preceding
public announcement of the Company's entry into the Fidelity Funds Agreement,
was $605 per $1,000 principal amount and $3.9375 per share, respectively.
Pursuant to the Fidelity Funds Agreement, the Fidelity Funds exchanged their
$28,245,000 principal amount of Old Debentures on March 31, 1995 for $14,122,500
principal amount of Fidelity Funds Debentures (which have the same principal
features (including, without limitation, maturity date, interest rate, interest
payment dates, optional redemption, the right of the holders to require
repurchase upon a Change in Control and degree of subordination) as those
contained in the New Debentures) and 1,340,441 shares of Common Stock. The
Fidelity Funds have the right under the Fidelity Funds Agreement to participate
in the Exchange Offer by tendering units ("Units") consisting of $500 principal
amount of Fidelity Funds Debentures and 47.45763852 shares of Common Stock. For
each Unit so tendered, the Fidelity Funds will receive the same consideration
due on account of each $1,000 principal amount of Old Debentures accepted for
exchange pursuant to the Exchange Offer. If 100% of the Units are accepted for
exchange pursuant to the Exchange Offer, the Company will be required to issue a
total of (i) $14,122,500 principal amount of New Debentures and (ii) 1,327,515
shares of Common Stock to the Fidelity Funds.
THE EXCHANGE OFFER
GENERAL
The Company is offering, upon the terms and subject to the conditions stated
in this Exchange Circular and the accompanying Letter of Transmittal, to
exchange New Debentures and shares of Common Stock for Old Debentures in the
ratio of $500 principal amount of New Debentures and 47 shares of Common Stock
for each $1,000 principal amount of Old Debentures. For a comparison of certain
of the principal features of the Old Debentures and the New Debentures, see
"Comparison of Old Debentures and New Debentures." Subject to the conditions of
the Exchange Offer, the Company will accept any and all Old Debentures tendered.
See "-- Conditions."
As at April 6, 1995, $31,755,000 aggregate principal amount of Old
Debentures were outstanding and held of record by approximately 67 persons. If
100% of the outstanding Old Debentures are accepted for exchange pursuant to the
Exchange Offer, the Company will be required to issue a total of (i) $15,877,500
aggregate principal amount of New Debentures and (ii) 1,492,485 shares of Common
Stock. Up to an
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additional $14,122,500 principal amount of New Debentures are subject to
issuance by the Company in the event that the Fidelity Funds exercise a certain
participation right granted to them by the Company. See "Recent Transactions in
Old Debentures."
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will issue New Debentures and Common Stock in exchange for Old
Debentures validly tendered (and not withdrawn) prior to 5:00 p.m., New York
City time, on the Expiration Date, subject to acceptance by the Company, and the
Exchange Agent will cause certificates representing such New Debentures and
Common Stock to be delivered, promptly after the Acceptance Date. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted validly
tendered Old Debentures when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering Holders for the purposes of receiving the New Debentures and
Common Stock. All tendering Holders, by execution of the Letter of Transmittal
(or facsimile thereof), waive any right to receive notice of acceptance of the
Old Debentures for exchange. All Old Debentures accepted for exchange by the
Company will be delivered to U. S. Trust Company of California, N.A. (the "Old
Trustee") for cancellation promptly after the Acceptance Date.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Debentures are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. The tender by a Holder pursuant to one of the procedures set
forth below will constitute an agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. Holders who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to their exchange of Old
Debentures pursuant to the Exchange Offer. The Company will pay all charges,
expenses and transfer taxes in connection with the Exchange Offer, other than
certain taxes described below under "Fees and Expenses."
Subject to applicable law, the Company reserves the right in its sole
discretion to make offers for, and to purchase in the open market, in privately
negotiated transactions or otherwise, any Old Debentures that remain outstanding
subsequent to the Expiration Date. The terms of any such offers for or purchases
of the Old Debentures could differ from the terms of the Exchange Offer.
INTEREST ON OLD DEBENTURES
The Company will not make any payment on account of accrued interest on the
Old Debentures accepted for exchange.
NO FRACTIONAL SECURITIES
No fractional securities will be issued pursuant to the Exchange Offer. The
New Debentures will be available only in registered form, without coupons, in
denominations of $500 and integral multiples thereof.
APPRAISAL RIGHTS
No appraisal or similar statutory rights are available to beneficial owners
of Old Debentures in connection with the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The "Expiration Date" for the Exchange Offer shall be 5:00 p.m. New York
City time, on May 19, 1995, unless the Company, in its sole discretion (as
limited by applicable law), extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is so
extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by giving oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Any such notice
shall also include disclosure of the approximate principal amount of Old
Debentures theretofore validly tendered pursuant to the Exchange Offer and not
properly withdrawn. There can be no assurance that the Company will exercise its
right to extend the Exchange Offer.
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The Company reserves the right (i) to delay accepting any Old Debentures, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept Old
Debentures not previously accepted if any of the conditions set forth below
under "-- Conditions" shall not have been satisfied and shall not have been
waived by the Company, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent; (ii) at any time, or from time to time, to
amend the terms of the Exchange Offer in any manner; and (iii) to modify the
form or amount of the consideration to be paid pursuant to the Exchange Offer,
provided that any such modified consideration will be provided to all tendering
Holders, even if they tendered their Old Debentures in the Exchange Offer prior
to the modification, and provided further that no increase or decrease in the
amount of Old Debentures being sought or in the consideration offered in the
Exchange Offer will be made unless the Exchange Offer will remain open for at
least ten business days from the date that notice of such increase or decrease
is first publicized, sent or given to the Holders. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by public announcement thereof. If the terms of the Exchange Offer are amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose any such amendment in a manner reasonably
calculated to inform the Holders of such amendment and the Company will extend
the Exchange Offer for a period which the Company in its sole discretion deems
appropriate, depending upon the significance of the amendment and the manner of
disclosure to Holders, if the Exchange Offer would otherwise expire during such
period. During any such delay or extension, all Old Debentures previously
tendered and not withdrawn will remain subject to the Exchange Offer (including
the right to withdraw tendered Old Debentures as set forth under "-- Withdrawal
of Tenders" below) and may be accepted for exchange by the Company. The
reservation by the Company of the right to delay acceptance for exchange of
and/or the actual exchange of the Old Debentures is subject to the provisions of
applicable law, including Rule 14e-1(c) under the Exchange Act, which requires
that the Company pay the consideration offered or return the Old Debentures
deposited by or on behalf of Holders promptly after the termination or
withdrawal of the Exchange Offer. The rights reserved by the Company in this
paragraph are in addition to its rights set forth under "-- Conditions" below.
Without limiting the manner in which the Company may choose to make a public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
HOW TO TENDER
A Holder electing to tender Old Debentures in the Exchange Offer should (i)
complete and sign the Letter of Transmittal or a facsimile thereof and have the
signature thereon guaranteed if required by the instructions thereof and mail or
otherwise deliver such Letter of Transmittal, or such facsimile, together with
certificates representing the Old Debentures and any other required documents,
to the Exchange Agent at its address set forth on the back cover of this
Exchange Circular; (ii) effect a tender of Old Debentures pursuant to the
procedures for book-entry transfer as set forth below; or (iii) request his
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder.
NO LETTERS OF TRANSMITTAL AND NO OLD DEBENTURES SHOULD BE SENT TO THE
COMPANY, THE INFORMATION AGENT OR THE OLD TRUSTEE.
All signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless (i) the Letter of Transmittal or notice of withdrawal is signed by the
registered Holder of the Old Debentures tendered therewith (or being withdrawn)
and the New Debentures and Common Stock are to be issued directly to such
Holder, and neither the box entitled "Special Issuance Instructions" nor
"Special Delivery Instructions" on the Letter of Transmittal has been completed
or (ii) such Old Debentures are being tendered for the account of an Eligible
Institution. If Old Debentures are registered in the name of a person other than
the signer of a Letter of Transmittal or a notice of withdrawal, as the case may
be, then the Old Debentures must be endorsed by the Holder or be accompanied by
a written instrument or instruments of transfer or exchange, in form
satisfactory to the Company, duly executed by the Holder. If a Letter of
Transmittal or any
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certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority to so act must be submitted. In the event that
signatures on a Letter of Transmittal are required to be guaranteed, such
guarantee must be by a firm or other entity identified in Rule 17A(d)-15 under
the Exchange Act, including any (i) bank, (ii) broker, dealer, municipal
securities dealer, municipal securities broker, government securities dealer or
governmental securities broker, (iii) credit union, (iv) national securities
exchange, registered securities association or clearing agency, or (v) savings
association (in each case, an "Eligible Institution"), acting according to the
procedures set forth in such Rule.
THE METHOD OF DELIVERY OF OLD DEBENTURES, THE LETTER OF TRANSMITTAL, AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS EFFECTED BY MAIL, IT IS RECOMMENDED THAT
HOLDERS USE AN AIR COURIER WITH A GUARANTEED NEXT DAY DELIVERY OR REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Unless the Old Debentures being tendered are deposited with the Exchange
Agent prior to the Expiration Date (accompanied by a properly completed Letter
of Transmittal), or tendered pursuant to the guaranteed delivery procedures or
book-entry transfer procedures set forth below, the Company may, at its option,
reject such tender. Issuance of New Debentures and Common Stock in exchange for
Old Debentures will be made only against deposit of properly tendered Old
Debentures. If less than the entire principal amount of any Old Debentures
evidenced by a submitted certificate is tendered, the tendering Holder should
fill in the principal amount tendered in the appropriate box on the Letter of
Transmittal with respect to the deposit being made, but only to the extent of
the principal amount of Old Debentures being tendered. The Exchange Agent will
then cause Old Debentures in the principal amount equal to the portion of such
delivered Old Debentures not tendered to be returned to the tendering Holder
(unless otherwise requested by the Holder under "Special Delivery Instructions"
in the relevant Letter of Transmittal), as promptly as practicable following the
Expiration Date. The entire principal amount of Old Debentures deposited with
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated. Tenders of Old Debentures will be accepted for exchange only in
principal amounts equal to $1,000 and integral multiples thereof.
Any beneficial owner whose Old Debentures are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered Holder promptly and instruct such
registered Holder to tender on behalf of the beneficial owner. If such
beneficial owner wishes to tender on his own behalf, such beneficial owner must,
prior to completing and executing the Letter of Transmittal and delivering Old
Debentures, either make appropriate arrangements to register ownership of the
Old Debentures in such beneficial owner's name or obtain a properly completed
bond power from the registered Holder. The transfer of record ownership may take
considerable time.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Debentures will be resolved by the
Company, in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any or all tenders that are
not in proper form or the acceptance of which would, in the opinion of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any irregularities or conditions of
tender as to particular Old Debentures. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) shall be final and binding. Unless waived, any
irregularities in connection with deliveries of tenders of Old Debentures must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent, the Information Agent nor any other person shall be under
any duty to give notification of any irregularities in such tenders or shall
incur any liability for failure to give such notification. Tenders of Old
Debentures will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Debentures received by the Exchange Agent that are
not properly tendered and as to which the irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable.
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BOOK-ENTRY TRANSFER PROCEDURES
The Exchange Agent will make a request to establish accounts with respect to
the Old Debentures at The Depository Trust Company, the Midwest Securities Trust
Company and the Philadelphia Depository Trust Company (each, a "Book-Entry
Transfer Facility") for the purpose of the Exchange Offer promptly after the
date of this Exchange Circular. Any financial institution that is a participant
in a Book-Entry Transfer Facility's system may make book-entry delivery of the
Old Debentures by causing such Book-Entry Transfer Facility to transfer such Old
Debentures into the Exchange Agent's account in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of Old
Debentures may be effected through book-entry transfer in the Exchange Agent's
account at any Book-Entry Transfer Facility, the Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at one of its addresses set forth below prior to the Expiration
Date, or the guaranteed delivery procedures described below must be complied
with. DELIVERY OF DOCUMENTS TO ANY BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
If a Holder of Old Debentures desires to tender such Old Debentures and the
certificate(s) representing such Old Debentures are not immediately available,
or time will not permit such Holder's certificate(s) or other required documents
to reach the Exchange Agent before the Expiration Date, or such Holder cannot
comply with the procedures for tender by book-entry transfer on a timely basis,
a tender may be effected if:
(i) the tender is made through an Eligible Institution;
(ii) on or prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof), and a Notice of Guaranteed Delivery
(by telegram, facsimile transmission, mail or hand delivery), substantially
in the form provided by the Company, which includes the name and address of
the Holder of Old Debentures and the principal amount of Old Debentures
tendered, states that the tender is being made thereby and guarantees that
within five AMEX trading days after the Expiration Date, the certificate(s)
representing the Old Debentures in proper form for transfer (or a
confirmation of a book-entry transfer of such Old Debentures) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificate(s) for all tendered Old Debentures, or a
confirmation of a book-entry transfer of such Old Debentures into the
Exchange Agent's applicable account at a Book-Entry Transfer Facility as
described above, and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five AMEX trading days
after the Expiration Date.
Notwithstanding any other provision of the Exchange Offer, the issuance of
New Debentures and Common Stock in exchange for Old Debentures tendered and
accepted for exchange pursuant to the Exchange Offer will, in all cases, occur
only after timely receipt by the Exchange Agent of the tendered Old Debentures,
together with a properly completed and duly executed Letter of Transmittal and
any other required documents.
If a Holder desires to tender Old Debentures pursuant to the Exchange Offer
but is unable to locate the certificates representing the Old Debentures to be
tendered, such Holder should write to or telephone the
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Old Trustee at the address or telephone number listed below, about procedures
for obtaining replacement certificates for Old Debentures or arranging for
indemnification, or about any other matter which requires handling by the Old
Trustee:
U. S. Trust Company of California, N.A.
515 South Flower Street
Suite 2700
Los Angeles, California 90071
Attn: Corporate Trust Department
(213) 861-5066
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Debentures and Common Stock
for, any Old Debentures not theretofore accepted for exchange or exchanged, and
may terminate or amend the Exchange Offer as provided herein, if any of the
following conditions exist:
(i) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might impair the ability of the
Company to proceed with the Exchange Offer or have a material adverse effect
on the contemplated benefits of such transactions to the Company or there
shall have occurred any material adverse development in any existing action
or proceeding with respect to the Company or any of its affiliates;
(ii) there shall have been proposed (including any proposed or pending
legislation in existence as of the date hereof), adopted, or enacted into
law any legislation, rule or regulation (a) limiting the deductibility of
interest on indebtedness attributable, directly or indirectly, to the
Exchange Offer; (b) that would materially increase the after-tax cost to the
Company of the Exchange Offer or the transactions contemplated hereby; or
(c) which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of such transaction to the Company;
(iii) there shall have been any material change, or development involving
a prospective change, in the business or financial affairs of the Company or
any of its subsidiaries, or the market for the Company's securities which,
in the sole judgment of the Company, would materially impair the
contemplated benefits of the Exchange Offer to the Company;
(iv) (a) any general suspension of, shortening of hours for, or
limitation on prices for, trading in securities on the New York Stock
Exchange, the AMEX or in the over-the-counter market (whether or not
mandatory), (b) a declaration of a banking moratorium or any suspension of
payments in respect of banks by federal or state authorities in the United
States (whether or not mandatory), (c) commencement of a war, armed
hostilities or other international or national crisis directly or indirectly
involving the United States, (d) any limitation (whether or not mandatory)
by any governmental authority on, or other event having a reasonable
likelihood of affecting, the extension of credit by banks or other lending
institutions in the United States, (e) any significant change in United
States currency exchange rates or a suspension of, or limitation on, the
markets therefor (whether or not mandatory), (f) any significant adverse
change in United States securities or financial markets generally or (g) in
the case of any of the foregoing existing at the time of the commencement of
the Exchange Offer, a material acceleration of worsening thereof; or
(v) the Company shall not have satisfied all applicable requirements of
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
shall not have received any necessary regulatory or other consents and
approvals.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions (including any action or inaction by the
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Company) or, to the extent waivable, may be waived by the Company in whole or in
part at any time and from time to time in its sole discretion. The Company's
failure at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right; the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts or circumstances; and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. If any of the
conditions are not satisfied, the Company may (i) refuse to accept Old
Debentures and return all tendered Old Debentures to tendering Holders; (ii)
extend the Exchange Offer and retain all Old Debentures tendered prior to the
final Expiration Date for the extended Exchange Offer, subject, however, to the
rights of Holders to withdraw such Old Debentures (see "-- Withdrawal of
Tenders"); or (iii) waive the unsatisfied conditions with respect to, or amend,
the terms of the Exchange Offer and accept all properly tendered Old Debentures
which have not been withdrawn. If any such waiver or amendment constitutes a
material change to the Exchange Offer, the Company will promptly disclose such
waiver or amendment in a manner reasonably calculated to inform affected Holders
of such waiver or amendment, and the Company will extend the Exchange Offer for
a period which the Company in its sole discretion deems appropriate, depending
on the significance of the waiver or amendment and the manner of disclosure to
Holders, if the Exchange Offer would otherwise expire during such period. The
Board has not made a decision as to what circumstances would lead it to waive
any conditions to the Exchange Offer, and any such waiver would depend on the
circumstances prevailing at the time of such waiver. The Company has no current
intent to waive any such conditions. Assuming that the Exchange Offer is not
terminated or withdrawn, all such conditions shall either be satisfied or waived
prior to the Expiration Date. Any determination by the Company concerning the
events described above will be final and binding upon all parties.
WITHDRAWAL OF TENDERS
Tenders of Old Debentures may be withdrawn prior to the Expiration Date.
Holders who wish to withdraw previously tendered Old Debentures must give notice
of withdrawal in writing or by telegram or facsimile transmission, which notice
must be received by the Exchange Agent at its address set forth on the back
cover page of this Exchange Circular prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person who tendered the
Old Debentures to be withdrawn and (ii) identify the Old Debentures to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Debentures). Any notice of withdrawal must be signed by the Holder in
the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the ownership of the Old Debentures. If the Old Debentures to be withdrawn
have been delivered to the Exchange Agent, withdrawal is effective immediately
upon receipt by the Exchange Agent of a written or telegram or facsimile
transmission notice of withdrawal meeting the requirements set forth above even
if physical release of the certificates is not yet effected. If the Old
Debentures have been tendered by book-entry transfer, any notice of withdrawal
must specify, in lieu of certificate numbers, the name and account number at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn Old
Debentures.
Any permitted withdrawals of tenders of Old Debentures may not be rescinded,
and any Old Debentures withdrawn will thereafter be deemed not validly tendered
for purposes of the Exchange Offer; however, withdrawn Old Debentures may be
retendered by following one of the procedures described above at any time prior
to the Expiration Date.
All questions as to the validity, form and eligibility (including time of
receipt) of the notice of withdrawal will be determined by the Company in its
sole discretion, which determination shall be final and binding on all parties.
Neither the Company, the Exchange Agent, the Information Agent, nor any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give such notification.
BACKUP WITHHOLDING
To prevent backup withholding on interest payments and dividends payable to
a tendering Holder with respect to New Debentures and Common Stock,
respectively, received by such Holder pursuant to the Exchange Offer (see
"Certain Income Tax Consequences -- Certain Federal Income Tax Consequences to
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Exchanging Owners -- Backup Withholding and Reporting Requirements"), such
Holder must provide the Exchange Agent with a correct taxpayer identification
number on the substitute Form W-9 included in the Letter of Transmittal and
certify: (i) that the taxpayer identification number provided is correct (or
that such Holder is awaiting a taxpayer identification number), and (ii) that
the Holder is either (a) exempt from backup withholding, (b) has not been
notified by the IRS that he is subject to backup withholding as a result of
failure to report all interest or dividends, or (c) that the IRS has notified
the Holder that the Holder is no longer subject to backup withholding.
EXCHANGE AGENT
Mellon Securities Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Completed Letters of Transmittal together with Old Debentures
and other necessary documents should be directed to the Exchange Agent at the
addresses and telephone numbers set forth on the back cover page of this
Exchange Circular.
The Company has agreed to pay the Exchange Agent compensation for its
services, to reimburse the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith and to indemnify the Exchange Agent against any
losses or claims incurred without negligence or bad faith on the part of the
Exchange Agent in connection with its duties under the Exchange Offer.
INFORMATION AGENT
D.F. King & Co., Inc. has been appointed as Information Agent for the
Exchange Offer. Questions and requests for additional copies of this Exchange
Circular and the Letter of Transmittal should be directed to the Information
Agent at the address and telephone number set forth on the back cover page of
this Exchange Circular.
The Company has agreed to pay the Information Agent compensation for its
services, to reimburse the Information Agent for its reasonable out-of-pocket
expenses in connection therewith and to indemnify the Information Agent against
any losses or claims incurred without negligence or bad faith on the part of the
Information Agent in connection with its duties under the Exchange Offer.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile transmission, telephone or in person by officers and
regular employees of the Company and their affiliates. The Company will pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of the Exchange
Offer material to the beneficial owners of the Old Debentures, and in handling
and forwarding tenders to the Exchange Agent.
The Company has not retained any dealer manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting tenders for the Exchange Offer.
The Company estimates that expenses of making the Exchange Offer will be
approximately $300,000. Such expenses will be paid from the Company's general
working capital.
The Company will pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Debentures pursuant to the Exchange Offer. If, however,
delivery of the New Debentures, Common Stock and/or certificates for Old
Debentures for principal amounts not exchanged is to be made to, or are to be
registered in the name of any person other than the Holder of the Old Debentures
tendered thereby, or if tendered Old Debentures are registered in the name of
any person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any other reason other than the transfer and
exchange of Old Debentures to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder prior to the
issuance of the New Debentures and Common Stock.
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COMPARISON OF OLD DEBENTURES AND NEW DEBENTURES
The following is a brief comparison of the principal features of the New
Debentures and the Old Debentures. These descriptions are summaries, do not
purport to be complete and are qualified in their entirety by reference to the
New Debentures, the New Indenture, the Old Debentures and the Old Indenture. For
further information with respect to the New Debentures and the Old Debentures,
see "Description of New Debentures" and "Description of Old Debentures."
Beneficial owners considering whether to tender Old Debentures should also
review the matters set forth in "Certain Income Tax Consequences," "Certain
Considerations" and "Special Factors."
PRINCIPAL AMOUNT. The New Debentures are limited to $30,000,000 aggregate
principal amount. If 100% of the Old Debentures are exchanged pursuant to the
Exchange Offer, the Company will be required to issue $15,877,500 aggregate
principal amount of New Debentures. Up to an additional $14,122,500 principal
amount of New Debentures are subject to issuance by the Company in the event
that the Fidelity Funds exercise a certain participation right granted to them
by the Company. See "Recent Transactions in Old Debentures." The Old Debentures
were originally issued in the aggregate principal amount of $60,000,000. As at
April 21, 1995, $31,755,000 aggregate principal amount of Old Debentures were
outstanding.
INTEREST. The New Debentures to be issued in the Exchange Offer will bear
interest at the rate of 15% (or $150.00 per $1,000 principal amount) per annum,
which will accrue beginning on the Acceptance Date. The Old Debentures bear
interest at the rate of 7 1/4% (or $72.50 per $1,000 principal amount) per
annum. The Company will not make any payment on account of accrued interest on
the Old Debentures.
MATURITY. The New Debentures will mature on July 15, 1999, which is prior
to the maturity of the Old Debentures which mature on January 15, 2002.
SUBORDINATION. The New Debentures are subordinated to Senior Indebtedness,
as such term is defined in the New Indenture. The Old Debentures are
subordinated to Senior Indebtedness, as such term is defined in the Old
Indenture. The indebtedness evidenced by the New Debentures, the Old Debentures
and the Fidelity Funds Debentures does not constitute Senior Indebtedness for
purposes of either the New Indenture or the Old Indenture. The indebtedness
evidenced by the New Debentures ranks equally with that evidenced by the Old
Debentures and the Fidelity Funds Debentures. As at April 17, 1995, the amount
of Senior Indebtedness outstanding for purposes of the New Indenture and the Old
Indenture aggregated approximately $31,075,000.
CONVERSION PROVISIONS. The New Debentures are not convertible. Each $1,000
principal amount of the Old Debentures is convertible into shares of Common
Stock at $18.14 per share, subject to adjustment under certain circumstances.
See "Price Range of Old Debentures and Common Stock" for a description of recent
market prices of the Old Debentures and the Common Stock and "Description of Old
Debentures -- Conversion Rights" for a description of conversion rights.
OPTIONAL REDEMPTION. The New Debentures may, at the Company's option, be
redeemed, in whole or in part, at any time after March 31, 1996, at 110% of the
principal amount redeemed plus accrued interest and at rates declining to 100%
on and after March 31, 1998. The Company has no present intention to redeem the
New Debentures. The Old Debentures are redeemable, at the option of the Company
in whole or in part, at a redemption price equal to 105.075% of the principal
amount redeemed plus accrued interest, prior to January 15, 1996 and declining
to 100% on January 15, 2002.
RIGHT TO REQUIRE REPURCHASE. Each holder of New Debentures will have the
right to require the Company to repurchase the New Debentures of such holder at
100% of the principal amount plus accrued and unpaid interest thereon upon the
occurrence of certain events (not involving Decisions and its affiliates)
constituting a Change in Control under the New Indenture. Each holder of the Old
Debentures has the right to require the Company to repurchase the Old Debentures
of such holder at 100% of the principal amount plus accrued and unpaid interest
thereon upon the occurrence of certain events constituting a Change in Control
under the Old Indenture.
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SINKING FUND. The New Debentures and the Old Debentures are not subject to
any sinking fund requirements.
SECURITY. The New Debentures and the Old Debentures are unsecured
obligations of the Company.
GUARANTEES. The New Debentures and the Old Debentures are not guaranteed.
SUBSEQUENT TRADING IN SECURITIES EXCHANGED
The Company intends to apply for listing of the New Debentures on the AMEX.
However, there is no assurance that the minimum requirements for listing the New
Debentures on the AMEX will be met. In the event that the New Debentures are not
so listed, the New Debentures may trade in the over-the-counter market. No
assurance can be given as to the development or liquidity of any trading market
for the New Debentures. See "Certain Considerations -- Liquidity and Trading
Market for New Debentures."
The Old Debentures are listed and traded on the AMEX. If a substantial
amount of the Old Debentures is accepted for exchange pursuant to the Exchange
Offer, it is likely that the Old Debentures will no longer meet the minimum
requirements for listing on the AMEX. If the Old Debentures are delisted by the
AMEX, the Old Debentures may trade in the over-the-counter market. No assurance
can be given as to the liquidity of any trading market for the Old Debentures
upon completion of the Exchange Offer. See "Certain Considerations -- Trading
Market Consequences for Untendered Old Debentures."
The Common Stock is listed and traded on the AMEX. Upon completion of the
Exchange Offer, the Common Stock will continue to be listed and traded on the
AMEX.
DESCRIPTION OF NEW DEBENTURES
The New Debentures subject to the Exchange Offer will be issued under an
indenture (the "New Indenture") to be entered into between the Company and
United States Trust Company of New York, as Trustee (the "New Trustee"). The
terms of the New Debentures include those stated in the New Indenture and those
made part of the New Indenture by reference to the Trust Indenture Act, as in
effect on the date of the New Indenture. The New Debentures are subject to all
such terms, and Holders are referred to the New Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the New Indenture does not purport to be complete and is qualified
in its entirety by reference to the New Indenture, including the definitions
therein of certain terms used below. Wherever particular Sections or defined
terms of the New Indenture are referred to, such Sections or defined terms are
incorporated herein by reference. A copy of the form of the New Indenture has
been filed as an exhibit to the 13e-3 Statement and the Issuer Tender Offer
Statement.
GENERAL
The New Debentures are unsecured, subordinated obligations of the Company,
mature on July 15, 1999 and are limited to $30,000,000 aggregate principal
amount. The New Debentures bear interest at the rate of 15% per annum from the
date of issue, or from the most recent payment date to which interest has been
paid or provided for, payable semi-annually on January 15 and July 15,
commencing July 15, 1995. Interest will be paid to the persons in whose name the
New Debenture is registered at the close of business on January 1 and July 1
next preceding the relevant interest payment date. Interest on the New
Debentures is computed on the basis of a 360-day year of twelve 30-day months.
Principal, premium, if any, and interest is payable, and the New Debentures
may be presented for redemption, repurchase, exchange or transfer, at the office
or agency of the Company in the Borough of Manhattan, The City of New York. In
addition, payment of interest may, at the option of the Company, be made by
check mailed to the address of the person entitled thereto as it appears in the
register of holders of the New Debentures. (Sections 301 and 1002)
The New Debentures are issued in registered form without coupons in
denominations of $500 and any whole multiple thereof. A holder may transfer or
exchange New Debentures in accordance with the New
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Indenture. The Security Registrar may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law. The Company need not transfer or exchange any New
Debentures (i) for a period of 15 days before the mailing of a notice of
redemption or (ii) if such New Debentures have been selected for redemption.
(Sections 302 and 305)
The Company intends to apply for listing of the New Debentures on the AMEX.
However, there is no assurance that the minimum requirements for listing the New
Debentures on the AMEX will be met. In the event that the New Debentures are not
so listed, the New Debentures may trade in the over-the-counter market. No
assurance can be given as to the development or liquidity of any trading market
for the New Debentures. See "Certain Considerations -- Liquidity and Trading
Market for New Debentures."
SUBORDINATION
The payment of principal of and premium, if any, and interest on the New
Debentures is, to the extent set forth in the New Indenture, subordinated and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below) of the Company, whether outstanding at the date
of the New Indenture or later incurred. (Article 13) In the event of any default
in the payment of the principal of (or premium, if any), or interest on, any
Senior Indebtedness or any default permitting the acceleration of Senior
Indebtedness where notice of such default has been given to the Company, no
payment with respect to the principal or interest on the New Debentures will be
made by the Company unless and until such default has been cured or waived.
(Section 1304) In addition, the Company is obligated to provide to Decisions at
least ten days' advance written notice in the event the Company shall desire to
make a principal (and, if applicable, premium) payment on account of any of the
New Debentures. Decisions has the right within five days following its receipt
of such notice from the Company to deliver a written notice ("Decisions Notice")
to the Company declaring all or any portion of the outstanding Decisions Debt
(as defined below) to be immediately due and payable. In the event that
Decisions shall deliver timely a Decisions Notice, the Company will not make any
payment on account of any of the New Debentures until the amount of the
Decisions Debt declared to be due and immediately payable in such Decisions
Notice is paid to Decisions by the Company. (Section 1305) Upon any payment or
distribution of the Company's assets to creditors upon any dissolution, winding
up, liquidation, reorganization, bankruptcy, insolvency, receivership or other
proceedings relating to the Company or to its creditors, whether voluntary or
involuntary, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due thereon before the holders of the New
Debentures will be entitled to receive any payment upon the principal of or
premium, if any, or interest on the New Debentures. (Section 1302)
By reason of such subordination, in the event of the insolvency of the
Company, holders of New Debentures may recover less, ratably, than holders of
Senior Indebtedness and other creditors of the Company.
For purposes of the New Indenture, "Senior Indebtedness" means the principal
of (and premium, if any) and interest on (a) the (i) promissory note issued by
the Company to Decisions dated January 4, 1994 in the original principal amount
of $6,000,000 (as amended by a letter agreement dated May 13, 1994 and further
amended by a modification agreement dated February 3, 1995) and (ii) the
promissory note (such promissory note together with the promissory note covered
by clause (i) being referred to as the "Decisions Notes") issued by the Company
to Decisions dated August 12, 1994 in the original principal amount of
$6,500,000 (as amended by the aforesaid modification agreement dated February 3,
1995) (the indebtedness covered by clause (a) being referred to collectively as
the "Decisions Debt"); (b) any and all other indebtedness and obligations of the
Company (including indebtedness of others guaranteed by the Company) other than
the New Debentures, whether or not contingent and whether outstanding on the
date of the New Indenture or thereafter created, incurred or assumed, which (i)
is for money borrowed or (ii) is evidenced by any bond, note, debenture or
similar instrument or (iii) represents the unpaid balance on the purchase price
of any property, business, or asset of any kind, or (iv) is an obligation of the
Company as lessee under any and all leases of property, equipment or other
assets under generally accepted accounting principles; and (c) deferrals,
amendments, renewals, extensions, modifications and refundings of any of the
foregoing contemplated in clauses (a) and (b) above, unless in any case in the
instrument creating or evidencing any
29
<PAGE>
such indebtedness or obligations or pursuant to which the same is outstanding it
is provided that such indebtedness or obligation is not superior in right of
payment to the New Debentures. Notwithstanding the foregoing, the indebtedness
evidenced by the Old Debentures and the Fidelity Funds Debentures (see "Recent
Transactions in Old Debentures") is not Senior Indebtedness and the indebtedness
represented by the New Debentures and the Fidelity Funds Debentures shall rank
equally with and shall not be superior in right of payment to that evidenced by
the Old Debentures. (Section 101)
On April 17, 1995, the principal amount of the Company's Senior Indebtedness
aggregated approximately $31,075,000, which amount is equal to the aggregate
principal amount of the Company's Senior Indebtedness, as such term is defined
under the Old Indenture. In addition, the New Debentures are effectively
subordinated to all rights of third-party creditors of the Company's
subsidiaries. On April 17, 1995, the Company's subsidiaries had outstanding
indebtedness in the aggregate principal amount of approximately $18,320,000. The
Company expects from time to time to incur additional indebtedness, including,
but not limited to, Senior Indebtedness. The New Indenture does not prohibit or
limit the incurrence of such additional indebtedness.
OPTIONAL REDEMPTION
The New Debentures may not be redeemed by the Company prior to March 31,
1996, and are redeemable on such date or thereafter, at the Company's option, in
whole or in part, upon not less than 20 nor more than 60 days' notice, at the
following Redemption Prices expressed as percentages of principal amount, plus
accrued and unpaid interest to the redemption date (and subject to the right of
any record holder to receive the interest payable on the applicable interest
payment date that is on or prior to the redemption date), if redeemed during the
12-month period beginning March 31 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------- ---------------
<S> <C>
1996 110%
1997 105%
</TABLE>
and at 100% of the principal amount, if redeemed on or after March 31, 1998.
(Sections 203, 1101 and 1105)
New Debentures in denominations larger than $500 may be redeemed, in part,
in whole multiples of $500. If fewer than all the New Debentures are redeemed,
the New Trustee will select the particular New Debentures to be redeemed by such
methods as the New Trustee shall deem fair and appropriate and as are in
accordance with the rules and regulations of the applicable self-regulatory
organizations. (Sections 1104 and 1108)
On and after the redemption date, unless the Company defaults on the payment
of the Redemption Price or on interest accrued and unpaid to the redemption
date, interest will cease to accrue on New Debentures called for redemption and
all rights of holders under the New Debentures will cease except the right to
receive the applicable Redemption Price. (Section 1107)
REPURCHASE AT OPTION OF HOLDERS UPON OCCURRENCE OF A CHANGE IN CONTROL
If prior to July 15, 1999 there occurs any Change in Control (as defined
below) with respect to the Company, each holder of New Debentures shall have the
right, at the holder's option, to require the Company to repurchase all of such
holder's New Debentures, or a portion thereof which is $500 in principal amount
or any whole multiple thereof, on the repurchase date that is 45 days after the
date of the notice by the Company of such Change in Control, at a price of 100%
of the principal amount, plus accrued interest to the repurchase date (subject
to the right of holders on the relevant regular record date to receive interest
due on an interest payment date that is prior to the repurchase date). (Section
1401)
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to mail to all holders of New Debentures a notice of the occurrence of
such Change in Control and of the repurchase right arising as a result thereof.
The Company must deliver a copy of such notice to the New Trustee and cause a
copy of such notice to be published in a newspaper of general circulation in the
Borough of Manhattan, The City of New York. To exercise the repurchase right,
holders of New Debentures must deliver on or before the
30
<PAGE>
30th day after the date of the notice of repurchase an irrevocable written
notice to the New Trustee of the holder's exercise of such right, together with
the New Debentures with respect to which the right is being exercised, duly
endorsed for transfer. (Section 1402)
For purposes of the New Indenture, a "Change in Control" of the Company will
be deemed to have occurred at such time as any person (other than Decisions and
its affiliates), together with its affiliates or associates, is or becomes the
beneficial owner, directly or indirectly, through a purchase, merger or other
acquisition transaction, of shares of capital stock of the Company entitling
such person to exercise 75% or more of the total voting power of all shares of
capital stock of the Company entitled to vote in elections of directors,
provided that a Change in Control shall not be deemed to have occurred if either
(i) the last reported sale price of the Common Stock as reported on the AMEX
(or, if the Common Stock is not listed or admitted to trading on the AMEX, the
applicable market, as specified in the New Indenture) for any five trading days
during the ten trading days immediately preceding the Change in Control is at
least equal to 105% of the Reference Price (as defined below) in effect on such
day or (ii) at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change in
Control consists of shares of common stock traded on a national securities
exchange or through the NASDAQ National Market System or another comparable
quotation system. "Beneficial owner" will be determined in accordance with Rule
13d-3, as in effect on the date of the execution of the New Indenture,
promulgated by the Commission under the Exchange Act. (Section 1406)
The "Reference Price" is equal to $18.14 per share of Common Stock and is
subject to adjustment upon the occurrence of certain events, including: the
issuance of Common Stock as a dividend or distribution on the Common Stock;
subdivisions, combinations and certain reclassifications of Common Stock; the
issuance to all holders of Common Stock of certain rights or warrants entitling
them to subscribe for Common Stock at less than the then-current market price
per share (as determined in the manner set forth in the New Indenture); and the
distribution to holders of Common Stock of any shares of capital stock of the
Company (other than Common Stock), evidences of indebtedness of the Company or
other assets, or rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in this sentence). No adjustment in the
Reference Price will be required unless such adjustment would require an
increase or decrease of at least 1% of the Reference Price, but any adjustment
that would otherwise be required to be made shall be carried forward and taken
into account in any subsequent adjustment. (Section 1407)
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, such
transaction would be subject to the requirements of Rule 13e-4, including the
filing of an Issuer Tender Offer Statement on Schedule 13E-4 with the Commission
and the furnishing of certain information contained therein to the holders of
New Debentures. The repurchase right provided to the holders of New Debentures
upon the occurrence of a Change in Control could discourage a potential acquiror
of the Company.
MERGERS AND CONSOLIDATIONS
The New Indenture provides that the Company may, without the consent of the
holders of New Debentures, consolidate with or merge into any other corporation,
or sell, convey, transfer or lease its properties and assets substantially in
their entirety to any person, provided that in any such case (i) the successor
corporation shall assume by a supplemental indenture the Company's obligations
under the New Indenture and (ii) certain other conditions are met. (Sections 801
and 802)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following are Events of Default under the New Indenture: (a) failure to
pay principal of or premium, if any, on any New Debenture when due, whether or
not such payment is prohibited by the subordination provisions of the New
Indenture; (b) failure to pay any interest on any New Debenture when due,
continued for 30 days (whether or not such payment is prohibited by the
subordination provision of the New Indenture); PROVIDED, HOWEVER, that if the
last day of such 30-day period is not a Business Day, then such period will be
extended until the next succeeding Business Day; (c) a default in the payment of
the Repurchase Price on any New Debenture when due; (d) a default in the payment
of indebtedness for borrowed money by the Company or any Significant Subsidiary
(as defined in the New Indenture) which
31
<PAGE>
results in the acceleration of the maturity of $1 million or more of
indebtedness, if such acceleration is not rescinded or indebtedness is not
discharged within 30 days after written notice to the Company as provided in the
New Indenture; (e) failure to perform any other covenant or agreement by the
Company in the New Debentures or the New Indenture (with certain exceptions),
continued for 60 days after written notice as provided in the New Indenture; and
(f) certain events in bankruptcy, insolvency or reorganization of the Company or
any Significant Subsidiary. (Section 501)
Subject to the provisions of the New Indenture relating to the duties of the
New Trustee in the event that an Event of Default shall occur and be continuing,
the New Trustee will be under no obligation to exercise any of its rights or
powers under the New Indenture at the request or direction of any of the
holders, unless such holders shall have offered to the New Trustee reasonable
indemnity. (Section 603) The holders of a majority in aggregate principal amount
of the outstanding New Debentures will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the New
Trustee or exercising any trust or power conferred on the New Trustee (subject
to certain exceptions). (Section 512)
If an Event of Default shall occur and be continuing, either the New Trustee
or the holders of at least 25% in aggregate principal amount of the outstanding
New Debentures may accelerate the maturity of all New Debentures; provided that
after such acceleration, but before a judgment or decree based on acceleration,
the holders of a majority in aggregate principal amount of outstanding New
Debentures may, under certain circumstances, rescind and annul such acceleration
if all Events of Default, other than non-payment of amounts which become due by
acceleration, have been cured or waived as provided in the New Indenture.
(Section 502)
No holder of any New Debenture will have the right to institute any
proceeding with respect to the New Indenture or for any remedy thereunder unless
such holder shall have previously given to the New Trustee written notice of a
continuing Event of Default and unless the holders of at least 25% in aggregate
principal amount of the outstanding New Debentures shall also have made written
request, and offered reasonable indemnity, to the New Trustee to institute such
proceeding as trustee, and the New Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding New
Debentures a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507) However, such
limitations do not apply to a suit instituted by a holder of a New Debenture for
the enforcement of payment of the principal of and premium, if any, or interest
on such New Debenture on or after the respective due dates expressed in such New
Debenture. (Section 508)
Upon request of the New Trustee, the Company will be required to furnish to
the New Trustee annually a statement as to the performance by the Company of
certain of its obligations under the New Indenture and as to any default in such
performance. (Section 704)
Prior to any declaration accelerating the maturity of the New Debentures,
the holders of a majority in aggregate principal amount of the outstanding New
Debentures may on behalf of the holders of all New Debentures waive certain past
defaults, not including a default in payment of the principal of or premium, if
any, or interest on any New Debenture or a default in respect of a covenant or
provision of the New Indenture which cannot be modified or amended without the
consent of all holders of New Debentures. (Section 513)
MODIFICATION
Supplemental indentures modifying or amending the New Indenture may be made
by the Company and the New Trustee with the consent of the holders of a majority
in aggregate principal amount of the outstanding New Debentures; provided that
no such modification or amendment may, without the consent of the holder of each
outstanding New Debenture affected thereby, (i) change the stated maturity of
any New Debenture, (ii) reduce the rate or extend the time of payment of
interest thereon, reduce the principal amount thereof or premium, if any,
thereon or reduce any amount payable on redemption or repurchase thereof, (iii)
impair or affect the right of a holder to institute suit for the payment
thereof, change the currency in which the New Debentures are payable or the
place of payment, (iv) adversely affect the right to have the New Debentures
repurchased upon a Change in Control, (v) modify the subordination provisions
32
<PAGE>
of the New Debentures in a manner adverse to the holders of the New Debentures
or (vi) reduce the aforesaid percentage of New Debentures, the consent of the
holders of which is required for any such modification or waiver of compliance
with the New Debentures without the consent of the holders of all of the New
Debentures then outstanding. (Section 902)
DESCRIPTION OF OLD DEBENTURES
The Old Debentures were issued by the Company under an indenture (the "Old
Indenture"), dated as of January 15, 1992, between the Company and the Old
Trustee. The terms of the Old Debentures include those stated in the Old
Indenture and those made part of the Old Indenture by reference to the Trust
Indenture Act as in effect on the date of the Old Indenture. The Old Debentures
are subject to all such terms, and Holders are referred to the Old Indenture and
the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Old Indenture does not purport to be complete and is
qualified in its entirety by reference to the Old Indenture, including the
definitions therein of certain terms used below. Wherever particular Sections or
defined terms of the Old Indenture are referred to, such Sections or defined
terms are incorporated herein by reference.
GENERAL
The Old Debentures are unsecured, subordinated obligations of the Company,
mature on January 15, 2002, and are limited to $60 million aggregate principal
amount. The Old Debentures bear interest at the rate of 7 1/4% per annum from
the most recent payment date to which interest has been paid or provided for,
payable semi-annually on January 15 and July 15. Interest is paid to the persons
in whose name the Old Debenture is registered at the close of business on the
January 1 and July 1 next preceding the relevant interest payment date. Interest
on the Old Debentures is computed on the basis of a 360-day year of twelve
30-day months.
Principal, premium, if any, and interest is payable, and the Old Debentures
may be presented for conversion, redemption, repurchase, exchange or transfer,
at the office or agency of the Company in the Borough of Manhattan, The City of
New York. In addition, payment of interest may, at the option of the Company be
made by check mailed to the address of the person entitled thereto as it appears
in the register of holders of the Old Debentures. (Sections 301 and 1002)
The Old Debentures were issued in registered form without coupons in
denominations of $1,000 and any whole multiple thereof. A holder may transfer or
exchange Old Debentures in accordance with the Old Indenture. The Security
Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law. The Company need not transfer or exchange any Old Debentures (i) for a
period of 15 days before the mailing of a notice of redemption or (ii) if such
Old Debentures have been selected for redemption. (Sections 302 and 305)
The Old Debentures are listed and traded on the AMEX. Upon completion of the
Exchange Offer, the Old Debentures may no longer meet the minimum requirements
for listing on the AMEX. If the Old Debentures are delisted by the AMEX, the Old
Debentures may trade in the over-the-counter market. No assurance can be given
as to the liquidity of any trading market for the Old Debentures upon completion
of the Exchange Offer. See "Certain Considerations -- Trading Market
Consequences for Untendered Old Debentures."
CONVERSION RIGHTS
The Old Debentures are convertible into Common Stock at any time prior to
redemption, repurchase or maturity, at a conversion price (the "Conversion
Price") equal to $18.14 per share. The right to convert Old Debentures called
for redemption or repurchase will expire at the close of business on the
redemption date or the repurchase date, as the case may be, and will be lost if
not exercised prior to that time (unless the Company defaults in making the
payment due upon redemption or repurchase in which case the conversion right
will continue uninterrupted). (Section 1201)
The holders of Old Debentures at the close of business on a record date are
entitled to receive the interest payable on the Old Debentures on the
corresponding interest payment date notwithstanding the
33
<PAGE>
conversion thereof or the Company's default in payment of the interest due on
such interest payment date, subject to certain provisions applicable to
defaulted interest. No payment or adjustment is to be made upon conversion for
interest accrued on the Old Debentures or for dividends on the Common Stock
issued on conversion. Therefore, Old Debentures surrendered for conversion
during the period from the close of business on any record date to the opening
of business on the corresponding interest payment date (except Old Debentures
called for redemption on a redemption date during such period or on such
interest payment date) must be accompanied by payment of an amount equal to the
interest payable on such Old Debentures on such interest payment date. A holder
of Old Debentures on a record date who converts Old Debentures on an interest
payment date will receive the interest and need not include a payment for any
such interest upon surrender of Old Debentures for conversion. (Sections 307 and
1202) The Company will not issue fractional shares of Common Stock upon
conversion of the Old Debentures and, in lieu thereof, will pay a cash
adjustment based upon the closing price of the Common Stock upon the AMEX (or on
such national securities exchange on which the Common Stock is then primarily
traded) on the last trading day prior to the date of conversion. (Section 1203)
The Conversion Price is subject to adjustment upon the occurrence of certain
events, including: the issuance of Common Stock as a dividend or distribution on
the Common Stock; subdivisions, combinations and certain reclassifications of
Common Stock; the issuance to all holders of Common Stock of certain rights or
warrants entitling them to subscribe for Common Stock at less than the
then-current market price per share (as determined in the manner set forth in
the Old Indenture); and the distribution to all holders of Common Stock of any
shares of capital stock of the Company (other than Common Stock), evidences of
indebtedness of the Company or other assets, or rights or warrants to subscribe
for or purchase any of its securities (excluding those referred to in this
sentence). No adjustment in the Conversion Price will be required unless such
adjustment would require an increase or decrease of at least 1% of the
Conversion Price, but any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(Section 1204)
SUBORDINATION
The payment of principal of and premium, if any, and interest on the Old
Debentures is, to the extent set forth in the Old Indenture, subordinated and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below) of the Company, whether outstanding at the date
of the Old Indenture or later incurred. (Article 13) In the event of any default
in the payment of the principal of, or interest on, any Senior Indebtedness or
any default permitting the acceleration of Senior Indebtedness where notice of
such default has been given to the Company, no payment with respect to the
principal or interest on the Old Debentures will be made by the Company unless
and until such default has been cured or waived. (Section 1304) Upon any payment
or distribution of the Company's assets to creditors upon any dissolution,
winding up, liquidation, reorganization, bankruptcy, insolvency, receivership or
other proceedings relating to the Company or to its creditors, whether voluntary
or involuntary, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due thereon before the holders of the Old
Debentures will be entitled to receive any payment upon the principal of or
premium, if any, or interest on the Old Debentures. (Section 1302)
By reason of such subordination, in the event of the insolvency of the
Company, holders of Old Debentures may recover less, ratably, than holders of
Senior Indebtedness and other creditors of the Company.
For purposes of the Old Indenture, "Senior Indebtedness" means the principal
of (and premium, if any) and interest on (a) any and all indebtedness and
obligations of the Company (including indebtedness of others guaranteed by the
Company) other than the Old Debentures, whether or not contingent and whether
outstanding on the date of the Old Indenture or thereafter created, incurred or
assumed, which (i) is for money borrowed or (ii) is evidenced by any bond, note,
debenture or similar instrument or (iii) represents the unpaid balance on the
purchase price of any property, business, or asset of any kind, or (iv) is an
obligation of the Company as lessee under any and all leases of property,
equipment or other assets required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles; and
34
<PAGE>
(b) any deferrals, amendments, renewals, extensions, modifications and
refundings of any indebtedness or obligations of the types referred to in clause
(a) above, unless in any case in the instrument creating or evidencing any such
indebtedness or obligations pursuant to which the same is outstanding it is
provided that such indebtedness or obligation is not superior in right of
payment to the Old Debentures. The indebtedness evidenced by the New Debentures
and the Fidelity Funds Debentures (see "Recent Transactions in Old Debentures")
is not Senior Indebtedness and the indebtedness evidenced by the Old Debentures
and the Fidelity Funds Debentures shall rank equally with and shall not be
superior in right of payment to that evidenced by the New Debentures. (Section
101)
On April 17, 1995, the principal amount of the Company's Senior Indebtedness
aggregated approximately $31,075,000, which amount is equal to the aggregate
principal amount of the Company's Senior Indebtedness, as such term is defined
under the New Indenture. In addition, the Old Debentures are effectively
subordinated to all rights of third-party creditors of the Company's
subsidiaries. On April 17, 1995, the Company's subsidiaries had outstanding
indebtedness in the aggregate principal amount of approximately $18,320,000. The
Company expects from time to time to incur additional indebtedness, including,
but not limited to, Senior Indebtedness. The Old Indenture does not prohibit or
limit the incurrence of such additional indebtedness.
OPTIONAL REDEMPTION
The Old Debentures are redeemable, at the Company's option, in whole or in
part, upon not less than 15 nor more than 60 days' notice, at the following
Redemption Prices expressed as percentages of principal amount, plus accrued and
unpaid interest to the redemption date (and subject to the right of any record
holder to receive the interest payable on the applicable interest payment date
that is on or prior to the redemption date), if redeemed during the 12-month
period beginning January 15 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
- --------- ----------- --------- -----------
<S> <C> <C> <C>
1995 105.075% 1999 102.175%
1996 104.350% 2000 101.450%
1997 103.625% 2001 100.725%
1998 102.900%
</TABLE>
and at 100% of the principal amount, if redeemed on January 15, 2002. (Sections
203, 1101 and 1105)
Old Debentures in denominations larger than $1,000 may be redeemed, in part,
in whole multiples of $1,000. If fewer than all the Old Debentures are redeemed,
the Old Trustee will select the particular Old Debentures to be redeemed by such
methods as the Old Trustee shall deem fair and appropriate and as are in
accordance with the rules and regulations of the applicable self-regulatory
organizations. (Sections 1104 and 1108)
On and after the redemption date, unless the Company defaults on the payment
of the Redemption Price or on interest accrued and unpaid to the redemption
date, interest will cease to accrue on Old Debentures called for redemption and
all rights of holders under the Old Debentures will cease except the right to
receive the applicable Redemption Price. (Section 1107)
REPURCHASE AT OPTION OF HOLDERS UPON OCCURRENCE OF A CHANGE IN CONTROL
If prior to January 15, 2002 there occurs any Change in Control (as defined
below) with respect to the Company, each holder of Old Debentures shall have the
right, at the holder's option, to require the Company to repurchase all of such
holder's Old Debentures, or a portion thereof which is $1,000 in principal
amount or any whole multiple thereof, on the repurchase date that is 45 days
after the date of the notice by the Company of such Change in Control, at a
price of 100% of the principal amount, plus accrued interest to the repurchase
date (subject to the right of holders on the relevant regular record date to
receive interest due on an interest payment date that is prior to the repurchase
date). (Section 1401)
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to mail to all holders of Old Debentures a notice of the occurrence of
such Change in Control and of the repurchase right arising as a result thereof.
The Company must deliver a copy of such notice to the Old Trustee and cause a
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<PAGE>
copy of such notice to be published in a newspaper of general circulation in the
Borough of Manhattan, The City of New York. To exercise the repurchase right,
holders of Old Debentures must deliver on or before the 30th day after the date
of the notice of repurchase an irrevocable written notice to the Old Trustee of
the holder's exercise of such right, together with the Old Debentures with
respect to which the right is being exercised, duly endorsed for transfer.
(Section 1402)
For purposes of the Old Indenture, a "Change in Control" of the Company will
be deemed to have occurred at such time as any person, together with its
affiliates or associates, is or becomes the beneficial owner, directly or
indirectly, through a purchase, merger or other acquisition transaction, of
shares of capital stock of the Company entitling such person to exercise 75% or
more of the total voting power of all shares of capital stock of the Company
entitled to vote in elections of directors, provided that a Change in Control
will not be deemed to have occurred if either (i) the last reported sale price
of the Common Stock as reported on the AMEX (or, if the Common Stock is not
listed or admitted to trading on the AMEX, the applicable market, as specified
in the Old Indenture) for any five trading days during the ten trading days
immediately preceding the Change in Control is at least equal to 105% of the
Conversion Price in effect on such day or (ii) at least 90% of the consideration
(excluding cash payments for fractional shares) in the transaction or
transactions constituting the Change in Control consists of shares of common
stock traded on a national securities exchange or through the NASDAQ National
Market System or another comparable quotation system. "Beneficial owner" will be
determined in accordance with Rule 13d-3, as in effect on the date of the
execution of the Old Indenture, promulgated by the Commission under the Exchange
Act. (Section 1406)
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, such
transaction would be subject to the requirements of Rule 13e-4, including the
filing of an Issuer Tender Offer Statement on Schedule 13E-4 with the Commission
and the furnishing of certain information contained therein to the holders of
Old Debentures. The repurchase right provided to the holders of Old Debentures
upon the occurrence of a Change in Control could discourage a potential acquiror
of the Company.
MERGERS AND CONSOLIDATIONS
The Old Indenture provides that the Company may, without the consent of the
holders of Old Debentures, consolidate with or merge into any other corporation,
or sell, convey, transfer or lease its properties and assets substantially in
their entirety to any person, provided that in any such case (i) the successor
corporation shall assume by a supplemental indenture the Company's obligations
under the Old Indenture and (ii) certain other conditions are met. (Sections 801
and 802)
In case of any reclassification or change of outstanding Common Stock (with
certain exceptions) or the Company's consolidation with or merger with or into
any other person (with certain exceptions), or any sale or transfer of all or
substantially all the assets of the Company, each holder of Old Debentures,
after the reclassification, change, consolidation, merger, sale or transfer,
will have the right to convert its Old Debentures only into the kind and amount
of securities, cash and other property which such holder would have been
entitled to receive upon such reclassification, change, consolidation, merger,
sale or transfer if such holder had held the Common Stock issuable upon the
conversion of such Old Debentures immediately prior to such reclassification,
change, consolidation, merger, sale or transfer. (Section 1211)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following are Events of Default under the Old Indenture: (a) failure to
pay principal of or premium, if any, on any Old Debenture when due, whether or
not such payment is prohibited by the subordination provisions of the Old
Indenture; (b) failure to pay any interest on any Old Debenture when due,
continued for 30 days, whether or not such payment is prohibited by the
subordination provision of the Old Indenture; (c) a default in the payment of
the Repurchase Price on any Old Debenture when due; (d) a default in the payment
of indebtedness for borrowed money by the Company or any Significant Subsidiary
(as defined in the Old Indenture) which results in the acceleration of the
maturity of $1 million or more of indebtedness, if such acceleration is not
rescinded or indebtedness is not discharged within 30 days after written notice
to the Company as provided in the Old Indenture; (e) failure to perform any
other covenant
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or agreement by the Company in the Old Debentures or the Old Indenture (with
certain exceptions), continued for 60 days after written notice as provided in
the Old Indenture; and (f) certain events in bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary. (Section 501)
Subject to the provisions of the Old Indenture relating to the duties of the
Old Trustee in the event that an Event of Default shall occur and be continuing,
the Old Trustee will be under no obligation to exercise any of its rights or
powers under the Old Indenture at the request or direction of any of the
holders, unless such holders shall have offered to the Old Trustee reasonable
indemnity. (Section 603) The holders of a majority in aggregate principal amount
of the outstanding Old Debentures will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Old
Trustee or exercising any trust or power conferred on the Old Trustee (subject
to certain exceptions). (Section 512)
If an Event of Default shall occur and be continuing, either the Old Trustee
or the holders of at least 25% in aggregate principal amount of the outstanding
Old Debentures may accelerate the maturity of all Old Debentures; provided that
after such acceleration, but before a judgment or decree based on acceleration,
the holders of a majority in aggregate principal amount of outstanding Old
Debentures may, under certain circumstances, rescind and annul such acceleration
if all Events of Default, other than non-payment of amounts which become due by
acceleration, have been cured or waived as provided in the Old Indenture.
(Section 502)
No holder of Old Debentures will have the right to institute any proceeding
with respect to the Old Indenture or for any remedy thereunder unless such
holder shall have previously given to the Old Trustee written notice of a
continuing Event of Default and unless the holders of at least 25% in aggregate
principal amount of the outstanding Old Debentures shall also have made written
request, and offered reasonable indemnity, to the Old Trustee to institute such
proceeding as trustee, and the Old Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding Old
Debentures a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507) However, such
limitations do not apply to a suit instituted by a holder of an Old Debenture
for the enforcement of payment of the principal of and premium, if any, or
interest on such Old Debenture on or after the respective due dates expressed in
such Old Debenture or of the right to convert such Old Debenture in accordance
with the Old Indenture. (Section 508)
Upon request of the Old Trustee, the Company will be required to furnish to
the Old Trustee annually a statement as to the performance by the Company of
certain of its obligations under the Old Indenture and as to any default in such
performance. (Section 704)
Prior to any declaration accelerating the maturity of the Old Debentures,
the holders of a majority in aggregate principal amount of the outstanding Old
Debentures may on behalf of the holders of all Old Debentures waive certain past
defaults, not including a default in payment of the principal of or premium, if
any, or interest on any Old Debenture, a failure by the Company to convert any
Old Debenture into Common Stock or a default in respect of a covenant or
provision of the Old Indenture which cannot be modified or amended without the
consent of all holders of Old Debentures. (Section 513)
MODIFICATION
Supplemental indentures modifying or amending the Old Indenture may be made
by the Company and the Old Trustee with the consent of the holders of a majority
in aggregate principal amount of the outstanding Old Debentures; provided that
no such modification or amendment may, without the consent of the holder of each
outstanding Old Debenture affected thereby, (i) change the stated maturity of
any Old Debenture, (ii) reduce the rate or extend the time of payment of
interest thereon, reduce the principal amount thereof or premium, if any,
thereon or reduce any amount payable on redemption or repurchase thereof, (iii)
impair or affect the right of a holder to institute suit for the payment
thereof, change the currency in which the Old Debentures are payable or the
place of payment, (iv) adversely affect the right to convert the Old Debentures
into Common Stock or the right to have the Old Debentures repurchased upon a
Change in Control, (v) modify the subordination provisions of the Old Debentures
in a manner adverse to
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the holders of the Old Debentures or (vi) reduce the aforesaid percentage of Old
Debentures, the consent of the holders of which is required for any such
modification or waiver of compliance with the Old Debentures without the consent
of the holders of all of the Old Debentures then outstanding. (Section 902)
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is a summary
of certain provisions relating to the capital stock and is qualified in its
entirety by the provisions of the Company's Certificate of Incorporation, as
amended, and its By-laws, as amended.
The authorized capitalization of the Company consists of 75,000,000 shares
of Common Stock, 3,000,000 shares of preferred stock, par value $.01 per share
("$.01 Preferred Stock"), and 6,000,000 of preferred stock, par value $.001 per
share ("$.001 Preferred Stock"). As at March 31, 1995, there were 15,410,302
shares of Common Stock issued and outstanding, 662,928 shares of $.01 Preferred
Stock issued and outstanding and no shares of $.001 Preferred Stock issued or
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders, except that
stockholders may cumulate their votes in the election of directors. In the event
of such cumulative voting, each stockholder has a number of votes equal to the
number of shares he owns times the number of directorships to be filled and can
distribute them among candidates as he wishes. As a result, minority
stockholders who have more than a certain percentage of shares may be able to
elect one or more directors depending on the number of directors to be elected
at such a meeting. The number of members of the Board may be expanded or reduced
as determined by the directors from time to time. In the event that the number
of directors is reduced, it would require more votes to elect a director.
Subject to all of the powers, preferences and rights that may be applicable to
any series of outstanding shares of the preferred stock of the Company, holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board out of funds legally available therefor. In the event of
any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, holders of the Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any outstanding preferred stock. Holders of the Common Stock have no preemptive
rights and have no rights to convert their Common Stock into any other
securities. All of the outstanding shares of the Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, as amended,
preferred stock may be issued from time to time in one or more series, each of
which shall be distinctively designated, shall rank equally and shall be
identical in all respects. However, the Board has the authority to issue from
time to time the preferred stock of any series and to state in the resolution or
resolutions providing for the issue of any series, the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future. The issuance of such additional preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of discouraging a third party from
acquiring a majority of the outstanding Common Stock of the Company. The Company
has no present plans to issue any additional shares of preferred stock.
The Board has authorized the issuance of a series of 1,800,000 shares of 10%
Preferred Stock and a series of 333,000 shares of Convertible Preferred Stock.
10% PREFERRED STOCK. As at March 31, 1995, there were 329,928 shares of 10%
Preferred Stock outstanding. Holders of shares of 10% Preferred Stock will be
entitled to receive, when, as and if declared by the Board, out of funds legally
available therefor, cumulative preferred dividends at an annual rate of $1.00
per share per annum payable semi-annually in arrears commencing on the six-month
anniversary of
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the date of original issuance and thereafter on the date that is six months
after the date on which the prior dividend was payable. The Company did not
declare and pay the September 1993 and March 1994 dividends due on the 10%
Preferred Stock and has not paid any dividends thereon thereafter.
The 10% Preferred Stock is redeemable in whole or in part (ratably in case
of a partial redemption) at any time or from time to time at the option of the
Company. In addition, the Company was required to redeem 25% of the originally
outstanding 10% Preferred Stock, subject to certain limitations, including
having legally available funds therefor, on March 27 of each year from 1991
through 1994 (the next succeeding business day in case any such anniversary
should not be a business day) (the "Redemption Date"), at a price of $10.00 per
share plus accrued and unpaid dividends; PROVIDED, HOWEVER, that if, prior to
the Redemption Date, the Company shall have purchased or otherwise acquired, in
open market or private transactions, or has optionally redeemed shares of the
10% Preferred Stock, then the shares of 10% Preferred Stock so purchased or
otherwise acquired shall be credited against the number of shares required to be
redeemed on such Redemption Date. The Company failed to redeem on March 28, 1994
all of the then-outstanding shares of 10% Preferred Stock.
The failure of the Company to pay dividends on the 10% Preferred Stock for
two consecutive periods and to redeem the 10% Preferred Stock on the 1994
Redemption Date each constitute an event of default under the Company's
Certificate of Incorporation, as amended. As a result, until such defaults are
cured, the holders of the 10% Preferred Stock, voting as a single class on the
basis of one vote per share, have the power to elect two directors to the Board
by exercising certain rights afforded to such holders in the Company's
Certificate of Incorporation, as amended. Holders of the 10% Preferred have no
other voting rights, except as otherwise required by law.
The shares of 10% Preferred Stock are not convertible into any other
security.
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Company, holders of 10% Preferred Stock are
entitled to receive $10.00 per share plus accrued dividends then unpaid, prior
to the making of any distributions on other equity securities of the Company.
Without the consent of the holders of at least two-thirds of the outstanding
shares of 10% Preferred Stock, the Company is not permitted to: (i) create any
class or series of preferred stock which shall have preference as to dividends
or distribution of assets over the 10% Preferred Stock, PROVIDED, HOWEVER, that
the consent of the holders of a majority of the outstanding shares of 10%
Preferred Stock is required for the issuance of a class of preferred stock equal
in preference as to dividends and distribution of assets to the 10% Preferred
Stock; or (ii) alter or change the provisions of the Company's Certificate of
Incorporation, as amended, so as to adversely affect the voting power,
preferences or special rights of the holders of the 10% Preferred Stock.
CONVERTIBLE PREFERRED STOCK. As at March 31, 1995, there were 333,000
shares of Convertible Preferred Stock outstanding. The Convertible Preferred
Stock is subordinated to the 10% Preferred Stock, in that no dividends can be
paid on the Convertible Preferred Stock and no shares of the Convertible
Preferred Stock may be redeemed, on any date, unless, as of such date, the
Company has satisfied its mandatory redemption obligations and its obligation to
pay semi-annual dividends with respect to the 10% Preferred Stock through such
date. The Convertible Preferred Stock is also subordinated to the 10% Preferred
Stock in the event of liquidation of the Company. The Convertible Preferred
Stock has no sinking fund and has a liquidation preference of $6.40 per share,
plus accrued and unpaid dividends. Dividends thereon are payable at a rate of
15% of the liquidation preference per annum (computed semi-annually) and are
cumulative. The Convertible Preferred Stock is convertible into Common Stock at
any time prior to redemption at a rate of .617 shares of Common Stock for each
share of Convertible Preferred Stock (subject to anti-dilution adjustments) and,
after all of the issued and outstanding shares of 10% Preferred Stock have been
redeemed, is redeemable (i) at the option of the holder, at a redemption price
equal to the liquidation preference plus accrued dividends or (ii) at the option
of the Company, at a redemption price equal to the liquidation preference plus
accrued dividends, plus a premium of $1.50 per share. The Convertible Preferred
Stock is mandatorily redeemable at a redemption price equal to the liquidation
preference plus accrued dividends on the later of the date on which all of the
issued and outstanding shares of 10% Preferred Stock have been redeemed and
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March 28, 1998. As long as shares of the Convertible Preferred Stock are
outstanding, no dividends may be paid on the Common Stock (other than dividends
payable in shares of Common Stock) and no shares of Common Stock may be
repurchased by the Company without the consent of the holders of a majority of
the outstanding shares of Convertible Preferred Stock.
PRICE RANGE OF OLD DEBENTURES AND COMMON STOCK
The Old Debentures and the Common Stock are listed and traded on the AMEX
under the symbols "AMA A" and "AMA", respectively. The following table sets
forth the high and low sale prices for the Old Debentures (in hundreds of
dollars) and Common Stock as reported by the AMEX for the periods indicated.
<TABLE>
<CAPTION>
OLD DEBENTURES COMMON STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
(IN HUNDREDS OF
DOLLARS)
<S> <C> <C> <C> <C>
1993
First Quarter....................................... $76 $68 3/8 $9 3/8 $5 3/4
Second Quarter...................................... 73 65 1/2 5 7/8 4 1/8
Third Quarter....................................... 68 40 1/2 4 1/2 2
Fourth Quarter...................................... 57 32 2 3/16 15/16
1994
First Quarter....................................... 54 3/4 34 1 7/16 1
Second Quarter...................................... 55 1/2 46 1/8 1 3/4 5/8
Third Quarter....................................... 56 49 1 7/16 1/2
Fourth Quarter...................................... 60 1/2 48 2 1/2 7/8
1995
First Quarter....................................... 64 53 3 15/16 1 3/4
</TABLE>
The closing price on the AMEX of the Old Debentures and the Common Stock on
February 3, 1995, the date preceding public announcement of the exchange
transaction with the Fidelity Funds, was $605 per $1,000 principal amount and
$3.9375 per share, respectively. The closing price on the AMEX of the Old
Debentures and the Common Stock on April 20, 1995, the date preceding public
announcement of the Exchange Offer, was $580 per $1,000 principal amount and
$2.375 per share, respectively.
The Company has not paid any dividends on its Common Stock since
organization, and it is not contemplated that it will pay any dividends on the
Common Stock in the foreseeable future. The Company currently is prohibited from
declaring and paying cash dividends on the Common Stock under the Decisions
Notes and pursuant to the terms of the Convertible Preferred Stock.
CERTAIN INCOME TAX CONSEQUENCES
The following discussion is a summary of certain expected federal income tax
consequences to beneficial owners of the Old Debentures ("Owners") and tax
consequences to the Company as a result of (i) the delivery by the Company of
New Debentures and Common Stock (collectively, the "Exchange Consideration") for
Old Debentures pursuant to the Exchange Offer (the "Exchange") and (ii) the
holding and disposition of the Exchange Consideration subsequent to the
Acceptance Date.
THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF ALL
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE EXCHANGE OFFER
OR THE HOLDING AND DISPOSITION OF THE EXCHANGE CONSIDERATION, NOR DOES IT
ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO PARTICULAR CATEGORIES OF
OWNERS PARTICIPATING IN THE EXCHANGE OFFER SUBJECT TO SPECIAL TREATMENT UNDER
THE FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, FINANCIAL
INSTITUTIONS, INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, FOREIGN PERSONS,
REGULATED INVESTMENT COMPANIES, TAXPAYERS SUBJECT TO ALTERNATIVE MINIMUM TAX,
AND S CORPORATIONS. THIS DISCUSSION ADDRESSES THE TAX CONSEQUENCES OF THE
EXCHANGE ONLY TO OWNERS WHO PARTICIPATE IN THE EXCHANGE OFFER ("EXCHANGING
OWNERS") HOLDING OLD DEBENTURES AND THE EXCHANGE CONSIDERATION AS
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CAPITAL ASSETS. FURTHER, THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. THIS
DISCUSSION IS BASED UPON PROVISIONS OF THE CODE, TREASURY REGULATIONS
PROMULGATED THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS, ALL AS
CURRENTLY IN EFFECT. EACH OF SUCH AUTHORITIES IS SUBJECT TO CHANGE, POSSIBLY
WITH RETROACTIVE EFFECT, WHICH CHANGE COULD AFFECT THE CONTINUING APPLICABILITY
OF THE CONCLUSIONS SET FORTH IN THIS DISCUSSION.
THE COMPANY HAS NOT SOUGHT AND WILL NOT SEEK ANY RULINGS FROM THE IRS OR
OPINIONS OF COUNSEL WITH RESPECT TO ANY TAX ISSUE RELATING TO THE EXCHANGE OR
THE OWNERSHIP AND DISPOSITION OF THE EXCHANGE CONSIDERATION. THERE CAN BE NO
ASSURANCE THAT THE IRS WILL NOT TAKE DIFFERENT TAX POSITIONS FROM THOSE
DESCRIBED HEREIN OR THAT SUCH POSITIONS, IF TAKEN, WILL NOT BE SUSTAINED.
EACH OWNER IS URGED TO CONSULT HIS OWN TAX ADVISER AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH OWNER OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS AND OF
CHANGES IN APPLICABLE TAX LAWS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO EXCHANGING OWNERS
EXCHANGE OF OLD DEBENTURES FOR THE EXCHANGE CONSIDERATION
The Exchange will constitute a recapitalization under Section 368(a)(1)(E)
of the Code. Consequently, the tax consequences to an Exchanging Owner will
depend, in part, on whether the New Debentures are considered to be "securities"
for purposes of the reorganization provisions of the Code. The determination of
whether a debt instrument is a "security" for such purpose involves an overall
evaluation of the nature of the debt instrument, with the term of the instrument
usually regarded as a significant factor. Debt instruments with stated terms of
five years or less are generally not treated as securities, although in
particular cases obligations with terms shorter than five years have been deemed
to constitute securities. Although the issue is not free from doubt, the Company
believes it is unlikely that the New Debentures will be treated as "securities"
for purposes of the reorganization provisions of the Code and the remainder of
this discussion assumes, unless otherwise noted, that the New Debentures will
not be treated as securities.
Exchanging Owners will generally recognize gain (but will not recognize
loss) in an amount equal to the lesser of (i) the excess of (A) the issue price
of the New Debentures plus the fair market value on the Acceptance Date of the
Common Stock received, over (B) such Exchanging Owner's adjusted tax basis in
the Old Debentures surrendered, or (ii) the issue price of the New Debentures.
See "Certain Federal Income Tax Consequences of Holding the New Debentures --
Original Issue Discount and -- Issue Price." With the exception of any gain
attributable to accrued market discount with respect to an Old Debenture (see
"Market Discount"), such gain would be capital gain and would be long-term
capital gain if the Old Debenture surrendered was held for more than one year on
the Acceptance Date. An Exchanging Owner's initial tax basis in Common Stock
received pursuant to the Exchange will be equal to such Exchanging Owner's
adjusted tax basis in the Old Debentures surrendered, decreased by the issue
price of the New Debentures received, and increased by the amount of gain
recognized as a result of the Exchange. The holding period of such Common Stock
received will include the period during which an Exchanging Owner held the Old
Debentures surrendered. An Exchanging Owner's initial tax basis in the New
Debentures will be equal to the issue price of the New Debentures, and such
Exchanging Owner's holding period for the New Debentures will begin on the day
after the Acceptance Date.
If, contrary to the expectation of the Company, the New Debentures were
treated as securities for purposes of the reorganization provision of the Code
then, subject to the discussion of "Treatment of Accrued Interest" below, no
income would be recognized by an Exchanging Owner as a result of the Exchange.
TREATMENT OF ACCRUED INTEREST
The Exchange Offer provides that the Company will not make any payment on
account of interest accrued with respect to the Old Debentures surrendered
pursuant to the Exchange Offer ("Accrued Interest"). Pursuant to the legislative
history of Section 354(a)(2)(B) of the Code, it appears likely, and this
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discussion assumes, that no portion of the Exchange Consideration will be deemed
allocable to Accrued Interest, and that, accordingly, Exchanging Owners will not
recognize interest income as a result of the Exchange.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF HOLDING THE NEW DEBENTURES
STATED INTEREST
Stated interest payments on a New Debenture will be taxable to a beneficial
owner thereof as ordinary interest income, and will be includable in such
beneficial owner's gross income pursuant to such beneficial owner's method of
accounting.
ORIGINAL ISSUE DISCOUNT
IN GENERAL. Treasury Regulations issued on January 27, 1994 under the
original issue discount ("OID") provisions of the Code (the "Final OID
Regulations") are relevant to several of the tax issues discussed herein,
including the amount of gain or loss recognized by an Exchanging Owner as a
result of the Exchange, an Exchanging Owner's tax basis in the New Debentures
received in the Exchange, the amount of OID, if any, with respect to the New
Debentures, and the amount of cancellation of indebtedness income recognized by
the Company. The Final OID Regulations are complex and have not yet been applied
or interpreted in administrative rulings or court decisions to a substantial
extent. Accordingly, application of the Final OID Regulations to the Exchange
and the New Debentures cannot be determined definitively absent further guidance
from the IRS or the courts, and the tax consequences of the Exchange and of
ownership and disposition of the New Debentures are therefor uncertain. The
positions that the Company will take for tax purposes at any time will
correspond with its understanding of the law at that time and may change from
the positions discussed below.
The New Debentures will be deemed issued with OID in the amount of the
excess, if any, of the "stated redemption price at maturity" of the New
Debentures over the "issue price" thereof (see "-- Issue Price"). Because all
interest payments with respect to the New Debentures will be "qualified stated
interest" (within the meaning of the Final OID Regulations), the stated
redemption price at maturity of a New Debenture will be equal to its face
amount.
If the New Debentures were to be issued with OID in excess of a statutorily
defined "de minimis" amount (0.25% multiplied by the product of the stated
redemption price at maturity and the number of complete years to maturity from
the issue date), beneficial owners of the New Debentures would be required to
recognize ordinary income in advance of the receipt of any cash payments
attributable to such income.
In such event, OID with respect to the New Debentures would be treated as
interest income to such beneficial owners and would be treated as accruing
throughout the period the New Debenture is held. The amount of OID, if any, that
beneficial owners would be required to recognize as interest income would be
determined by application of principles of "economic accrual," pursuant to which
OID would be treated as accruing daily (the "Daily Portion") on a
yield-to-maturity basis. If the New Debentures were issued with OID, a
beneficial owner would be required to include in gross income, for a given
taxable year, an amount equal to the sum of the Daily Portions for each day
during the taxable year that such beneficial owner held the New Debentures. A
beneficial owner's adjusted tax basis in a New Debenture would be increased by
the amount of OID included in gross income.
ISSUE PRICE
IN GENERAL. As of the date hereof, the issue price of the New Debentures
can not be determined. The Final OID Regulations provide that if a substantial
amount of the debt instruments in an "issue" is "traded on an established
market" within the meaning of Treasury Regulation Section1.1273-2(f) ("Traded"),
the issue price of each debt instrument in the "issue" is the fair market value
of the debt instrument determined as of the "issue date." For purposes of this
computation, the Final OID Regulations provide that the "issue date" is the
first date on which a substantial amount of the traded debt instruments in the
issue is issued. As described below, the Company anticipates, and this
discussion assumes, that the New Debentures will be treated as Traded.
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RELATIONSHIP BETWEEN THE NEW DEBENTURES AND THE FIDELITY FUNDS
DEBENTURES. The Final OID Regulations provide that, "[t]wo or more debt
instruments are part of the same issue if they have the same payment and credit
terms and are sold reasonably close in time either pursuant to a common plan or
as part of a single transaction or series of related transactions." Although
there is no judicial or administrative authority interpreting this provision,
the Company believes, and, unless noted, this discussion assumes, that the
Fidelity Funds Debentures and the New Debentures will be treated as part of the
"same issue" within the meaning of the Final OID Regulations. If so, the
Fidelity Funds Debentures and the New Debentures will be treated as having the
same issue price for tax purposes.
DEFINITION OF TRADED. The Final OID Regulations provide that property is
treated as Traded if it is traded on certain specified markets ("Market Sold")
at any time during the 60-day period ending 30 days after the "issue date" (the
"Relevant Period"). Generally, the Final OID Regulations treat property as
Market Sold if, (i) it is listed on a national securities exchange, an
interdealer quotation system sponsored by a national securities association
(such as NASDAQ), or a designated foreign exchange or board of trade, (ii) it is
traded either on a board of trade designated as a contract market by the
Commodities Futures Trading Commission or on an interbank market, (iii) it
appears on a "quotation medium," I.E., a system of general circulation
(including a computer listing available to subscribing brokers and dealers) that
provides a reasonable basis to determine fair market value by disseminating
either recent price quotations of one or more identified brokers, dealers or
traders or actual prices of recent sales (but not the "yellow sheets") or (iv)
it is "readily quotable" in that price quotations are readily available from
dealers, brokers or traders.
Since the Company does not currently know whether or not the Fidelity Funds
Debentures are or will be Market Sold within the Relevant Period with respect
thereto, it can not be known, at this time, whether the issue price of the New
Debentures will be determined by reference to the fair market value of the New
Debentures or the fair market value of the Fidelity Funds Debentures. If the
Fidelity Funds Debentures were treated as Traded, the issue price of a New
Debenture would be equal to the fair market value of a Fidelity Funds Debenture
as of the date that the Fidelity Funds Debentures were issued. If the Fidelity
Funds Debentures were not treated as Traded, the issue price of a New Debenture
would be equal to the fair market value of a New Debenture as of the first date
that the New Debentures were issued.
If the IRS were to assert that the New Debentures and the Fidelity Funds
Debentures were not part of the "same issue" of debt instruments, and if the IRS
were to prevail with respect to such assertion, the issue price of the New
Debentures would equal the fair market value thereof as of the date that the New
Debentures were issued. Further, in the event that the New Debentures were not
treated as part of the same issue as the Fidelity Funds Debentures it is
possible that the New Debentures issued pursuant to the Exchange Offer would
have different amounts of OID than New Debentures issued in exchange for
Fidelity Funds Debentures pursuant to the right of the Fidelity Funds to tender
Fidelity Funds Debentures and Common Stock received pursuant to the Fidelity
Funds Agreement in exchange for New Debentures and Common Stock.
INFORMATION REPORTING. If the New Debentures are issued with OID, the
Company will provide annual information statements to holders of New Debentures
and to the IRS stating the amount of OID determined to be attributable to the
New Debentures for that year.
MARKET DISCOUNT
Generally, if an Owner's basis for an Old Debenture (determined at the time
of acquisition) is less than the principal amount of such Old Debenture, subject
to a "de minimis" exception similar to the "de minimis" exception applicable
under the OID rules discussed above, such Old Debenture constitutes a market
discount bond. In such event, gain, if any, recognized by an Exchanging Owner as
a result of the Exchange would constitute ordinary income (generally treated as
interest) to the extent of the market discount accrued on the Old Debenture
while such Exchanging Owner held the Old Debenture (except to the extent that
such market discount was previously included in gross income by the Exchanging
Owner). Under Section 1276(c) of the Code, any accrued market discount with
respect to an Old Debenture in excess of the gain recognized
43
<PAGE>
as the result of the surrender of such Old Debenture pursuant to the Exchange
Offer would generally be treated as ordinary income to the extent of gain
recognized upon a taxable disposition of the Common Stock received in exchange
for such Old Debenture.
With respect to any taxable year, a holder of a market discount bond who
does not elect to include such market discount in income on a current basis is
required to defer the deduction of the "net direct interest expense" with
respect to any market discount bond to the extent such expense is not in excess
of the market discount accrued with respect to such obligation. Net direct
interest expense means, with respect to any taxable year, the excess of the
amount of interest paid or accrued on indebtedness incurred or continued to
purchase or carry a market discount bond over the aggregate amount of interest
(and OID) includable in gross income with respect to such bond. Any net direct
interest expense deferred with respect to an Old Debenture would be treated as
interest paid or accrued in the year of the Exchange to the extent of the gain
recognized by an Exchanging Owner with respect to such Old Debenture and any
deferred net direct interest expense in excess of the amount so treated would be
treated as net direct interest expense deferred with respect to the Common Stock
received in exchange for such Old Debenture.
AMORTIZABLE BOND PREMIUM
An Exchanging Owner will be treated as having acquired a New Debenture at a
"premium" if the New Debenture's issue price exceeds its principal amount. An
Exchanging Owner who is so treated may elect to amortize the premium on a
constant yield-to-maturity method pursuant to the rules described in Section 171
of the Code. The portion of any such bond premium amortized in a taxable year
reduces the amount of interest income included by a holder of a New Debenture
with respect to such taxable year and such holder's adjusted tax basis for such
New Debenture.
Under Section 171 of the Code, in the case of a bond subject to redemption
at the issuer's option, such as the New Debentures, the amount of amortizable
bond premium will initially be determined with reference to the amount payable
on the earlier redemption date, rather than the amount payable at maturity, if a
smaller amortizable bond premium attributable to the period ending on the
earlier redemption date results. Accordingly, the amount of premium, if any,
available to offset interest income with respect to a New Debenture may,
initially, be less than the amount so available in the absence of such a
redemption right.
The election to amortize bond premium pursuant to Section 171 of the Code is
irrevocable without the consent of the IRS and would apply to all debt
instruments (other than tax-exempt bonds) held by the electing Exchanging Owner
at the beginning of the first taxable year to which the election applies or
thereafter acquired.
ELECTION TO INCLUDE ALL INTEREST AS OID
An Exchanging Owner may generally elect to include (using a
yield-to-maturity method) in gross income all stated interest, acquisition
discount, OID, de minimis OID, market discount, de minimis market discount, and
unstated interest, as adjusted by any amortizable bond premium or acquisition
premium accruing with respect to a New Debenture (the "Accrued Interest
Election"). Subject to the exceptions described below, the Accrued Interest
Election may be made on a bond-by-bond basis and is irrevocable without IRS
consent. If an Exchanging Owner makes the Accrued Interest Election for a New
Debenture treated as having been acquired at a premium (under the rules
described above with respect to "Amortizable Bond Premium"), such Exchanging
Owner will be treated as having made the election under Section 171(c)(2) of the
Code to amortize the bond premium over the term of the New Debenture and such
election would apply to all bonds held by the Exchanging Owner at the beginning
of the taxable year to which the election applies and to all bonds thereafter
acquired by the Exchanging Owner.
DISPOSITION OF NEW DEBENTURES
Generally, any sale or exchange of a New Debenture by an Exchanging Owner in
a taxable transaction would result in taxable gain or loss equal to the
difference between the amount realized (except to the extent attributable to
accrued interest which has not been included as income pursuant to the
Exchanging Owner's method of accounting, which amount would constitute ordinary
interest income) and such Exchanging
44
<PAGE>
Owner's adjusted tax basis in the New Debenture. Such gain or loss would be
capital gain or loss and would be long-term capital gain or loss if, at the time
of such disposition, the holding period of the New Debenture were to exceed one
year.
OWNERSHIP AND DISPOSITION OF THE COMMON STOCK
In general, the sale or exchange in a taxable transaction of Common Stock
received pursuant to the Exchange (other than certain redemptions taxed as
distributions under Section 302 of the Code) would result in gain or loss to an
Exchanging Owner thereof in an amount equal to the difference between the amount
realized on such sale or exchange and such Exchanging Owner's adjusted tax basis
in such Common Stock. Such gain or loss would be capital gain or loss and would
be long-term capital gain or loss if, at the time of such disposition, the
holding period of such Common Stock were to exceed one year. However, in the
case of Common Stock received in exchange for an Old Debenture with accrued
market discount, the accrued market discount, if any, that carried over to such
Common Stock would be treated as ordinary income on the taxable disposition of
such Common Stock. See "-- Market Discount."
Distributions, if any, on Common Stock paid out of current or accumulated
earnings and profits would be ordinary income to the beneficial owners thereof
when paid. Distributions in excess of earnings and profits would first be
treated as a tax-free return of capital, reducing the tax basis in the Common
Stock on which such distributions were made, and any such distributions in
excess of such basis would be treated as gain realized on the sale of such
Common Stock. Corporate beneficial owners of Common Stock may be eligible for
the corporate dividends received deduction, generally, up to 70% of the amount
of the dividend.
BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
Backup withholding at the rate of 31% may apply with respect to interest and
dividends payable to a tendering Holder with respect to New Debentures and
Common Stock, respectively, received by such Holder pursuant to the Exchange
Offer unless such Holder provides the Exchange Agent with a correct taxpayer
identification number on the substitute Form W-9 included in the Letter of
Transmittal and certifies (i) that the taxpayer identification number provided
is correct (or that such Holder is awaiting a taxpayer identification number),
and (ii) that the Holder is either (a) exempt from backup withholding, (b) has
not been notified by the IRS that he is subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) that the IRS has
notified the Holder that the Holder is no longer subject to backup withholding.
A holder of New Debentures and Common Stock who does not provide the Company
with a correct taxpayer identification number may be subject to penalties
imposed by the IRS. Any amount withheld under these rules would be creditable
against the federal income tax liability of the beneficial owner of the Common
Stock or New Debentures.
THE FOREGOING SUMMARY IS FOR INFORMATION PURPOSES ONLY AND DOES NOT DISCUSS
ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR
OWNER IN LIGHT OF HIS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION.
ACCORDINGLY, EACH OWNER SHOULD CONSULT SUCH OWNER'S TAX ADVISER AS TO THE
SPECIFIC TAX CONSEQUENCES TO SUCH OWNER OF THE EXCHANGE OF OLD DEBENTURES FOR
THE EXCHANGE CONSIDERATION PURSUANT TO THE EXCHANGE OFFER AND THE HOLDING AND
DISPOSITION OF THE NEW DEBENTURES AND THE COMMON STOCK, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND
ANY CHANGES IN SUCH LAWS.
45
<PAGE>
CERTAIN TAX CONSEQUENCES TO THE COMPANY
CANCELLATION OF INDEBTEDNESS INCOME
As a result of the Exchange, the Company is expected to recognize
cancellation of indebtedness income ("COD") in an amount equal to the excess of
(i) the principal amount of the Old Debentures surrendered over (ii) the issue
price of the New Debentures and the fair market value of the Common Stock issued
pursuant to the Exchange on the Acceptance Date. The Company expects (subject to
the results of the Company's operations for the 1995 taxable year and to the
discussion of "NOLs and Capital Loss Carryforwards", below) that all or most of
any COD recognized by the Company as a result of the Exchange would be offset by
the Company's net operating loss carryforwards ("NOLs") for regular federal
income tax purposes. However, under the federal alternative minimum tax ("AMT")
only 90% of the COD resulting from the Exchange may be offset by the Company's
alternative tax NOLs. Accordingly, 10% of such COD would be taxed at the 20% AMT
rate. See "NOLs and Capital Loss Carryforwards."
A substantial portion of the COD resulting from the Exchange is expected to
be subject to California corporate income tax at the rate of 9.3%.
NOLS AND CAPITAL LOSS CARRYFORWARDS
At December 31, 1994, for federal income tax purposes, the Company estimates
that it had approximately $29 million of NOLs and approximately $5 million of
capital loss carryforwards which would otherwise expire in varying amounts
through 2008 and 1996, respectively. The Company anticipates that all or a
substantial portion of its NOLs will be utilized to offset COD resulting from
the Exchange and the Fidelity Exchange and, to the extent so utilized, will not
be available to offset future taxable income of the Company.
Under Sections 382 and 383 of the Code, the taxable income of a corporation
which has experienced an "ownership change" which may be offset by pre-ownership
change losses (including any NOLs or capital loss carryforwards) is subject to
an annual limitation generally equal to the value of the stock of such
corporation immediately before such ownership change multiplied by a long-term
tax-exempt rate published from time to time by the IRS (6.5% for ownership
changes occurring in April 1995). The Company would experience an ownership
change if the percentage of the value of stock of the Company owned by one or
more "5-percent shareholders" (within the meaning of Section 382 of the Code)
increases by more than 50 percentage points during any 3 year period.
While the Company does not believe that an ownership change would result
from the consummation of the Exchange and certain related transactions, the
determination of whether the Company has previously or will undergo an ownership
change as a result of the Exchange is subject to substantial uncertainties. No
assurance can be given that the IRS would not assert that the Company has
experienced or would experience, as a result of the Exchange and certain related
transactions, an ownership change or that the IRS would not ultimately prevail
with respect to such assertion. Further, no assurance can be given that an
ownership change would not occur as a result of future transactions involving
the stock of the Company which are beyond the control of the Company. In the
event of an ownership change of the Company, the annual limitation imposed under
Section 382 may severely restrict the Company's ability to utilize NOLs to
offset its taxable income, including possibly COD resulting from the Exchange
and the Fidelity Exchange and any remaining NOLs or capital loss carryforwards
to offset future income.
46
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company at December 31, 1994 (i) on an actual basis, (ii) on such pro forma
basis after giving effect to the Fidelity Exchange and (iii) on such pro forma
basis as adjusted for the Exchange Offer. This table should be read in
conjunction with the Pro Forma Financial Information and Consolidated Financial
Statements included elsewhere in this Exchange Circular. See also "Summary
Selected Historical and Pro Forma Financial Data," "Recent Transactions in Old
Debentures," "Description of New Debentures," "Description of Old Debentures"
and "Description of Capital Stock."
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- PRO FORMA -----------
REFLECTING
FIDELITY
EXCHANGE
-------------
(IN
THOUSANDS)
<S> <C> <C> <C>
Short-term debt.......................................................... $ 1,214 $ 1,214 $ 1,214
---------- ------------- -----------
Long-term debt, excluding current portion
Revolving line of credit............................................... 18,497 18,497 18,497
7 1/4% Convertible Subordinated Debentures............................. 60,000 31,755
15% Subordinated Debentures............................................ 14,123 30,000
7% Secured Promissory Note............................................. 6,000 6,000 6,000
9% Secured Promissory Note............................................. 6,500 6,500 6,500
Other.................................................................. 806 806 806
---------- ------------- -----------
Total long-term debt................................................. 91,803 77,681 61,803
---------- ------------- -----------
Minority interests in consolidated subsidiaries.......................... 5,000 5,000 5,000
---------- ------------- -----------
Mandatorily redeemable preferred stock................................... 6,567 6,567 6,567
---------- ------------- -----------
Common stock and other stockholders' equity (deficit)
Common stock........................................................... 142 155 170
Capital in excess of par............................................... 58,703 61,957 66,047
Accumulated deficit.................................................... (61,922) (53,107) (43,713)
Other.................................................................. 839 839 839
---------- ------------- -----------
Total common stock and other stockholders' equity (deficit).......... (2,238) 9,844 23,343
---------- ------------- -----------
Total short-term debt and capitalization............................. $ 102,346 $ 100,306 $ 97,927
---------- ------------- -----------
---------- ------------- -----------
</TABLE>
47
<PAGE>
ADVANCED MEDICAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets at December 31, 1993 and 1994.................................................. F-3
Consolidated Statements of Operations for the years ended December 31, 1992, 1993 and 1994................. F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1992, 1993 and 1994................. F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the period from December 31, 1991 to December
31, 1994.................................................................................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Advanced Medical, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Advanced Medical, Inc. and its subsidiaries at December 31, 1993 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes in 1993 to comply with the provisions of
Statement of Financial Accounting Standards No. 109.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for investments in 1994 to comply with the provisions of
Statement of Financial Accounting Standards No. 115.
PRICE WATERHOUSE LLP
San Diego, California
March 17, 1995
F-2
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................ $ 1,762 $ 1,340
Restricted cash and investment securities................................................ 1,862 1,732
Securities available for sale............................................................ 4,343 2,883
Receivables, net......................................................................... 25,999 24,841
Inventories.............................................................................. 19,371 20,347
Prepaid expenses and other current assets................................................ 1,731 2,140
--------- ---------
Total current assets................................................................... 55,068 53,283
Net assets held for sale................................................................... 3,925
Net investment in sales-type and direct financing leases................................... 15,067 14,807
Property, plant and equipment, net......................................................... 11,800 11,595
Other non-current assets................................................................... 6,258 4,921
Intangible assets, net..................................................................... 50,773 47,518
--------- ---------
$ 142,891 $ 132,124
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt........................................................ $ 19,125 $ 1,214
Notes payable............................................................................ 16,690
Accounts payable......................................................................... 6,509 8,427
Accrued expenses and other current liabilities........................................... 15,577 14,066
--------- ---------
Total current liabilities.............................................................. 57,901 23,707
--------- ---------
Long-term debt............................................................................. 70,999 91,803
Other non-current liabilities.............................................................. 10,787 7,285
--------- ---------
81,786 99,088
--------- ---------
Minority interests in consolidated subsidiaries............................................ 5,000 5,000
--------- ---------
Contingent liabilities and commitments (Notes 8, 12, and 13)
Mandatorily redeemable equity securities................................................... 6,478 6,567
--------- ---------
Non-redeemable preferred stock, common stock and other stockholders' equity (deficit):
Preferred stock, authorized 6,000 and 3,000 shares at $.001 and $.01 par value,
respectively; issued and outstanding -- none............................................
Common stock, authorized 75,000 shares at $.01 par value; issued and outstanding --
14,152 shares........................................................................... 142 142
Capital in excess of par value........................................................... 59,478 58,703
Accumulated deficit...................................................................... (67,599) (61,922)
Treasury stock........................................................................... (734) (734)
Unrealized holding gains from securities available for sale.............................. 883
Other equity............................................................................. 439 690
--------- ---------
Total non-redeemable preferred stock, common stock and other stockholders' equity
(deficit)............................................................................. (8,274) (2,238)
--------- ---------
$ 142,891 $ 132,124
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Sales........................................................................... $ 128,286 $ 119,417 $ 111,681
Cost of sales................................................................... 72,952 72,209 65,590
--------- --------- ---------
Gross margin.................................................................. 55,334 47,208 46,091
--------- --------- ---------
License fees revenue............................................................ 356 441 441
--------- --------- ---------
Selling expenses................................................................ 19,715 18,882 16,850
General and administrative expenses............................................. 15,778 13,773 10,746
Research and development expenses............................................... 9,425 9,050 6,345
Restructuring charges........................................................... 5,413
--------- --------- ---------
Total operating expenses...................................................... 44,918 47,118 33,941
--------- --------- ---------
Income from operations........................................................ 10,772 531 12,591
--------- --------- ---------
Other income (expenses):
Interest income............................................................... 2,637 2,767 2,526
Interest expense.............................................................. (11,617) (10,880) (8,690)
Other, net.................................................................... 2,285 2,065 1,136
--------- --------- ---------
(6,695) (6,048) (5,028)
--------- --------- ---------
Income (loss) before income taxes, minority interests, extraordinary item and
cumulative effect of change in accounting principle............................ 4,077 (5,517) 7,563
Provision for income taxes...................................................... 1,956 926 1,886
--------- --------- ---------
Income (loss) before minority interests, extraordinary item and cumulative
effect of change in accounting principle....................................... 2,121 (6,443) 5,677
Minority interests in consolidated subsidiaries................................. (4,565) 3,755
--------- --------- ---------
Income (loss) before extraordinary item and cumulative effect of change in
accounting principle........................................................... (2,444) (2,688) 5,677
Extraordinary item -- loss on early retirement of debt.......................... 8,632
--------- --------- ---------
Income (loss) before cumulative effect of change in accounting principle........ (11,076) (2,688) 5,677
Cumulative effect on prior years of accounting change for income taxes.......... 3,985
--------- --------- ---------
Net income (loss)............................................................... (11,076) 1,297 5,677
Dividends and accretion on mandatorily redeemable preferred stock............... 1,832 1,387 874
--------- --------- ---------
Net income (loss) applicable to common stock.................................... $ (12,908) $ (90) $ 4,803
--------- --------- ---------
--------- --------- ---------
Income (loss) per common share assuming no dilution:
Income (loss) before extraordinary item and cumulative effect of change in
accounting principle......................................................... $ (.30) $ (.29) $ .34
Extraordinary item............................................................ (.62)
Cumulative effect of change in accounting principle........................... .28
--------- --------- ---------
Net income (loss) per common share assuming no dilution..................... $ (.92) $ (.01) $ .34
--------- --------- ---------
--------- --------- ---------
Income (loss) per common share assuming full dilution:
Income (loss) before extraordinary item and cumulative effect of change in
accounting principle......................................................... $ (.30) $ (.29) $ .22
Extraordinary item............................................................ (.62)
Cumulative effect of change in accounting principle........................... .28
--------- --------- ---------
Net income (loss) per common share assuming full dilution................... $ (.92) $ (.01) $ .22
--------- --------- ---------
--------- --------- ---------
Weighted average common shares outstanding assuming no dilution................. 13,962 14,073 14,069
--------- --------- ---------
--------- --------- ---------
Weighted average common shares outstanding assuming full dilution............... 13,962 14,073 24,099
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................. $ (11,076) $ 1,297 $ 5,677
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization............................................... 11,524 10,581 8,492
Cumulative effect of change in accounting principle......................... (3,985)
Restructuring charges....................................................... 5,413
Net gain on disposal/write-off of property and investments.................. (1,973) (3,895) (880)
Equity in net loss (gain) of investee and minority interests................ 4,565 (3,755)
Extraordinary loss -- early retirement of debt.............................. 8,632
(Increase) decrease, net of effects from acquisitions and divestitures:
Receivables............................................................... (1,209) 4,944 1,283
Inventories............................................................... (2,932) (1,233) (976)
Prepaid expenses and other current assets................................. 84 753 (409)
Net investment in sales-type leases....................................... (6,768) (107) 458
Other non-current assets.................................................. 709 (1,681) 304
Increase (decrease), net of effects from acquisitions and divestitures:
Accounts payable.......................................................... 2,230 (3,404) 1,918
Accrued expenses and other current liabilities............................ (3,381) (3,768) (1,530)
Litigation settlements.................................................... (1,000) (250)
Other non-current liabilities............................................. (15,431) 371 (3,502)
--------- --------- ---------
Net cash (used in) provided by operating activities............................. (15,026) 531 10,585
--------- --------- ---------
Cash flows from investing activities:
Net decrease (increase) in restricted cash and investments.................... 81 (746) 130
Capital expenditures.......................................................... (3,984) (1,616) (4,549)
Investments................................................................... (8,540) (1,960)
Proceeds from disposal of property............................................ 2,492 104 253
Proceeds from sale of investments............................................. 3,136 20,027 7,534
Notes receivable.............................................................. (200) 200
--------- --------- ---------
Net cash (used in) provided by investing activities............................. (7,015) 16,009 3,368
--------- --------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities........................... 366 (2,823) (5,296)
Principal payments on long-term debt.......................................... (40,853) (10,535) (44,998)
Proceeds from issuance of notes payable and long-term debt.................... 63,500 300 36,293
Dividends paid................................................................ (1,115) (544)
Proceeds from issuance of common stock........................................ 7,688
Offering costs................................................................ (4,603)
Redemption/repurchase of preferred stock...................................... (3,703) (3,816) (686)
--------- --------- ---------
Net cash provided by (used in) financing activities............................. 21,280 (17,418) (14,687)
--------- --------- ---------
Effect of exchange rate changes on cash......................................... 165 197 312
--------- --------- ---------
Net decrease in cash and cash equivalents....................................... (596) (681) (422)
Cash and cash equivalents at beginning of year.................................. 3,039 2,443 1,762
--------- --------- ---------
Cash and cash equivalents at end of year........................................ $ 2,443 $ 1,762 $ 1,340
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN TREASURY STOCK
-------------- EXCESS OF ACCUMULATED ---------------
SHARES AMOUNT PAR VALUE DEFICIT SHARES AMOUNT
------ ------ ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991....... 12,652 $127 $39,982 $(57,820) 74 $(704)
Accretion and dividends on
mandatorily redeemable preferred
stock............................. (1,832)
Issuance of common stock........... 500 5 6,954
Exercise of common stock
warrant........................... 1,000 10 15,740
Other equity transactions.......... 20 (11) 111
Net loss for the year.............. (11,076)
------ ------ ---------- ----------- ------ ------
Balance at December 31, 1992....... 14,152 142 60,864 (68,896) 63 (593)
Accretion and dividends on
mandatorily redeemable preferred
stock............................. (1,387)
Other equity transactions.......... 1 20 (141)
Net income for the year............ 1,297
------ ------ ---------- ----------- ------ ------
Balance at December 31, 1993....... 14,152 142 59,478 (67,599) 83 (734)
Accretion and dividends on
mandatorily redeemable preferred
stock............................. (874)
Unrealized holding gains from
securities available for sale.....
Other equity transactions.......... 99
Net income for the year............ 5,677
------ ------ ---------- ----------- ------ ------
Balance at December 31, 1994....... 14,152 $142 $58,703 $(61,922) 83 $(734)
------ ------ ---------- ----------- ------ ------
------ ------ ---------- ----------- ------ ------
<CAPTION>
UNREALIZED
HOLDING
GAINS FROM
SECURITIES
AVAILABLE OTHER
FOR SALE EQUITY TOTAL
---------- ------ --------
<S> <C> <C> <C>
Balance at December 31, 1991....... $ 322 $(18,093)
Accretion and dividends on
mandatorily redeemable preferred
stock............................. (1,832)
Issuance of common stock........... 6,959
Exercise of common stock
warrant........................... 15,750
Other equity transactions.......... (399) (268)
Net loss for the year.............. (11,076)
----- ------ --------
Balance at December 31, 1992....... (77) (8,560)
Accretion and dividends on
mandatorily redeemable preferred
stock............................. (1,387)
Other equity transactions.......... 516 376
Net income for the year............ 1,297
----- ------ --------
Balance at December 31, 1993....... 439 (8,274)
Accretion and dividends on
mandatorily redeemable preferred
stock............................. (874)
Unrealized holding gains from
securities available for sale..... $883 883
Other equity transactions.......... 251 350
Net income for the year............ 5,677
----- ------ --------
Balance at December 31, 1994....... $883 $ 690 $ (2,238)
----- ------ --------
----- ------ --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 1 -- BUSINESS AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS AND ORGANIZATION:
Advanced Medical, Inc. ("Advanced Medical"), operating through its
consolidated subsidiaries, is a leading developer and manufacturer of infusion
products and related technologies for the health care industry. On April 2,
1990, Advanced Medical acquired the IMED Division of Fisher Scientific Company
through IMED Corporation ("IMED"). IMED is a 90% owned subsidiary on a
fully-diluted basis. (Advanced Medical and its subsidiaries are collectively
referred to as the "Company".)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION:
The financial statements include the accounts of Advanced Medical and its
greater than 50 percent-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. IMED's foreign
subsidiaries are consolidated as of and for the periods ended November 30, 1992,
1993 and 1994 in the December 31, 1992, 1993 and 1994 consolidated financial
statements, respectively.
REVENUE RECOGNITION:
Revenues from sales of fluid delivery instruments and related disposable
products, and from instrument capital lease contracts, are recognized at the
time such products are shipped. Revenues from instrument operating lease
contracts are recognized over the terms of the lease agreements, ranging from 1
to 5 years.
LICENSE FEE REVENUE RECOGNITION:
During 1991, IMED entered into a marketing, distribution and development
agreement with Pharmacia AB ("Pharmacia"). Pursuant to the agreement, a product
distribution fee of $6,530 was classified as deferred revenue (a non-current
liability) and is recognized on a straight-line basis over the 15 year term of
the agreement.
CONCENTRATIONS OF CREDIT RISK:
The Company provides a variety of financing arrangements for its customers.
The majority of the Company's accounts receivable are from hospitals throughout
the United States with credit terms of generally 30 days. The Company maintains
adequate reserves for potential credit losses and such losses, which have been
minimal, have been within management's estimates.
SECURITIES AVAILABLE FOR SALE:
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). As permitted under SFAS 115, the Company
adopted the standard on a prospective basis. In accordance with SFAS 115, the
Company's investment in Alteon, Inc. (Note 5) is classified as securities
available for sale and is required to be carried at fair market value. During
1993, the Company accounted for its securities available for sale using the cost
method.
INVENTORIES:
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided using the straight-line method based upon the
following estimated useful lives of the assets or lease terms, if shorter, for
leasehold improvements and instrument operating leases:
<TABLE>
<S> <C>
Leasehold improvements......................................... 3 to 10 years
Machinery and equipment........................................ 3 to 10 years
Furniture and fixtures......................................... 4 to 8 years
Instruments on operating lease contracts....................... 1 to 5 years
</TABLE>
F-7
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 1 -- BUSINESS AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
INTANGIBLE ASSETS:
The excess of purchase price over the estimated fair values of assets
acquired and liabilities assumed has been recorded as goodwill and is amortized
using the straight-line method over 35 years. Patents are amortized using the
straight-line method over estimated useful lives of 4 to 12 years. Technology
licenses are amortized using the straight-line method over estimated useful
lives of 15 years. Management periodically reviews intangible assets for
impairment.
DEBT ISSUE COSTS:
Debt issue costs of $3,901 and $4,074 at December 31, 1993 and 1994,
respectively, are amortized using the straight-line method over the respective
terms of the debt agreements and are included in other non-current assets.
FOREIGN CURRENCY TRANSLATION:
The accounts of foreign subsidiaries which use local currencies as
functional currencies are translated into U.S. dollars using year-end exchange
rates for assets and liabilities, historical exchange rates for equity and
weighted average exchange rates during the period for revenues and expenses. The
gains or losses resulting from translations are excluded from results of
operations and accumulated as a component of stockholders' deficit.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are expensed as incurred.
INCOME TAXES:
The Company and its domestic subsidiaries file a consolidated Federal income
tax return. Domestic subsidiaries file income tax returns in multiple states on
either a stand-alone or combined basis. Foreign subsidiaries file income tax
returns in their respective jurisdictions based on their separate taxable
income. The Company provides for deferred income taxes on undistributed earnings
of its foreign subsidiaries.
Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse (see Note 7). As
permitted under SFAS 109, the Company's 1992 consolidated statement of
operations has not been restated.
Prior to 1993, the provision for income taxes was based on income and
expense included in the accompanying consolidated statements of operations.
Differences between taxes so computed and taxes payable under applicable
statutes and regulations were classified as deferred taxes arising from timing
differences.
STATEMENT OF CASH FLOWS:
For the purpose of the statement of cash flows, the Company considers
short-term investments with an original maturity of three months or less to be
cash equivalents, excluding restricted amounts held in escrow or trust.
NET INCOME (LOSS) PER COMMON SHARE:
The Company's net income (loss) per common share assuming no dilution is
computed using the weighted average number of common shares outstanding during
the respective periods. Net income (loss)
F-8
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 1 -- BUSINESS AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
per common share assuming no dilution does not include common stock equivalents
(options and warrants) because the effect would be antidilutive. The Company's
net income (loss) per common share assuming full dilution is computed using the
weighted average number of common shares outstanding plus, for the year ended
December 31, 1994, the shares that would be outstanding assuming conversion of
the $6,000 secured promissory note ("Decisions Note") issued to Decisions
Incorporated ("Decisions") on January 4, 1994, and conversion of the $6,500
secured promissory note ("the Note") issued to Decisions on August 12, 1994 (see
Note 6). Net income (loss) applicable to common stock for the year ended
December 31, 1994 has been increased by $386 for the interest expense (net of
tax) on the convertible debt since conversion on January 4, 1994 and August 12,
1994, respectively, was assumed. The calculation of net income (loss) per common
share assuming full dilution excludes common stock equivalents and convertible
securities that are antidilutive.
NOTE 2 -- RESTRUCTURINGS AND ASSETS HELD FOR SALE:
During 1993, the Company adopted a plan to sell its Irish manufacturing
facility to a wholly-owned subsidiary of its European marketing and distribution
partner, Pharmacia. The Irish manufacturing facility primarily produces molded
components used to assemble disposable administration sets ("Sets").
Net assets held for sale in the accompanying balance sheet consists of the
following at December 31, 1993:
<TABLE>
<S> <C>
Inventories......................................................... $ 1,258
Property, plant and equipment....................................... 3,000
Other assets........................................................ 939
---------
Total assets...................................................... 5,197
Accounts payable and accrued expenses............................... 1,272
---------
Net assets held for sale............................................ $ 3,925
---------
---------
</TABLE>
Assets held for sale are presented at their expected net realizable values
and liabilities are presented at their carrying amounts.
The Company recorded a $3,515 restructuring charge during 1993 in connection
with the proposed sale of its Irish manufacturing operations and the relocation
of its molding operations to the United States. Professional fees and relocation
costs of $1,300 are included in the restructuring charge. During 1993, the
Company also recorded a $1,898 charge to consolidate certain of the Company's
operations. The provision includes severance payments, facilities consolidation
costs and the write-off of equipment associated with discontinued products, net
of the defined benefit plan curtailment gain (see Note 11).
During 1994, the Company sold its Irish manufacturing facility to Pharmacia
for $4,089, from which the net proceeds were used to repay a portion of the GECC
long-term debt. The Company entered into an agreement with Pharmacia for the
purchase, at fixed prices, of minimum quantities of Sets and components used to
assemble Sets through 1996. The Company is obligated to purchase approximately
$2,300 and $800 from Pharmacia during 1995 and 1996, respectively.
F-9
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 3 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Receivables:
Trade receivables............................................................... $ 19,204 $ 17,822
Allowance for doubtful accounts................................................. (804) (855)
--------- ---------
18,400 16,967
Current portion of net investment in sales-type and direct financing leases
(Note 12)...................................................................... 7,146 6,948
Other........................................................................... 453 926
--------- ---------
$ 25,999 $ 24,841
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Inventories:
Raw materials................................................................... $ 5,094 $ 5,311
Work-in-process................................................................. 4,438 3,753
Finished goods.................................................................. 9,839 11,283
--------- ---------
$ 19,371 $ 20,347
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Property, plant and equipment:
Machinery and equipment....................................................... 10,671 8,530
Furniture and fixtures........................................................ 2,779 2,915
Leasehold improvements........................................................ 2,749 2,776
Instruments on operating lease contracts...................................... 9,156 10,729
Construction-in-process....................................................... 731 1,717
---------- ----------
26,086 26,667
Accumulated depreciation and amortization..................................... (14,286) (15,072)
---------- ----------
$ 11,800 $ 11,595
---------- ----------
---------- ----------
</TABLE>
Depreciation expense was $6,709, $5,659 and $3,893 for 1992, 1993 and 1994,
respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Accrued expenses and other current liabilities:
Compensation.................................................................... $ 3,275 $ 2,958
Restructuring................................................................... 1,176 1,234
Interest........................................................................ 2,350 216
Deferred revenue................................................................ 1,048 637
Income taxes.................................................................... 1,665 2,025
Warranty........................................................................ 2,671 2,355
Other........................................................................... 3,392 4,641
--------- ---------
$ 15,577 $ 14,066
--------- ---------
--------- ---------
</TABLE>
F-10
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 3 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS: (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Other non-current liabilities:
Deferred revenue................................................ $ 5,763 $ 5,119
Restructuring................................................... 1,725 200
Warranty........................................................ 1,176 1,185
Other........................................................... 2,123 781
--------- ---------
$ 10,787 $ 7,285
--------- ---------
--------- ---------
</TABLE>
NOTE 4 -- INTANGIBLES:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Intangible assets:
Goodwill...................................................................... $ 47,513 $ 47,513
Patents....................................................................... 15,816 15,816
Technology licenses and other................................................. 19
---------- ----------
63,348 63,329
Accumulated amortization...................................................... (12,575) (15,811)
---------- ----------
$ 50,773 $ 47,518
---------- ----------
---------- ----------
</TABLE>
During 1993, the Company discontinued its funding of Dean Kamen and his
affiliates ("Kamen") to develop hospital infusion pumps and related disposables
based on Kamen's fluid management technology. Other expenses in 1993 includes a
loss of $1,919, consisting of the write off of unamortized technology licenses
of $3,919 less a non-refundable product development fee of $2,000. The product
development fee was received in 1991 from Pharmacia as part of a $10,000
arrangement to develop products using Kamen's fluids management technology. The
fees were to be earned upon the attainment of certain development milestones.
Since IMED discontinued funding Kamen, the deferred revenue of $2,000 was
released to income and IMED will not receive any of the remaining $8,000 of
product development fees.
Goodwill was reduced by $3,234 during 1993 as a result of Advanced Medical
acquiring Kamen's interests in IMED (see Note 9).
NOTE 5 -- SECURITIES AVAILABLE FOR SALE:
Current marketable securities comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
-------------------- --------------------
MARKET MARKET
COST VALUE COST VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Applied Immune Sciences, Inc. ("AIS")............................ $ 873 $ 1,072
Alteon, Inc. ("Alteon").......................................... 3,470 7,570 $ 2,000 $ 2,883
--------- --------- --------- ---------
$ 4,343 $ 8,642 $ 2,000 $ 2,883
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
During 1993, the Company sold 327 shares of its AIS common stock for $6,332,
resulting in a realized gain of $3,681. During 1994, the Company sold all
remaining 107 shares of its AIS common stock for $1,005, resulting in a realized
gain of $133.
F-11
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 5 -- SECURITIES AVAILABLE FOR SALE: (CONTINUED)
During 1993, the Company sold 554 shares of its Alteon common stock for
$5,180, resulting in a realized gain of $3,020. During 1994, the Company sold
378 shares of its Alteon common stock for $2,763, resulting in a realized gain
of $1,293. At December 31, 1994, the Company owned 513 shares of Alteon common
stock.
The market value at December 31, 1994 is based on the quoted market price
and is considered to represent fair value as determined under SFAS 115. The fair
value may not represent actual value of the Alteon common stock that could have
been realized as of December 31, 1994 or that will be realized in the future.
The gross unrealized gain as of March 17, 1995 on the current marketable
equity securities was $1,332.
NOTE 6 -- NOTES PAYABLE AND LONG-TERM DEBT:
In connection with the acquisition of the IMED Division, IMED entered into a
revolving credit facility and a term loan agreement with GECC. During 1994, IMED
restructured its loan agreement with GECC ("Amended Loan Agreement").
Long-term debt comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1994
---------- ---------
<S> <C> <C>
GECC term loan (IMED)............................................................ $ 17,742
GECC revolving credit facility (IMED)............................................ $ 18,497
Debentures (Advanced Medical).................................................... 60,000 60,000
Exchanged Senior Note (Advanced Medical)......................................... 9,300
Decisions Note and the Note (Advanced Medical)................................... 12,500
Other............................................................................ 3,082 2,020
---------- ---------
90,124 93,017
Current portion.................................................................. (19,125) (1,214)
---------- ---------
$ 70,999 $ 91,803
---------- ---------
---------- ---------
</TABLE>
GECC LONG-TERM DEBT
The Amended Loan Agreement includes a $42,000 revolving credit facility that
replaces the previous $22,000 revolving credit facility and the term loan. The
interest rate on the Amended Loan Agreement is the index rate plus 2% (10 1/2%
at December 31, 1994). Outstanding indebtedness under the Amended Loan Agreement
will mature in March 1999. Advances under the Amended Loan Agreement will be
made against a borrowing base consisting of 85% of eligible accounts receivable,
65% of eligible inventory and 85% of the future value of eligible instrument
lease receivables. The Amended Loan Agreement contains affirmative and negative
covenants, including, among others, the maintenance of certain financial ratios,
balances, and earnings levels, limitations on capital expenditures and transfer
of funds to Advanced Medical and restrictions on incurring additional debt. The
Amended Loan Agreement is secured by a first priority interest in all of IMED's
assets and the IMED capital stock and certain patents used in IMED's business,
owned by Advanced Medical.
DEBENTURES
The Company has outstanding 7 1/4% convertible subordinated debentures
("Debentures") in the principal amount of $60,000. The Debentures are
convertible at the option of the holder into common stock of the Company at any
time prior to maturity, unless previously redeemed or repurchased, at a
conversion price of $18.14 per share, subject to adjustment in certain events.
The Debentures mature on January 15, 2002. Interest on the Debentures is payable
semi-annually on each January 15 and July 15. The Debentures are
F-12
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 6 -- NOTES PAYABLE AND LONG-TERM DEBT: (CONTINUED)
redeemable in whole or in part at the option of the Company at any time on or
after January 15, 1993, at the redemption prices set forth in the indenture,
together with accrued and unpaid interest, provided that the Debentures may not
be redeemed during the twelve-month periods commencing on January 15, 1993 and
January 15, 1994, unless the last reported sale price of the common stock for a
specified period prior to such redemption is at least 170% and 160%,
respectively, of the conversion price then in effect. The Debenture holders may
require the Company to repurchase the Debentures, in whole or in part, in
certain circumstances involving a change in control of the Company. The
Debentures are subordinate to all existing or future senior indebtedness of the
Company, and are also effectively subordinated to liabilities of the Company's
subsidiaries. The indenture does not restrict the incurrence of senior
indebtedness or other indebtedness by the Company or any subsidiary (see Note
16).
REFINANCINGS
On January 4, 1994, the Company issued the Decisions Note and borrowed
$6,000 from Decisions. The Note bears interest at 7% and is payable on the
earlier of January 4, 2001 or on demand by Decisions provided the repayment is
generated by net income of the Company exclusive of IMED, any borrowing or debt
or equity offering by the Company, or funds available through distribution from
affiliates, including IMED. The principal portion of the note is convertible at
the option of the holder into 6,000,000 shares of the Company's common stock at
a conversion price of $1.00 per share (subject to antidilution protection). The
Decisions Note is secured by a first priority security interest in all of the
Company's assets subject to the rights of GECC under the Amended Loan Agreement.
The proceeds of the Note were used by the Company to pay $6,000 of indebtedness
to Aeneas Venture Corporation ("Aeneas").
On August 12, 1994, the Company issued the Note and borrowed an additional
$6,500 from Decisions. The proceeds of the loan were used to (i) pay all
remaining indebtedness to Aeneas in the amount of $3,188, (ii) make the July 15,
1994 interest payment on the Debentures in the amount of $2,187 and (iii) pay
other obligations of the Company. The payment of all indebtedness owed by
Advanced Medical to Aeneas released Advanced Medical from its obligations under
a letter agreement with Aeneas thereby removing the restrictions imposed on
Advanced Medical's use of its available cash. The Note is payable on January 4,
2001 and has an annual interest rate of 9%. Interest on the principal is due on
June 30 and December 31 of each year. In regards to security, the Note ranks
pari passu with the Decisions Note. The Note is convertible, at the option of
the holder, into up to 10,483,870 shares of the Company's common stock at a
conversion price of $.62 per share (subject to antidilution protection). Any
shares of common stock converted cannot be sold into the public market prior to
August 12, 1996.
MATURITIES
Maturities of long-term debt during the years subsequent to December 31,
1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------
<S> <C>
1996..................................................................... $ 326
1997..................................................................... 149
1998..................................................................... 160
1999..................................................................... 18,668
Thereafter............................................................... 72,500
---------
$ 91,803
---------
---------
</TABLE>
At December 31, 1994, the fair value, as determined under SFAS No. 107, of
long-term debt, including current maturities, was $69,017. The estimated fair
values represent the quoted market price for the Debentures and carrying amounts
for all other debt.
F-13
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 7 -- INCOME TAXES:
Income (loss) before income taxes, minority interests, extraordinary item
and cumulative effect of change in accounting principle comprises the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
<S> <C> <C> <C>
Domestic operations...................................................... $ (5,778) $ (9,650) $ 2,515
Foreign operations....................................................... 9,855 4,133 5,048
--------- --------- ---------
$ 4,077 $ (5,517) $ 7,563
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes comprises the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
<S> <C> <C> <C>
Current:
Federal.................................................................. $ 60
State.................................................................... $ 601 $ 281 664
Foreign.................................................................. 1,082 818 1,049
--------- --------- ---------
1,683 1,099 1,773
--------- --------- ---------
Deferred:
Federal.................................................................. 140 (338) 81
State.................................................................... 250 509 115
Foreign.................................................................. (117) (344) (83)
--------- --------- ---------
273 (173) 113
--------- --------- ---------
$ 1,956 $ 926 $ 1,886
--------- --------- ---------
--------- --------- ---------
</TABLE>
The principal items accounting for the differences in income taxes computed
at the U.S. statutory rate (34%) and the effective income tax rate comprise the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Taxes computed at statutory rate........................................ $ 1,386 $ (1,875) $ 2,578
State income taxes, net of federal benefit.............................. 562 521 884
Foreign taxes........................................................... 965 442 965
Taxes above the U.S. rate on earnings deemed repatriated................ (527) 374 397
Amortization of non-deductible intangible assets........................ 606 744 442
Non-taxable basis difference............................................ (1,036)
Losses for which no current benefits are available...................... 451
Limitations of acquired tax benefits.................................... 306
Items affected by valuation allowance................................... (3,380)
Miscellaneous........................................................... (37)
--------- --------- ---------
Provision for income taxes before extraordinary item.................... 1,956 926 1,886
--------- --------- ---------
Extraordinary item:
Taxes computed at statutory rate...................................... (3,025)
State income taxes, net of federal benefit............................ (83)
Losses for which no current benefits are available.................... 2,842
--------- --------- ---------
(266)
--------- --------- ---------
Total................................................................... $ 1,690 $ 926 $ 1,886
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 7 -- INCOME TAXES: (CONTINUED)
As of December 31, 1994 the Company has net operating loss carryforwards of
approximately $29,000 for federal income tax purposes which expire in varying
amounts through 2008. As of December 31, 1994 the Company has capital loss
carryforwards of approximately $5,000 for federal income tax purposes which
expire in varying amounts through 1996. The availability of the Company's net
operating loss and capital loss carryforwards would be subject to substantial
limitations if it should be determined that certain stockholders of the Company
have increased their percentage of ownership of the Company's stock by more than
50% during a specified period.
The components of the net deferred tax asset as of December 31, 1994 are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward......................... $ 10,523
Capital loss carryforward............................... 2,047
Accrued liabilities and reserves........................ 3,116
Unearned income......................................... 2,394
Debt issue costs........................................ 732
Inventory............................................... 984
Book and tax depreciation/amortization differences...... 877
Miscellaneous........................................... 1,522
---------
22,195
Valuation allowance..................................... (20,436)
---------
Total deferred tax assets............................... 1,759
---------
Deferred tax liabilities:
Miscellaneous........................................... 459
---------
Total deferred tax liabilities.......................... 459
---------
Net deferred tax assets............................... $ 1,300
---------
---------
</TABLE>
NOTE 8 -- LITIGATION AND CONTINGENCIES:
The Company is a defendant in various actions, claims, and legal proceedings
arising from normal business operations. Management believes they have
meritorious defenses and intends to vigorously defend against all allegations
and claims. As the ultimate outcome of these matters is uncertain, no contingent
liabilities or provisions have been recorded in the accompanying financial
statements for such matters. However, in management's opinion, based upon
discussion with legal counsel, liabilities arising from these matters, if any,
will not have a material adverse effect on the consolidated financial position
or results of operations.
An action was commenced during 1986 against various parties including the
corporate predecessor of IMED alleging, among other matters, breach of
employment contract and wrongful discharge and seeking $5,000 and $40,000 in
actual and punitive damages, respectively. During 1993, IMED settled this action
with the plaintiff. Pursuant to the settlement agreement, the action was
dismissed and IMED paid $1,000 to the plaintiff during 1993 and delivered to the
plaintiff a promissory note, payable over 2 years, in the principle amount of
$1,275. As a $1,375 contingent liability was previously recorded, $900 was
charged to other expense during 1993.
An action was commenced during 1991 against IMED, Fisher and various other
parties alleging, among other matters, breach of contract and misappropriation
of trade secrets. The plaintiffs were seeking unspecified punitive and
compensatory damages. During 1994, IMED settled this action with the plaintiffs.
Pursuant
F-15
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 8 -- LITIGATION AND CONTINGENCIES: (CONTINUED)
to the settlement agreement, the action was dismissed and IMED paid $250 to the
plaintiff and delivered to a subsidiary of Fisher a promissory note, payable
over 5 years, in the principal amount of $750. A charge related to this
liability in the amount of $1,200 was recorded in the fourth quarter of 1993.
NOTE 9 -- MANDATORILY REDEEMABLE EQUITY SECURITIES AND MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES:
PREFERRED STOCK:
Mandatorily redeemable preferred stock activity comprises the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
<S> <C> <C> <C>
Balance at beginning of period........................................... $ 12,437 $ 9,451 $ 6,478
Retirement of 10% preferred stock........................................ (3,703) (3,816)
Repurchase of 10% preferred stock........................................ (785)
Accretion of amounts payable upon redemption............................. 733 575 177
Accrued dividends........................................................ 1,099 812 697
Payment of dividends..................................................... (1,115) (544)
--------- --------- ---------
Balance at end of period................................................. $ 9,451 $ 6,478 $ 6,567
--------- --------- ---------
--------- --------- ---------
</TABLE>
In connection with the capitalization of Advanced Medical and mergers during
1989, 1,594 shares of $.01 par value mandatorily redeemable preferred stock
("10% preferred stock") were issued (1,800 shares authorized). The 10% preferred
stockholders are entitled to cumulative dividends in preference to any dividends
on common stock, payable semi-annually on March 27 and September 27, if
declared, out of funds legally available. The 10% preferred stock has a
liquidation value of $10.00 per share plus accrued and unpaid dividends. The 10%
preferred stockholders have limited voting rights under certain circumstances;
the stock is not convertible into any other class of stock.
The 10% preferred stock was recorded at its fair value at the issuance date
($6.26 per share). The carrying amount is periodically increased for the amounts
which will be payable upon redemption. The accretion to the carrying amount is
determined using the interest method and results in a corresponding decrease to
paid-in capital.
The 10% preferred stock is redeemable at any time at the option of the Board
of Directors, in whole or in part, and is mandatorily redeemable in the amount
of $3,985 by March 27 of each year from 1991 through 1994, if declared
(aggregate redemption price of $15,940).
The Company redeemed 180 shares of its 10% preferred stock during 1990. To
satisfy the remaining redemption requirement of 219 shares, the Company redeemed
262 shares of its 10% preferred stock in March 1991 through the issuance of 333
shares of a newly created class of mandatorily redeemable convertible preferred
stock ("convertible preferred stock") to a stockholder or entities controlled by
the stockholder. The convertible preferred stock is subordinate to the existing
10% preferred stock and has a liquidation preference of $6.40 per share.
Cumulative dividends are payable semi-annually at 15% of the liquidation
preference. Each share is convertible into .617 common shares, subject to
anti-dilution adjustments, at any time prior to redemption. The convertible
preferred stock is redeemable after all the 10% preferred shares are redeemed
(a) at the holder's option at the liquidation preference plus accrued dividends,
or (b) at the Company's option at the liquidation preference plus accrued
dividends, plus $1.50 per share. The convertible preferred stock is mandatorily
redeemable at the liquidation preference plus accrued dividends on the later of
March 26, 1998 or the date all existing 10% preferred stock is redeemed.
F-16
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 9 -- MANDATORILY REDEEMABLE EQUITY SECURITIES AND MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES: (CONTINUED)
On July 12, 1994, IMED commenced a Tender Offer for up to all of the
outstanding shares of 10% Preferred Stock for a cash price equal to $9.00 per
share (the "Tender Offer"). The Tender Offer expired on August 30, 1994, at
which time 68,517 shares of the 10% Preferred Stock were tendered. Immediately
upon purchase thereof, IMED distributed all such shares of the 10% Preferred
Stock acquired by it pursuant to the Tender Offer to Advanced Medical and
received a credit from Advanced Medical against the amount of accrued and unpaid
dividends on shares of IMED's preferred stock held by Advanced Medical in an
amount equal to the liquidation value of the 10% Preferred Stock ($10 per share)
plus accrued and unpaid dividends thereon ($1.45 per share).
COMMON STOCK WARRANT
IMED's common stock warrant held by GECC and included in minority interests
in consolidated subsidiaries on the accompanying consolidated balance sheet is
comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
IMED common stock warrant (includes net accretion to estimated redemption price of
$2,491 at December 31, 1993 and 1994)............................................... $ 5,000 $ 5,000
--------- ---------
--------- ---------
</TABLE>
In connection with the loan agreements, IMED issued a warrant allowing GECC
to purchase 10% of IMED's common stock on a fully-diluted basis for nominal
consideration, subject to adjustment as provided in the agreement, and
exercisable at any time until August 12, 2004. IMED is required to purchase not
less than 25% of the shares under the warrant, or warrant stock if exercised, at
the option of GECC, and also upon (a) the filing of a registration statement for
the offering of IMED's common stock; (b) the sale of IMED; (c) the prepayment in
full of the GECC loans, or (d) the termination by GECC of the revolving loan
under provisions of the loan agreement. Additionally, IMED has the option to
redeem not less than 25% of the shares under warrant, or warrant stock if
exercised, beginning April 2, 1995. The purchase price per share will be the
higher of fair value (determined by either an investment banking firm or at
quoted price if the shares are publicly traded) or fully-diluted net book value
at the purchase date. Additionally, the warrant shares, or warrant stock if
exercised, have specified registration rights.
In September 1993, the Company acquired all of the interests of IMED held by
Kamen, which included a 10.79% common equity interest and $1,690 of 10%
redeemable preferred stock, for $1,750. Minority interests were reduced by the
carrying amount of Kamen's interests of $4,984. The excess of the carrying
amount ($4,984) over the purchase price ($1,750) has been recorded as a
reduction in goodwill.
NOTE 10 -- STOCK OPTION PLANS:
The Company maintains several stock option and purchase plans under which
incentive stock options may be granted to key employees and nonqualified stock
options may be granted to key employees, directors, officers, independent
contractors and consultants. A maximum of 1,950 shares of common stock are
subject to issuance under the Plans.
The exercise price for incentive stock options generally may not be less
than the underlying stock's fair market value at the grant date. The exercise
price for non-qualified stock options granted to non-directors will not be less
than the par value of a share of common stock, as determined by a committee
appointed by the Board of Directors ("the Committee"). The exercise price for
non-qualified stock options granted to directors may not be less than the
underlying stock's fair market value at the grant date.
Options granted to non-directors generally vest and become exercisable as
determined by the Committee. Options granted to directors generally vest and
become exercisable at a rate of four thousand shares for
F-17
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 10 -- STOCK OPTION PLANS: (CONTINUED)
each 12 month period of continuous service as a director. Options granted to
non-directors generally expire upon the earlier of the termination of the
optionee's employment or ten years from the grant date. Options granted to
directors generally expire upon the earlier of the date the optionee is no
longer a director or five years from the grant date.
STOCK OPTION ACTIVITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Outstanding, beginning of year...................................................................... 631 589 471
Granted during the year............................................................................. 8
Cancelled during the year........................................................................... (42 ) (126) (143)
------ ------ ------
Outstanding, end of year (at prices ranging from $4.47 to $16.94 per share)......................... 589 471 328
------ ------ ------
------ ------ ------
Fully vested and exercisable at end of the year (at prices ranging from $4.47 to $16.94 per
share)............................................................................................. 198 294 254
------ ------ ------
------ ------ ------
</TABLE>
At December 31, 1994, there were 1,551 shares reserved for future grants.
During January 1995, the Company cancelled options to acquire 266 shares of
common stock (at prices ranging from $4.47 to $16.94 per share) and granted
options to acquire 1,224 shares of common stock (at $1.8125 per share) to key
employees of the Company.
NOTE 11 -- BENEFIT PLANS:
PENSION PLANS
The Company has a defined benefit pension plan (the "Plan") which covers
substantially all of its U.S. employees. On December 1, 1993, the Company's
Board of Directors approved amendments to the Plan provisions which include,
among other matters, cessation of benefit accruals after December 31, 1993. All
earned benefits as of that date are preserved and the Company continues to
contribute to the Plan as necessary to fund earned benefits. The portion of the
projected benefit obligation based on the expected future compensation levels
decreased $1,381, and nonvested benefits decreased $508. The Plan also had an
unrecognized net loss, resulting from Plan asset performance experience
different than assumed, remaining unamortized of $1,219 and unrecognized prior
service costs of $18 at December 31, 1993. The sum of the effects resulting from
the Plan curtailment was a gain of $652 and was included in restructuring
charges at December 31, 1993 as described in Note 2.
Certain of the Company's foreign employees are covered by defined benefit
pension plans. Benefits are based on years of service and the employee's
compensation during the last five years of employment. The Company's funding
policy is to contribute the net pension cost annually to the plan. As a result
of the Company's plan to sell its Irish manufacturing facility, the foreign
accrued pension cost of $298 is included in net assets held for sale at December
31, 1993 as described in Note 2.
F-18
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 11 -- BENEFIT PLANS: (CONTINUED)
The following table sets forth the plans' estimated funded status and
amounts recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
---------------------- -----------------
DOMESTIC FOREIGN DOMESTIC
----------- --------- -----------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................................... $ 8,836 $ 620 $ 7,080
----------- --------- -------
----------- --------- -------
Accumulated benefit obligation.......................................... $ 9,171 $ 783 $ 7,310
----------- --------- -------
----------- --------- -------
Projected benefit obligation for service rendered to date............... $ 9,171 $ 1,572 $ 7,310
Plan assets at fair value, consisting of equity and fixed income
restricted funds (Domestic) and equities, fixed income securities and
cash (Foreign)......................................................... 8,880 1,513 8,937
----------- --------- -------
Plan assets (less) greater than projected benefit obligation............ (291) (59) 1,627
Unrecognized net gain................................................... (65) (239) (1,533)
----------- --------- -------
(Accrued) prepaid pension cost.......................................... $ (356) $ (298) $ 94
----------- --------- -------
----------- --------- -------
</TABLE>
The components of net periodic pension cost (benefit) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
------------------------ -----------------
DOMESTIC FOREIGN DOMESTIC
----------- ----------- -----------------
<S> <C> <C> <C>
Service cost-benefits earned during the period............................ $ 1,391 $ 230 $ 143
Interest cost on projected benefit obligation............................. 674 135 631
Actual return on plan assets.............................................. (775) (129) 263
Amortization and deferred amounts......................................... 147 17 (1,075)
Employee contributions.................................................... (108)
----------- ----- -------
Net periodic pension cost (benefit)....................................... $ 1,437 $ 145 $ (38)
----------- ----- -------
----------- ----- -------
Discount rates............................................................ 7.02% 7.5% 8.56%
Rates of increase in compensation levels.................................. 4.0% 5.5% 4.0%
Expected long-term rate of return on assets............................... 9.0% 8.0% 9.0%
</TABLE>
F-19
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 12 -- LEASES:
LEASE RECEIVABLES
The Company leases instruments to customers under non-cancelable capital and
operating lease contracts with terms ranging generally from 1 to 5 years.
Scheduled future minimum lease payments are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31: LEASES LEASES
- ----------------------------------------------------------------- --------- -----------
<S> <C> <C>
1995........................................................... $ 9,319 $ 1,486
1996........................................................... 7,296 1,136
1997........................................................... 4,852 918
1998........................................................... 3,044 675
1999........................................................... 1,465 414
Thereafter..................................................... 194
--------- -----------
Total minimum lease payments................................... 26,170 $ 4,629
-----------
-----------
Allowance for uncollectible lease payments..................... (396)
Unearned income................................................ (4,019)
---------
21,755
Current portion (see Note 3)................................... (6,948)
---------
Net investment in sales-type and direct financing leases....... $ 14,807
---------
---------
</TABLE>
Operating lease revenue totaled $7,673, $2,838 and $2,033 during 1992, 1993
and 1994, respectively.
LEASE COMMITMENTS
The Company leases buildings and equipment under non-cancelable operating
leases with initial terms ranging from 1 to 6 years. Scheduled future minimum
lease commitments as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------------------------------------------
<S> <C>
1995...................................................... $ 2,325
1996...................................................... 2,095
1997...................................................... 1,143
1998...................................................... 83
---------
$ 5,646
---------
---------
</TABLE>
Rent expense was $3,840, $3,845 and $3,740 during 1992, 1993 and 1994,
respectively.
NOTE 13 -- RELATED PARTY ARRANGEMENTS AND COMMITMENTS:
On April 2, 1990, IMED entered into an agreement with Deka Products Limited
Partnership ("Deka") whereby Deka granted IMED an exclusive, worldwide,
royalty-free license of certain intravenous infusion pump technology developed
by Deka. In consideration for this technology, IMED issued Deka 10.79% of its
common stock and 13% of its preferred stock (each on a fully diluted basis).
During 1993, the Company discontinued its funding of Deka and AMD to develop
hospital infusion pumps and related disposables based on Deka's fluid management
technology and the Company acquired all the interests of IMED held by Deka (see
Notes 4 and 9).
During 1990, IMED entered into a five-year purchase and supply agreement
with a hospital buying group. Pursuant to the agreement, the buying group is to
market IMED's products to the individual hospitals which are members of the
buying group. In exchange for such marketing efforts, IMED granted the buying
F-20
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 13 -- RELATED PARTY ARRANGEMENTS AND COMMITMENTS: (CONTINUED)
group stock appreciation rights ("SARs") of up to an aggregate of 250,000 shares
of Advanced Medical common stock, subject to a vesting schedule based on
purchasing volumes. Upon signing the agreement the buying group was immediately
vested in 50,000 SARs and during 1991 the buying group's purchasing volumes
qualified it to become vested in an additional 50,000 SARs. The recorded
liability related to such SARs totaled $400 at December 31, 1993. During 1994,
IMED repurchased all vested SARs and paid $400 to the buying group.
In October 1991, IMED sold certain European assets to Pharmacia and entered
into a marketing, distribution and development arrangement with Pharmacia (the
"Pharmacia Transaction"), pursuant to which Pharmacia obtained the exclusive
right to market and distribute IMED's infusion products in a territory that
includes most of Europe. On August 12, 1994, the Company, IMED and Pharmacia
amended their distribution agreement. Under the terms of the Amended and
Restated Distribution Agreement ("Amended Distribution Agreement"), Pharmacia
retains the exclusive right (subject to certain exceptions) to distribute IMED's
infusion products in the territory that includes most of Europe. Under the
Amended Distribution Agreement, Pharmacia has the right not to distribute
certain products currently under development by IMED. In the event of such an
election, IMED has the right to sell such products directly or through others,
and under certain circumstances, has the right to repurchase from Pharmacia the
distribution rights to IMED products currently distributed by Pharmacia in the
territory. In addition, Pharmacia has the right to terminate the Amended
Distribution Agreement at any time on 12 months' notice, in which event
Pharmacia would be required to make a payment of $2,500 to IMED and IMED would
be required to make payments to Pharmacia based on net sales of products
currently distributed by Pharmacia for the 4 years following termination.
During 1994, the Company issued the Decisions Note and the Note to
Decisions, a corporation affiliated with Jeffry M. Picower. Mr. Picower is an
officer, director and significant stockholder of the Company. (See Note 6.)
F-21
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 14 -- SEGMENT INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales to unaffiliated customers:
United States.............................................................. $ 117,099 $ 107,434 $ 98,787
Foreign.................................................................... 11,187 11,983 12,894
---------- ---------- ----------
Net sales as reported in the accompanying statement of operations............ $ 128,286 $ 119,417 $ 111,681
---------- ---------- ----------
---------- ---------- ----------
Intergeographic sales:
United States.............................................................. $ 5,480 $ 5,014 $ 7,668
Foreign.................................................................... 19,744 11,948 6,565
---------- ---------- ----------
Total intergeographic sales.................................................. $ 25,224 $ 16,962 $ 14,233
---------- ---------- ----------
---------- ---------- ----------
Income from operations:
United States.............................................................. $ 13,868 $ 3,149 $ 12,438
Foreign.................................................................... 1,242 676 1,584
---------- ---------- ----------
15,110 3,825 14,022
General corporate expenses................................................... (4,338) (3,294) (1,431)
Interest income.............................................................. 2,637 2,767 2,526
Interest expense............................................................. (11,617) (10,880) (8,690)
Other, net................................................................... 2,285 2,065 1,136
---------- ---------- ----------
Income (loss) before income taxes, minority interests, extraordinary item and
cumulative change in accounting principle................................... $ 4,077 $ (5,517) $ 7,563
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Identifiable assets:
United States........................................................................... $ 121,665 $ 117,408
Foreign................................................................................. 10,259 6,875
---------- ----------
131,924 124,283
General corporate assets.................................................................. 10,967 7,841
---------- ----------
Total assets as reported in the accompanying balance sheet................................ $ 142,891 $ 132,124
---------- ----------
---------- ----------
</TABLE>
NOTE 15 -- SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS:
Foreign and state income taxes paid during 1992, 1993 and 1994 totaled
$2,061, $870 and $1,433, respectively. Interest paid during 1992, 1993 and 1994
totaled $19,568, $10,280 and $7,745, respectively. Interest paid during 1992
includes $12,451 accrued in previous periods.
NOTE 16 -- SUBSEQUENT EVENT (UNAUDITED):
Effective March 31, 1995, the Company completed an exchange (the "Exchange")
wherein $28,245, or approximately 47%, in principal amount of the Company's
Debentures were exchanged for an aggregate of $14,123 in principal amount of the
Company's newly created 15% Subordinated Debentures due 1999 ("15% Debentures")
and 1,340,441 shares of the Company's common stock ("Common Stock"). As a result
of this transaction, the Company will recognize an extraordinary gain on the
extinguishment of debt of approximately $8,200 in the first quarter of 1995.
F-22
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
NOTE 16 -- SUBSEQUENT EVENT (UNAUDITED): (CONTINUED)
PRO FORMA CONDENSED BALANCE SHEET
The unaudited Pro Forma Condensed Balance Sheet is based upon the Company's
historical consolidated balance sheet at December 31, 1994, after giving effect
to the pro forma adjustments described in the footnotes hereto as if the
Exchange had been consummated on December 31, 1994.
The pro forma adjustments described herein are based upon currently
available information and upon certain assumptions that the Company believes are
reasonable under current circumstances and which are described herein. The
unaudited Pro Forma Condensed Balance Sheet should be read in conjunction with
the Company's historical consolidated financial statements and accompanying
notes thereto. Due to the fact that the Exchange and certain related
transactions occurred subsequent to December 31, 1994, the pro forma financial
information presented herein is not necessarily indicative of the results or
balances that would have been attained had the Exchange actually taken place
prior to December 31, 1994 and the actual adjustments and balances may vary from
those presented in the unaudited Pro Forma Condensed Balance Sheet. However,
management believes that any differences between actual adjustments and pro
forma adjustments will not have a material impact on the pro forma financial
statements.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
The unaudited Pro Forma Condensed Statement of Operations is based upon the
Company's historical consolidated statement of operations for the year ended
December 31, 1994, after giving effect to the pro forma adjustments described in
the footnotes hereto as if the Exchange had been consummated on January 1, 1994.
The pro forma adjustments described herein are based upon currently
available information and upon certain assumptions that the Company believes are
reasonable under current circumstances and which are described herein. The
unaudited Pro Forma Condensed Statement of Operations should be read in
conjunction with the historical consolidated financial statements and
accompanying notes thereto. The Pro Forma Condensed Statement of Operations is
not necessarily indicative of what actual results of operations would have been
for the respective period presented had the Exchange actually taken place on
January 1, 1994 and does not purport to project the Company's results of
operations for any future period.
F-23
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
EXCHANGE DECEMBER 31,
PRO FORMA 1994 PRO
ACTUAL ADJUSTMENTS FORMA AS
1994 DEBIT/(CREDIT) ADJUSTED
---------- -------------- ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 1,340 $ (300)(B) $ 1,040
Receivables, net.................................................... 24,841 24,841
Inventories......................................................... 20,347 20,347
Restricted cash and investment securities, securities available for
sale, prepaid expenses and other current assets.................... 6,755 6,755
---------- ------------
Total current assets.............................................. 53,283 52,983
Net investment in sales-type and direct financing leases.............. 14,807 14,807
Property, plant and equipment, net.................................... 11,595 11,595
Other non-current assets.............................................. 4,921 (1,393)(A) 3,828
300(B)
Intangible assets, net................................................ 47,518 47,518
---------- ------------
$ 132,124 $ 130,731
---------- ------------
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt and accounts payable.............. $ 9,641 $ 9,641
Accrued expenses and other current liabilities...................... 14,066 (620)(A) 14,686
---------- ------------
Total current liabilities......................................... 23,707 24,327
---------- ------------
Long-term debt........................................................ 91,803 28,245(A) 77,681
(14,123)(A)
Other non-current liabilities......................................... 7,285 7,285
---------- ------------
99,088 84,966
---------- ------------
Minority interests in consolidated subsidiaries and mandatorily
redeemable equity securities......................................... 11,567 11,567
---------- ------------
Common stock and other stockholders' equity (deficit):
Preferred stock
Common stock........................................................ 142 (13)(A) 155
Capital in excess of par value...................................... 58,703 (3,673)(A) 62,376
Accumulated deficit................................................. (61,922) (8,423)(A) (53,499)
Treasury stock, unrealized holding gains from securities available
for sale and other equity.......................................... 839 839
---------- ------------
Total non-redeemable preferred stock, common stock and other
stockholders' (deficit) equity................................... (2,238) 9,871
---------- ------------
$ 132,124 $ 130,731
---------- ------------
---------- ------------
</TABLE>
F-24
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Note 1 -- The Exchange pro forma adjustments assume the surrender of $28,245 in
principal amount of Debentures in exchange for an aggregate of $14,123 in
principal amount of the Company's newly created 15% Debentures and 1,340,441 of
Common Stock. The Exchange pro forma adjustments are made as follows:
(A) Reflects the surrender of $28,245 of Debentures in exchange for an aggregate
of $14,123 in principal amount of the Company's newly created 15% Debentures
and 1,340,441 shares of Common Stock ($2.75/share) and the corresponding
extraordinary gain on retirement of debt of $10,436. The extraordinary gain
is recorded net of $1,393, comprising the write-off of approximately 47% of
the unamortized Debenture debt issue costs and net of $620, the effective
tax rate applicable to the Exchange.
(B) Reflects the use of cash to pay $300 of debt issue costs in connection with
the Company's newly created 15% Debentures.
F-25
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1994
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
EXCHANGE
PRO FORMA
ADJUSTMENTS PRO FORMA
1994 DEBIT/(CREDIT) AS ADJUSTED
--------- -------------- -----------
<S> <C> <C> <C>
Income from operations.................................................... $ 12,591 $ 12,591
--------- -----------
Other income (expenses):
Interest income......................................................... 2,526 2,526
Interest expense........................................................ (8,690) $ (122)(D) (8,638)
70(E)
Other, net.............................................................. 1,136 1,136
--------- -----------
(5,028) (4,976)
--------- -----------
Income before income taxes and extraordinary item......................... 7,563 7,615
Provision for income taxes................................................ 1,886 20(F) 1,906
--------- -----------
Income before extraordinary item.......................................... 5,677 5,709
Extraordinary item -- gain on early retirement of debt.................... (8,226)(C) 8,226
--------- -----------
Net Income................................................................ 5,677 13,935
Dividends on mandatorily redeemable preferred stock....................... 874 874
--------- -----------
Net income applicable to common stock..................................... $ 4,803 $ 13,061
--------- -----------
--------- -----------
Income per common share assuming no dilution:
Income before extraordinary item........................................ $ .34 $ .32
Extraordinary item...................................................... .53
--------- -----------
Net income per common share assuming no dilution...................... $ .34 $ .85
--------- -----------
--------- -----------
Income per common share assuming full dilution:
Income before extraordinary item........................................ $ .22 $ .21
Extraordinary item...................................................... .32
--------- -----------
Net income per common share assuming full dilution.................... $ .22 $ .53
--------- -----------
--------- -----------
Weighted average common shares outstanding assuming no dilution........... 14,069 15,409
--------- -----------
--------- -----------
Weighted average common shares outstanding assuming full dilution......... 24,099 25,439
--------- -----------
--------- -----------
</TABLE>
F-26
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Note 1 -- The Exchange pro forma adjustments assume the surrender of $28,245 in
principal amount of Debentures in exchange for an aggregate of $14,123 in
principal amount of the Company's newly created 15% Debentures and 1,340,441 of
Common Stock. The Exchange pro forma adjustments are made as follows:
(C) Reflects the extraordinary gain of $10,436 on the extinguishment of debt due
to the Exchange of $28,245 in principal amount of Debentures for an
aggregate of $14,123 in principal amount of 15% Debentures and 1,340,441
shares of Common Stock ($2.75/share). The extraordinary gain is recorded net
of $1,590, comprising the write-off of approximately 47% of the unamortized
Debenture debt issue costs and net of $620, the effective tax rate
applicable to the Exchange.
(D) Reflects the elimination of approximately 47% of the amortization of
Debenture debt issue costs of $197, net of additional amortization of debt
issue costs of $75 incurred with the Exchange.
(E) Reflects additional interest expense of $2,118 incurred on the $14,123 of
15% Debentures, net of the elimination of interest expense of $2,048 related
to the $28,245 of Debentures which is assumed to have been retired in
connection with the Exchange.
(F) Reflects the tax effect on items (D) and (E) above, calculated at the
statutory rate.
F-27
<PAGE>
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
Mellon Securities Trust Company
BY MAIL: BY FACSIMILE:
P.O. Box 817 (201) 296-4062
Midtown Station
New York, NY 10018
BY HAND DELIVERY: BY COURIER:
120 Broadway 85 Challenger Road
Teller's Window Overpeck Centre
13th Floor Ridgefield Park, NJ 07660
New York, NY 10271
CONFIRM BY TELEPHONE:
(800) 777-3674
Any questions or requests for assistance or additional copies of this
Exchange Circular, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at the address and telephone
number set forth below.
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (collect)
or
(800) 669-5550 (Toll Free)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
IN RESPECT OF
ADVANCED MEDICAL, INC.
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
------------------------
PURSUANT TO THE EXCHANGE CIRCULAR DATED APRIL 21, 1995
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MAY
19, 1995, UNLESS EXTENDED AS SET FORTH HEREIN (SUCH DATE, AS EXTENDED FROM
TIME TO TIME, BEING THE "EXPIRATION DATE"). TENDERS OF OLD DEBENTURES MAY BE
WITHDRAWN PRIOR TO THE EXPIRATION DATE.
THE EXCHANGE AGENT:
Mellon Securities Trust Company
<TABLE>
<S> <C>
BY MAIL: BY FACSIMILE:
P.O. Box 817 (201) 296-4062
Midtown Station
New York, NY 10018
BY HAND DELIVERY: BY COURIER:
120 Broadway 85 Challenger Road
Teller's Window Overpeck Centre
13th Floor Ridgefield Park, NJ 07660
New York, NY 10271
</TABLE>
CONFIRM BY TELEPHONE:
(800) 777-3674
THE INFORMATION AGENT:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (Collect)
or
(800) 669-5550 (Toll Free)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE FOR
THE EXCHANGE AGENT OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN TO THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN
THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Exchange Circular dated April
21, 1995 (the "Exchange Circular") and this Letter of Transmittal which
collectively constitute the offer (the "Exchange Offer") made by Advanced
Medical, Inc., a Delaware corporation (the "Company"), upon the terms and
subject to the conditions set forth in the Exchange Circular and this Letter of
Transmittal, to exchange its 15% Subordinated Debentures due July 15, 1999 ("New
Debentures") and shares of its common stock, $.01 par value per share ("Common
Stock"), for its 7 1/4% Convertible Subordinated Debentures due January 15, 2002
("Old Debentures") in the ratio of $500 principal amount of New Debentures and
47 shares of Common Stock for each $1,000 principal amount of Old Debentures
tendered. Recipients of
<PAGE>
the Exchange Circular should read the requirements described in such Exchange
Circular with respect to eligibility to participate in the Exchange Offer.
Capitalized terms used but not defined herein have the meaning given to them in
the Exchange Circular.
This Letter of Transmittal is to be used by Holders (i) if certificates
representing Old Debentures are to be forwarded herewith; (ii) if delivery of
Old Debentures is to be made by book-entry transfer to the Exchange Agent's
account at The Depository Trust Company, the Midwest Securities Trust Company or
the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the section of the Exchange
Circular entitled "The Exchange Offer -- Book-Entry Transfer Procedures;" or
(iii) if delivery of Old Debentures is to be made pursuant to the guaranteed
delivery procedures set forth in the section of the Exchange Circular entitled
"The Exchange Offer -- Guaranteed Delivery Procedures."
This Letter of Transmittal must be executed by the Holders of the Old
Debentures listed herein (or on behalf of such Holder as set forth below).
Any beneficial owner whose Old Debentures are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on behalf of the beneficial owner. If such
beneficial owner wishes to tender on his own behalf, such beneficial owner must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Debentures, either make appropriate arrangements to register ownership of
the Old Debentures in such beneficial owner's name or obtain a properly
completed bond power from the registered holder. The transfer of record
ownership may take considerable time.
In order to properly complete this Letter of Transmittal, a Holder must (i)
complete the box entitled "Description of Old Debentures;" (ii) if appropriate,
check and complete the sections relating to book-entry transfer and guaranteed
delivery and the boxes relating to Special Issuance Instructions and Special
Delivery Instructions; (iii) sign this Letter of Transmittal by completing the
box entitled "Sign Here;" and (iv) complete the Substitute Form W-9. Each Holder
should carefully read the detailed Instructions below prior to completing this
Letter of Transmittal.
Holders who desire to tender their Old Debentures for exchange and (i) whose
Old Debentures are not immediately available; (ii) who cannot deliver their Old
Debentures and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date; or (iii) who cannot complete the procedures for
book-entry transfer on a timely basis, must tender the Old Debentures pursuant
to the guaranteed delivery procedures set forth in Instruction 2 of this Letter
of Transmittal.
Holders who wish to tender their Old Debentures for exchange must, at a
minimum, complete columns (1), (2) (if applicable) and (3) in the box below
entitled "Description of Old Debentures" and sign the box below entitled "Sign
Here." If only those columns are completed, such Holder will have tendered for
exchange the principal amount of Old Debentures listed in column (3). If the
Holder wishes to exchange less than all of such Old Debentures, column (4) must
be completed in full. In such case, the Holder will have tendered for exchange
the principal amount of Old Debentures listed in column (4). In either such
case, such Holder should refer to Instruction 5 of this Letter of Transmittal.
<PAGE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD DEBENTURES
(1) (2) (3) (4)
NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT TENDERED
REGISTERED HOLDER(S) (PLEASE FOR EXCHANGE (ONLY IF
FILL IN EXACTLY THE NAME(S) IN OLD DEBENTURE CERTIFICATE DIFFERENT AMOUNT FROM
WHICH OLD DEBENTURES ARE NUMBER(S) (A) (ATTACH AGGREGATE COLUMN (3)) (MUST BE
REGISTERED, SEPARATE SIGNED SCHEDULE IF PRINCIPAL INTEGRAL MULTIPLES OF
IF BLANK) MORE SPACE IS NEEDED) AMOUNT $1,000) (B)
</TABLE>
(a) Need not be completed by Holders tendering Old Debentures for exchange by
book-entry transfer. Please check the appropriate box below and provide the
requested information.
(b) Need not be completed by Holders who wish to tender for exchange the
principal amount of Old Debentures listed in column (3). Completion of
column (4) will indicate that the Holder wishes to tender for exchange only
the principal amount of Old Debentures indicated in column (4).
/ / CHECK HERE IF TENDERED OLD DEBENTURES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution _______________________________________________
Name of Book-Entry Transfer Facility ________________________________________
Book-Entry Transfer Facility Account Number _________________________________
Transaction Code Number _____________________________________________________
/ / CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holders(s) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Window Ticket Number (if available) _________________________________________
Name of Institution which Guaranteed Delivery _______________________________
Book-Entry Transfer Facility Account Number
(if delivered by book-entry transfer) _______________________________________
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY if the New Debentures
and Common Stock issued in exchange for Old
Debentures or certificates for Old Debentures
in a principal amount not exchanged for New
Debentures are to be mailed or delivered to
someone other than the undersigned or to the
undersigned at an address other than that
address shown below the undersigned's signa-
ture.
Mail or deliver to:
Name
(Please Print)
Address
(Include Zip Code)
(Tax Identification or Social Security No.)
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY if the New Debentures
and Common Stock issued in exchange for Old
Debentures or certificates for Old Debentures
in a principal amount not exchanged or
accepted for exchange are to be issued in the
name of someone other than the undersigned.
Issue to:
Name
(Please Print)
Address
(Include Zip Code)
(Tax Identification or Social Security No.)
Credit Old Debentures not exchanged or
accepted for exchange by book-entry transfer
to the Book-Entry Transfer Facility account
set forth below:
(Book-Entry Transfer Facility Account Number)
SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE>
To Advanced Medical, Inc.:
Upon the terms and conditions of the Exchange Offer by the Company to
exchange its New Debentures and Common Stock for its Old Debentures in the ratio
of $500 principal amount of New Debentures and 47 shares of Common Stock for
each $1,000 principal amount of Old Debentures tendered, the undersigned hereby
tenders to the Company for exchange the Old Debentures indicated above on the
terms set forth below.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Old Debentures tendered for exchange herewith,
the undersigned will have irrevocably sold, assigned, transferred and exchanged,
to or upon the order of the Company, all right, title and interest in, to and
under all of the Old Debentures tendered for exchange hereby, and will have
appointed the Exchange Agent as the true and lawful agent of such Holder with
respect to such Old Debentures, with full power of substitution to (i) deliver
certificates representing such Old Debentures, or transfer ownership of such Old
Debentures on the account books maintained by a Book-Entry Transfer Facility,
(together, in any such case, with all accompanying evidences of transfer and
authenticity), to or upon the order of the Company, (ii) present and deliver
such Old Debentures for transfer on the books of the Company, and (iii) receive
all benefits or otherwise exercise all rights and incidents of beneficial
ownership with respect to such Old Debentures.
The undersigned hereby represents and warrants that he has full power and
authority to exchange, assign and transfer the Old Debentures tendered for
exchange hereby, and that when such Old Debentures are accepted for exchange by
the Company, the Company will acquire good and marketable title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the exchange, assignment and transfer of the
Old Debentures tendered for exchange hereby.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Old Debentures,
when, as and if the Company gives oral or written notice thereof to the Exchange
Agent. Tenders of Old Debentures may be withdrawn prior to the Expiration Date.
See the section entitled "The Exchange Offer -- Withdrawal of Tenders" in the
Exchange Circular. Old Debentures not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in the
box above entitled "Special Delivery Instructions."
The undersigned acknowledges that the Company's acceptance of Old Debentures
validly tendered for exchange pursuant to any one of the procedures described in
the section of the Exchange Circular entitled "The Exchange Offer -- How to
Tender" and in the Instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer.
The undersigned recognizes that the Company has no obligation pursuant to
the "Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Old Debentures from the name of the Holder(s) thereof if the
Company does not accept for exchange such Old Debentures so tendered for
exchange.
A tender for exchange of Old Debentures pursuant to any one of the
procedures set forth in the section of the Exchange Circular entitled "The
Exchange Offer -- How to Tender" will constitute the tendering Holder's
acceptance of the terms and conditions of the Exchange Offer, as well as the
representation and warranty that (i) such Holder owns the Old Debentures being
tendered within the meaning of Rule 14e-4 under the Exchange Act ("Rule 14e-4")
and (ii) the tender of such Old Debentures complies with Rule 14e-4 (to the
extent that Rule 14e-4 is applicable to such exchange).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tenders may be withdrawn only in accordance with
the procedures set forth in the Instructions contained herein and in the
Exchange Circular.
<PAGE>
SIGN HERE
MUST BE SIGNED BY THE REGISTERED HOLDER(S)
EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)
REPRESENTING THE OLD DEBENTURES OR ON A
SECURITY POSITION LISTING OR BY PERSON(S)
AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY
CERTIFICATES OR DOCUMENTS TRANSMITTED
HEREWITH. IF SIGNATURE IS BY TRUSTEES,
EXECUTORS, ADMINISTRATORS, GUARDIANS,
ATTORNEYS-IN-FACT, OFFICERS OF CORPORATIONS OR
OTHERS ACTING IN A FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE SET FORTH FULL TITLE. SEE
INSTRUCTION 6 OF THIS LETTER OF TRANSMITTAL.
Signature(s) of Holder(s)
Dated ,1995
Name(s)
(Please Print)
Title
Address
(Include Zip Code)
Area Code and Telephone Number ()
Tax Indentification or Social Security No.
GUARANTEE OF SIGNATURE(S)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED
BY INSTRUCTION 1)
Authorized Signature
Dated ,1995
Name and Title
(Please Print)
Name of Firm
Address
(Include Zip Code)
Area Code and Telephone No. ()
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm or other
entity identified in Rule 17A(d)-15 under the Exchange Act, including any (i)
bank, (ii) broker, dealer, municipal securities dealer, municipal securities
broker, government securities dealer or governmental securities broker, (iii)
credit union, (iv) national securities exchange, registered securities
association or clearing agency, or (v) savings association (in each case an
"Eligible Institution"). Signatures on this Letter of Transmittal need not be
guaranteed (i) if this Letter of Transmittal is signed by the Holder(s) of the
Old Debentures tendered herewith and such Holder(s) has not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Old Debentures are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD DEBENTURES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by Holders
(i) if certificates are to be forwarded herewith; (ii) if delivery of Old
Debentures is to be made by book-entry transfer to the Exchange Agent's account
at a Book-Entry Transfer Facility; or (iii) if delivery of Old Debentures is to
be made pursuant to the guaranteed delivery procedures. Certificates for all
physically tendered Old Debentures or any confirmation of a book-entry transfer
(a "Book-Entry Confirmation"), as well as a properly completed and duly executed
copy of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at one of its addresses set forth on the cover of this Letter of Transmittal
prior to the Expiration Date. Holders who elect to tender Old Debentures and (i)
whose Old Debentures are not immediately available; (ii) who cannot deliver the
Old Debentures and all other required documents to the Exchange Agent on or
prior to the Expiration Date; or (iii) who are unable to complete the procedures
for book-entry transfer on a timely basis, may have such tender effected if: (a)
such tender is made through an Eligible Institution; (b) on or prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
hereof) and a Notice of Guaranteed Delivery (by telegram, facsimile
transmission, mail or hand delivery) which includes the name and address of the
Holder of such Old Debentures and the principal amount of Old Debentures
tendered, states that the tender is being made thereby and guarantees that
within five AMEX trading days after the Expiration Date, the certificate(s)
representing such Old Debentures in proper form for transfer (or a Book-Entry
Confirmation), and any other documents required by this Letter of Transmittal,
will be deposited by such Eligible Institution with the Exchange Agent; and (c)
certificate(s) for all tendered Old Debentures or a Book-Entry Confirmation and
other required documents are received by the Exchange Agent within five AMEX
trading days after the Expiration Date.
THE METHOD OF DELIVERY OF OLD DEBENTURES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER. IF
DELIVERY IS EFFECTED BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN AIR COURIER
WITH A GUARANTEED NEXT DAY DELIVERY OR REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY OLD
DEBENTURES SHOULD BE SENT TO THE COMPANY, THE INFORMATION AGENT OR THE OLD
TRUSTEE.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders by execution of this Letter of Transmittal (or facsimile
hereof, if applicable), waive any rights to receive notice of the acceptance of
their Old Debentures for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled "Description
of Old Debentures" above is inadequate, the certificate numbers and principal
amounts of the Old Debentures being tendered should be listed on a separate
signed schedule affixed hereto.
4. WITHDRAWALS. Tenders of Old Debentures may be withdrawn prior to the
Expiration Date. Holders who wish to withdraw previously tendered Old Debentures
must give notice of withdrawal in
<PAGE>
writing or by telegram or facsimile transmission, which must be received by the
Exchange Agent at one of the addresses set forth on the cover of this Letter of
Transmittal prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person who tendered the Old Debentures to be withdrawn
and (ii) identify the Old Debentures to be withdrawn (including the certificate
number or numbers and principal amount of such Old Debentures). Any notice of
withdrawal must be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Debentures were
tendered (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the ownership of such Old Debentures. If the Old Debentures have
been tendered by book-entry transfer, a notice of withdrawal must specify, in
lieu of certificate numbers, the name and account number at the appropriate
Book-Entry Transfer Facility to be credited with the withdrawn Old Debentures.
Any permitted withdrawals may not be rescinded, and any Old Debentures withdrawn
will thereafter be deemed not validly tendered for purposes of the Exchange
Offer; however, withdrawn Old Debentures may be retendered by following one of
the procedures described in the section of the Exchange Circular entitled "The
Exchange Offer -- How to Tender" at any time prior to the Expiration Date.
5. PARTIAL TENDERS. (Not applicable to Holders who tender Old Debentures by
book-entry transfer.) Tender of Old Debentures will be accepted only in
principal amounts equal to $1,000 and integral multiples thereof. If less than
the entire principal amount of Old Debentures evidenced by a submitted
certificate is tendered, fill in the principal amount of Old Debentures which
are tendered for exchange in column (4) of the box entitled "Description of Old
Debentures." In case of partial tender for exchange, a new certificate for the
remainder of the principal amount of the Old Debentures will be sent to the
Holder unless otherwise requested by the Holder in the box entitled "Special
Delivery Instructions" on this Letter of Transmittal as promptly as practicable
after the expiration of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; POWERS OF ATTORNEY AND
ENDORSEMENTS.
(a) The signature(s) of the Holder on this Letter of Transmittal must
correspond with the name as written on the face of the Old Debentures without
alteration, enlargement or any change whatsoever.
(b) If any tendered Old Debentures are held of record by two or more joint
owners, each such owner must sign this Letter of Transmittal.
(c) If any tendered Old Debentures are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal (or facsimiles hereof) and all
other required documents as there are different registrations of certificates.
(d) When this Letter of Transmittal is signed by the Holder(s) of the Old
Debentures listed and transmitted hereby, no endorsements of Old Debentures or
separate powers of attorney or other authorizations are required. If, however,
New Debentures and Common Stock are to be issued to a person other than the
Holder(s) or Old Debentures not tendered or not accepted, are to be issued or
returned in the name of a person other than the Holder(s), then the Old
Debentures transmitted hereby must be endorsed or accompanied by appropriate
powers of attorney or other authorizations in a form satisfactory to the
Company, in either case signed exactly as the name(s) of the Holder(s) appears
on the Old Debentures. Signatures on such Old Debentures, powers of attorney or
other authorizations must be guaranteed by an Eligible Institution (unless
signed by an Eligible Institution).
(e) If this Letter of Transmittal, Old Debentures, or powers of attorney or
other authorizations are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and proper evidence satisfactory to the Company of their authority to
so act must be submitted.
(f) If this Letter of Transmittal is signed by a person other than the
registered Holder(s) of the Old Debentures listed, the Old Debentures must be
endorsed or accompanied by appropriate powers of attorney or other
authorizations, in either case signed exactly as the name(s) of the registered
<PAGE>
Holder(s) appear(s) on the certificates representing such Old Debentures.
Signatures on such Old Debentures, or powers of attorney or other authorizations
must be guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the transfer and exchange of
Old Debentures pursuant to the Exchange Offer. If, however, delivery of New
Debentures, Common Stock and/or certificates for Old Debentures not exchanged is
to be made to, or are to be registered in the name of any person other than the
signer(s) of this Letter of Transmittal, or if tendered Old Debentures are
registered in the name of any person other than the signer(s) of this Letter of
Transmittal, or if a transfer tax is imposed for any other reason other than the
transfer and exchange of Old Debentures to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered Holder or any other person) will be payable by the tendering
Holder prior to the issuance of the New Debentures and Common Stock.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the New Debentures or
Common Stock are to be issued, or if any Old Debentures not tendered or accepted
for exchange are to be issued or sent to, someone other than the Holder or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders tendering Old Debentures by book-entry
transfer may request that Old Debentures not exchanged or accepted for exchange
be credited to such account maintained at a Book-Entry Transfer Facility as such
Holder may designate.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Old Debentures will be
resolved by the Company, in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any or all
tenders that are not in proper form or the acceptance of which would, in the
opinion of the Company or its counsel, be unlawful. The Company also reserves
the absolute right, subject to applicable law, to waive any irregularities or
conditions of tender as to particular Old Debentures. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
Instructions herein) shall be final and binding. Unless waived, any
irregularities in connection with deliveries of tenders of Old Debentures must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent, the Information Agent nor any other person shall be under
any duty to give notification of any irregularities in such tenders or shall
incur any liability for failure to give such notification. Tenders of Old
Debentures will not be deemed to have been made until such irregularities have
been cured or waived.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
any of the specified conditions as described under "The Exchange Offer --
Conditions" in the Exchange Circular in the case of any Old Debentures tendered
(except as otherwise provided in the Exchange Circular).
11. MUTILATED, LOST, STOLEN OR DESTROYED OLD DEBENTURES. Any Holder whose
Old Debentures have been mutilated, lost, stolen or destroyed should contact the
Old Trustee for further instructions.
12. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Requests for assistance
or for additional copies of the Exchange Circular and this Letter of Transmittal
may be directed to the Information Agent at the address or telephone number set
forth on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES OF ALL PHYSICALLY TENDERED OLD DEBENTURES
OR A BOOK-ENTRY CONFIRMATION, OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, in order to prevent backup withholding on
interest and dividends payable to a Holder with respect to New Debentures and
Common Stock, respectively, whose tendered Old Debentures are accepted for
exchange, such Holder is required to provide the Company (as payor), through the
Exchange Agent, with such Holder's correct taxpayer identification number
("TIN") on Substitute Form W-9 below or otherwise establish a basis for
exemption from backup withholding. If
<PAGE>
such Holder is an individual, the TIN is such Holder's social security number.
If the Exchange Agent is not provided with the correct TIN, the Holder may be
subject to penalties imposed by the Internal Revenue Service.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which
the Exchange Agent will provide upon request) signed under penalty of perjury,
attesting to the Holder's exempt status. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
The backup withholding rate is 31%. Backup withholding is not an additional
federal income tax. Rather, the federal income tax liability of beneficial
owners of New Debentures and Common Stock subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on interest and dividends received by a
tendering Holder with respect to New Debentures and Common Stock, respectively,
received by such Holder pursuant to the Exchange Offer, such Holder is required
to provide the Exchange Agent with a correct TIN on the Substitute Form W-9
provided below, and to certify (i) that the TIN provided thereon is correct (or
that such Holder is awaiting a TIN) and (ii) that the Holder is either (A)
exempt from backup withholding, (B) has not been notified by the Internal
Revenue Service that he is subject to backup withholding as a result of failure
to report all interest or dividends or (C) that the Internal Revenue Service has
notified the Holder that he is no longer subject to backup withholding. Failure
to provide the information requested on such Form or to make the certification
requested may subject the tendering Holder to 31% federal income tax withholding
on interest and dividend payments received by such Holder on the New Debentures
and Common Stock, respectively.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (E.G., social
security number or employer identification number) of the record owner of the
Old Debentures. If the Old Debentures are held in more than one name or are not
held in the name of the beneficial owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
<PAGE>
<TABLE>
<C> <S> <C>
PAYER'S NAME: ADVANCED MEDICAL, INC.
SUBSTITUTE Part 1 -- (a) Name (If joint names, Part 2 -- PLEASE PROVIDE YOUR TIN ON
FORM W-9 list first and circle the name of the THE APPROPRIATE LINE BELOW AND
DEPARTMENT OF THE TREASURY person or entity whose number you CERTIFY BY SIGNING AND DATING BELOW.
INTERNAL REVENUE SERVICE enter in Part 2 below.). (See
Payer's Request for Guidelines if your name has changed.) Social Security Number
Taxpayer Identification (b) Business name (Sole Proprietors OR
Number (TIN) see Guidelines.)
(c) Please check appropriate box: Employer Identification
/ / Individual/Sole Proprietor Number
/ / Corporation For Payees Exempt
/ / Partnership / / Other from Backup Withholding
(d) Address (Number, Street, Apt. (See Part II of Guidelines.)
or Suite No., City, State and
Zip Code).
Part 3 -- Certification -- Under Part 3 --
penalties of perjury, I certify that: Awaiting TIN / /
(a) The number shown on this form is
my correct Taxpayer Identification
Number (or I am waiting for a
number to be issued to me) and
(b) I am not subject to backup
withholding because (i) I am
exempt from backup withholding,
(ii) I have not been notified by
the Internal Revenue Service (the
"IRS") that I am subject to
backup withholding as a result of
a failure to report all interest
or dividends, or (iii) the IRS
has notified me that I am no
longer subject to backup
withholding.
Certification instructions -- You must cross out item (b) in Part 3 above if
you have been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return.
SIGNATURE DATE
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER
IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an
application in the near future. I understand that (i) if I do not
provide a taxpayer identification number within seven days after the
Exchange Agent receives my Awaiting TIN Certification, backup
withholding, if applicable, will begin and continue until I furnish my
taxpayer identification number, and (ii) if within sixty days the
Exchange Agent receives my taxpayer identification number on a new IRS
Form W-9 or Substitute Form W-9, the Exchange Agent will return
amounts withheld through the date such IRS Form W-9 or Substitute Form
W-9 is received.
Signature ____________________________________ Date ____________, 1995
- --------------------------------------------------------------------------------
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
PURPOSE OF SUBSTITUTE FORM W-9.
The Company is required to file an information return with the IRS and,
consequently, must get your correct TIN to report income paid to you. Use
Substitute Form W-9 to give your correct TIN to the Exchange Agent and, when
applicable, (1) to certify the TIN you are giving is correct (or you are waiting
for a number to be issued), (2) to certify you are not subject to backup
withholding, or (3) to claim exemption from backup withholding if you are an
exempt payee. Giving your correct TIN and making the appropriate certifications
will prevent certain payments from being subject to backup withholding.
WHAT IS BACKUP WITHHOLDING?
Under certain conditions, the Company or the trustee must withhold and pay to
the IRS 31% of payments made to you pursuant to the Offer. This is called
"backup withholding." Payments that could be subject to backup withholding
include interest, dividends, broker and barter exchange transactions, rents,
royalties, nonemployee pay, and certain payments from fishing boat operators.
Real estate transactions are not subject to backup withholding.
If you give the Exchange Agent your correct TIN, make the proper certifications,
and report all your taxable interest and dividends on your tax return, your
payments will not be subject to backup withholding. Payments you receive will be
subject to backup withholding if:
1. You do not furnish your TIN to the Exchange Agent, or
2. The IRS tells the Company that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the Exchange Agent that you are not subject to
backup withholding under 3 above (for reportable interest and dividend
accounts opened after 1983 only), or
5. You do not certify your TIN. See the Part III instructions below for
exceptions.
Certain payees and payments are exempt from backup withholding and information
reporting. See the Part II instructions below.
HOW TO GET A TIN.
If you do not have a TIN, apply for one immediately. To apply, get Form SS-5,
Application for a Social Security Number Card (for individuals), from your local
office of the Social Security Administration, or Form SS-4, Application for
Employer Identification Number (for businesses and all other entities), from
your local IRS office.
If you do not have a TIN, write "Applied For" in the space for the TIN in Part 2
of Substitute Form W-9, complete the certification, sign and date the form (an
"Awaiting TIN Certification"), and give it to the Exchange Agent. Backup
withholding, if applicable, will begin 7 days after the Exchange Agent receives
an Awaiting TIN Certification and will continue until you furnish your TIN. If
within 60 days the Exchange Agent receives your TIN on a new IRS Form W-9 or
copy of the Substitute Form W-9 provided above, the Exchange Agent will return
amounts withheld through the date such IRS Form W-9 or Substitute Form W-9 is
received.
NOTE: Writing "Applied For" on the form means that you have already applied for
a TIN OR that you intend to apply for one soon.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form and give it to the Exchange Agent.
PENALTIES
FAILURE TO FURNISH TIN.--If you fail to furnish your correct TIN to the Exchange
Agent, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not due to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-- If you make a
false statement with no reasonable basis that results in no backup withholding,
you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS.--If either the Exchange Agent or the Company discloses or uses
TINs in violation of Federal law, the Exchange Agent or the Company, as the case
may be, may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME.--If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, please enter your first name, the last name shown on your social
security card, and your new last name.
SOLE PROPRIETOR.--You must enter your individual name. (Enter either your SSN or
EIN in Part 2.) You may also enter your business name or "doing business as"
name on the business name line. Enter your name as shown on your social security
card and business name as it was used to apply for your EIN on Form SS-4.
PART I--TAXPAYER IDENTIFICATION NUMBER (TIN)
If you are a sole proprietor, you may enter your SSN or EIN. Also see the chart
below for further clarification of name and TIN combinations. If you do not have
a TIN, follow the instructions under HOW TO GET A TIN above.
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
If you are exempt from backup withholding, you should still complete this form
to avoid possible erroneous backup withholding. Enter your correct TIN and write
"Exempt" in Part 2, and sign and date the form.
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, listed payees (1)
through (13), and a person registered under the Investment Advisors Act of 1940
who regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except that a corporation
that provides medical and health care services or bills and collects payments
for such services is not exempt from backup withholding or information
reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
<PAGE>
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan (IRA), or a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A State, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to backup
withholding also include the following:
- Payments to nonresident aliens subject to withholding under
section 1441.
- Payments to partnerships not engaged in a trade or business in
the U.S. and that have at least one nonresident partner.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, give the Exchange Agent a completed Form W-8 Certificate of Foreign
Status.
PART III--CERTIFICATION
For a joint account, only the person whose TIN is shown in Part 2 should sign.
PRIVACY ACT NOTICE
Section 6109 requires you to give your correct TIN to persons who must file
information returns with the IRS to report interest, dividends, and certain
other income, paid to you, mortgage interest you paid, the acquisition or
abandonment of secured property, cancellation of debt, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or not
you are required to file a tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
give a TIN to a payer. Certain penalties may also apply.
<PAGE>
WHAT NAME AND NUMBER TO GIVE THE EXCHANGE AGENT
<TABLE>
<CAPTION>
- --------------------------------------------------------
GIVE NAME AND
SSN OF:
FOR THIS TYPE OF ACCOUNT
- --------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The
trust (grantor is also trustee) grantor-trustee(1)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under state law
5. Sole proprietorship The owner(3)
6. A valid trust, estate, or Legal entity(4)
pension trust
7. Corporate The corporation
8. Association, club, religious, The organization
charitable, educational, or
other tax-exempt organization
9. Partnership The partnership
10. A broker or registered nominee The broker or
nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that
receives agricultural program
payments
- ------------------------------------------------------------
- ------------------------------------------------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
</TABLE>
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE>
ADVANCED MEDICAL, INC.
9775 BUSINESSPARK AVENUE
SAN DIEGO, CALIFORNIA 92131
April 21, 1995
Dear Holder:
Enclosed is a copy of an Exchange Circular by Advanced Medical, Inc. with
respect to its 7 1/4% Convertible Subordinated Debentures due January 15, 2002
("Old Debentures") and the related Letter of Transmittal (which together
constitute the "Offer"). Pursuant to the Offer, Advanced Medical, Inc. is
offering to exchange its 15% Subordinated Debentures due July 15, 1999 ("New
Debentures") and shares of its common stock, $.01 par value ("Common Stock"),
for Old Debentures in the ratio of $500 principal amount of New Debentures and
47 shares of Common Stock for each $1,000 principal amount of Old Debentures
tendered. The expiration date is 5:00 P.M. New York City time on May 19, 1995,
unless extended as stated in the Offer. Please read carefully the enclosed
documents, which include Advanced Medical, Inc.'s most recent financial
statements.
If, after reviewing the information set forth in the Offer, you wish to
tender Old Debentures for exchange please follow the instructions contained in
the Offer.
Neither Advanced Medical, Inc. nor its Board of Directors is making any
recommendation to any holder of Old Debentures as to whether to tender Old
Debentures. Each holder is urged to consult his investment and tax advisers
before deciding whether to tender any Old Debentures.
Very truly yours,
ADVANCED MEDICAL, INC.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
IN RESPECT OF
ADVANCED MEDICAL, INC.
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
------------------------
PURSUANT TO THE EXCHANGE CIRCULAR DATED APRIL 21, 1995
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MAY
19, 1995, UNLESS EXTENDED AS SET FORTH HEREIN (SUCH DATE, AS EXTENDED FROM
TIME TO TIME, BEING THE "EXPIRATION DATE"). TENDERS OF OLD DEBENTURES MAY BE
WITHDRAWN PRIOR TO THE EXPIRATION DATE.
As set forth in the Exchange Circular dated April 21, 1995 (the "Exchange
Circular") of Advanced Medical, Inc., a Delaware corporation (the "Company"), in
the section entitled "The Exchange Offer -- Guaranteed Delivery Procedures" and
in the accompanying Letter of Transmittal, which collectively with the Exchange
Circular constitutes the Company's offer (the "Exchange Offer") to exchange its
15% Subordinated Debentures due July 15, 1999 ("New Debentures") and shares of
its common stock, $.01 par value per share ("Common Stock"), for its 7 1/4%
Convertible Subordinated Debentures due January 15, 2002 ("Old Debentures") in
the ratio of $500 principal amount of New Debentures and 47 shares of Common
Stock for each $1,000 principal amount of Old Debentures tendered, this form, or
one substantially equivalent hereto, must be used by any Holder (as defined in
the Exchange Circular) of the Old Debentures who wishes to tender Old Debentures
pursuant to the Exchange Offer and (i) whose Old Debentures are not immediately
available; (ii) who cannot deliver their Old Debentures and all other required
documents to the Exchange Agent on or prior to the Expiration Date; or (iii) who
complete the procedures for book-entry transfer on a timely basis. Such form may
be delivered by telegram, facsimile transmission, mail or hand delivery to the
Exchange Agent. The method of delivery is at the option and risk of the
tendering Holder. Capitalized terms used but not defined herein have the meaning
given to them in the Exchange Circular.
The Exchange Agent:
Mellon Securities Trust Company
<TABLE>
<S> <C>
By Mail: By Facsimile:
P.O. Box 817 (201) 296-4062
Midtown Station
New York, NY 10018
By Hand Delivery: By Courier:
120 Broadway 85 Challenger Road
Teller's Window Overpeck Centre
13th Floor Ridgefield Park, NJ 07660
New York, NY 10271
</TABLE>
Confirm by Telephone:
(800) 777-3674
The Information Agent:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
(212) 269-5550 (Collect)
or
(800) 669-5550 (Toll Free)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE FOR THE EXCHANGE AGENT OR TRANSMISSION VIA A FACSIMILE NUMBER
OTHER THAN TO THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby represents that he owns the Old Debentures tendered
hereby within the meaning of Rule 14e-4 under the Exchange Act ("Rule 14e-4"),
and hereby tenders to the Company in compliance with Rule 14e-4 and upon the
terms and subject to the conditions set forth in the Exchange Circular and the
related Letter of Transmittal, receipt of which is hereby acknowledged, the
principal amount of Old Debentures specified below pursuant to the guaranteed
delivery procedures set forth under the section entitled "The Exchange Offer --
Guaranteed Delivery Procedures" in the Exchange Circular.
<TABLE>
<S> <C>
Old Debenture Certificate Numbers
(if available) Principal Amount Tendered
If Old Debentures Notes will be tendered by SIGN HERE
book-entry transfer:
Name of Tendering Institution: --------------------------------------------
(Signature(s)
--------------------------------------------
--------------------------------------------
Name(s) (Please Print)
Account No. -------------------------------, --------------------------------------------
at The Depository Trust Company, the Midwest --------------------------------------------
Securities Trust Company or the Philadelphia (Address)
Depository Trust Company --------------------------------------------
Zip Code
()
Area Code and Telephone No.
Date:, 1995
</TABLE>
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17A(d)-15 under
the Exchange Act (an "Eligible Institution") acting according to the procedures
set forth in such Rule, guarantees (i) that the above named person(s) own(s) the
Old Debentures tendered hereby within the meaning of Rule 14e-4; (ii) that such
tender of Old Debentures complies with Rule 14e-4; and (iii) delivery to the
Exchange Agent of the Old Debentures tendered hereby in proper form for
transfer, or confirmation of the book-entry transfer of such Old Debentures into
the Exchange Agent's account at The Depository Trust Company, the Midwest
Securities Trust Company or the Philadelphia Despotitory Trust Company pursuant
to the procedures for book-entry transfer set forth in the Exchange Circular,
and any other required documents, all by 5:00 p.m., New York City time, on the
fifth AMEX trading day following the Expiration Date.
--------------------------------------
Name of Firm
--------------------------------------
Authorized Signature
--------------------------------------
Name and Title (Please print)
--------------------------------------
Address
--------------------------------------
City and State
--------------------------------------
Zip Code
(___)_________________________________
Area Code & Telephone No.
Date:___________________________, 1995
DO NOT SEND OLD DEBENTURES WITH THIS FORM. ACTUAL TENDER OF OLD DEBENTURES
MUST BE MADE PURSUANT TO AND BE ACCOMPANIED BY A LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder. If such delivery is effected by mail, it is
recommended that the Holder use an air courier with a guaranteed next day
delivery or registered mail, properly insured, with return receipt requested.
For a full description of the guaranteed delivery procedures, see the section of
the Exchange Circular entitled "The Exchange Offer -- Guaranteed Delivery
Procedures." In all cases, sufficient time should be allowed to assure timely
delivery. No Notice of Guaranteed Delivery should be sent to the Company or the
Information Agent.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the Holder(s) of
the Old Debentures referred to herein, the signature must correspond with the
name(s) as written on the face of the Old Debentures without alteration,
enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
Holder(s) of any Old Debentures listed, this Notice of Guaranteed Delivery must
be accompanied by appropriate bond powers signed as the name(s) of the Holder(s)
appear(s) on the face of the Old Debentures without alteration, enlargement or
any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, evidence satisfactory
to the Company of such person's authority so to act must be submitted with this
Notice of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or for additional copies of the Exchange Circular, the Letter of
Transmittal and this Notice of Guaranteed Delivery may be directed to the
Information Agent at the address or telephone number set forth on the cover
hereof.
4
<PAGE>
EXCHANGE OFFER
IN RESPECT OF
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
OF
ADVANCED MEDICAL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MAY 19,
1995, UNLESS EXTENDED AS SET FORTH HEREIN (SUCH DATE, AS EXTENDED FROM TIME TO
TIME, BEING THE "EXPIRATION DATE"). TENDERS OF OLD DEBENTURES MAY BE WITHDRAWN
PRIOR TO THE EXPIRATION DATE.
April 21, 1995
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
As set forth in the Exchange Circular dated April 21, 1995 (the "Exchange
Circular") of Advanced Medical, Inc., a Delaware corporation (the "Company"),
and the accompanying Letter of Transmittal, the Company is offering to exchange
(the "Exchange Offer") its 15% Subordinated Debentures due July 15, 1999 ("New
Debentures") and shares of its common stock, $.01 par value per share ("Common
Stock"), for its 7 1/4% Convertible Subordinated Debentures due January 15, 2002
("Old Debentures") in the ratio of $500 principal amount of New Debentures and
47 shares of Common Stock for each $1,000 principal amount of Old Debentures
tendered.
The Company will not pay any fees or commissions to any broker or dealer or
other person for soliciting tenders of Old Debentures pursuant to the Exchange
Offer. You will be reimbursed for customary expenses incurred by you in
forwarding any of the enclosed materials to your clients, and in handling and
forwarding tenders to the Exchange Agent.
The Company will pay or cause to be paid all transfer taxes, if any,
applicable to the transfer of any Old Debentures pursuant to the Exchange Offer,
except as otherwise provided in Instruction 7 of each enclosed Letter of
Transmittal.
Enclosed are copies of the following documents:
1. The Exchange Circular;
2. The Letter of Transmittal;
3. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9;
4. A form of letter (with attached instructions) which you may use for
correspondence with your clients together with a form of delivery
instructions for the bond power (to be used in requesting a bond power if
the beneficial owner of the Old Debentures is not the registered Holder) and
a form of delivery instructions for tendering Old Debentures (to be used in
delivering instructions to tender Old Debentures if the beneficial owner of
the Old Debentures is not the registered Holder);
5. Form of bond power;
6. The Notice of Guaranteed Delivery (to be used to tender Old
Debentures if certificates for the Old Debentures are not immediately
available); and
7. Return envelope addressed to the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS SOON
AS POSSIBLE. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on May 19, 1995 unless the Exchange Offer is extended, in which case the
term "Expiration Date" shall
<PAGE>
mean the latest date and time on which the Exchange Offer as so extended shall
expire. HOLDERS WHO DESIRE TO TENDER THEIR OLD DEBENTURES MUST DO SO ON OR PRIOR
TO THE EXPIRATION DATE.
In order to participate in the Exchange Offer, a Holder must (i) complete
and sign the Letter of Transmittal or a facsimile thereof and have the signature
thereon guaranteed if required by the instructions thereof and mail or otherwise
deliver such Letter of Transmittal, or such facsimile, together with
certificates representing the Old Debentures and any other required documents,
to the Exchange Agent at its address set forth on the back cover page of the
Exchange Circular; (ii) effect a tender of Old Debentures pursuant to the
procedures for book-entry transfer as set forth in the Exchange Circular and the
Letter of Transmittal; or (iii) request his broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such Holder.
Holders who wish to tender their Old Debentures and (i) whose Old Debentures
are not immediately available; (ii) who cannot deliver their Old Debentures and
all other required documents to the Exchange Agent on or prior to the Expiration
Date; or (iii) who cannot complete the procedure for book-entry transfer on a
timely basis, must tender their Old Debentures according to the guaranteed
delivery procedures set forth in the Exchange Circular under the section
entitled "The Exchange Offer -- Guaranteed Delivery Procedures."
Any inquiries you may have with respect to the Exchange Offer or requests
for additional copies of the above documents should be addressed to the
Information Agent at the address or telephone number set forth on the back cover
of the Exchange Circular.
Very truly yours,
Advanced Medical, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF ADVANCED MEDICAL, INC., THE EXCHANGE AGENT OR THE
INFORMATION AGENT; AN AFFILIATE OF ADVANCED MEDICAL, INC., THE EXCHANGE AGENT OR
THE INFORMATION AGENT; OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT
FOR STATEMENTS EXPRESSLY MADE IN THE EXCHANGE CIRCULAR AND THE ACCOMPANYING
LETTER OF TRANSMITTAL.
2
<PAGE>
\
EXCHANGE OFFER
IN RESPECT OF
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
OF
ADVANCED MEDICAL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MAY 19,
1995, UNLESS EXTENDED AS SET FORTH HEREIN (SUCH DATE, AS EXTENDED FROM TIME TO
TIME, BEING THE "EXPIRATION DATE"). TENDERS OF OLD DEBENTURES MAY BE WITHDRAWN
PRIOR TO THE EXPIRATION DATE.
April 21, 1995
To Our Clients:
Enclosed for your consideration are the Exchange Circular dated April 21,
1995 (the "Exchange Circular") and the related Letter of Transmittal relating to
the offer (the "Exchange Offer") by Advanced Medical, Inc., a Delaware
corporation (the "Company"), to exchange its 15% Subordinated Debentures due
July 15, 1999 ("New Debentures") and shares of its common stock, $.01 par value
per share ("Common Stock"), for its 7 1/4% Convertible Subordinated Debentures
due January 15, 2002 ("Old Debentures") in the ratio of $500 principal amount of
New Debentures and 47 shares of Common Stock for each $1,000 principal amount of
Old Debentures tendered. Capitalized terms used but not defined herein have the
meaning given to them in the Exchange Circular.
We are the registered Holder of Old Debentures for your account. A tender of
such Old Debentures can be made only by us as the registered Holder pursuant to
your instructions. The enclosed Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Old Debentures held by
us for your account unless we execute and deliver to you a bond power which
authorizes you to tender Old Debentures on behalf of the registered Holder.
We request your instructions as to whether you wish us to (i) tender any or
all of the Old Debentures held by us for your account or (ii) execute and
deliver to you a bond power so that you can tender your Old Debentures. TENDERS
MAY BE MADE AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE. IF YOU DESIRE TO
TENDER YOUR OLD DEBENTURES, YOU MUST INSTRUCT US TO: (i) TENDER YOUR OLD
DEBENTURES ON YOUR BEHALF IN AMPLE TIME TO PERMIT US TO TENDER YOUR OLD
DEBENTURES ON OR PRIOR TO THE EXPIRATION DATE OR (ii) EXECUTE AND DELIVER A BOND
POWER WHICH AUTHORIZES YOU TO TENDER YOUR OLD DEBENTURES, ALLOWING AMPLE TIME
FOR BOTH DELIVERY OF THE BOND POWER AND THE TENDER OF YOUR OLD DEBENTURES ON OR
PRIOR TO THE EXPIRATION DATE. HOLDERS WHO TENDER AFTER THE EXPIRATION DATE WILL
NOT BE ENTITLED TO PARTICIPATE IN THE EXCHANGE OFFER. YOUR INSTRUCTIONS TO US
SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE.
Your attention is directed to the following:
1. The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on May 19, 1995, unless the Exchange Offer is extended, in which case the
term "Expiration Date" shall mean the latest time and date on which the
Exchange Offer as so extended shall expire.
2. The Company will pay all transfer taxes, if any, applicable to the
transfer and exchange of Old Debentures pursuant to the Exchange Offer,
except as otherwise provided in Instruction 7 of the Letter of Transmittal.
If you wish to have us (i) tender any or all of your Old Debentures held by
us as the registered Holder or (ii) execute and deliver to you a bond power so
that you can tender your Old Debentures held by us as the registered Holder,
please so instruct us by completing, executing, detaching and returning to us
the appropriate instruction form attached hereto. An envelope to return your
instructions to us is enclosed.
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER FOR TENDERS OF
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
OF
ADVANCED MEDICAL, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Exchange Circular and related Letter of Transmittal in connection with the
Exchange Offer by the Company for its Old Debentures.
This will instruct you to tender Old Debentures, as indicated below, upon
the terms and subject to the conditions set forth in the Exchange Circular and
related Letter of Transmittal.
Unless otherwise indicated, the execution and delivery of these instructions
constitutes the undersigned's instruction to you to tender the entire principal
amount of Old Debentures listed below under the column heading "Principal
Amount."
Old Debentures that are to be tendered unless otherwise indicated:
<TABLE>
<CAPTION>
7 1/4%
CONVERTIBLE
SUBORDINATED OLD DEBENTURES TO
DEBENTURES DUE BE TENDERED
JANUARY 15, 2002 PRINCIPAL AMOUNT ("YES" OR "NO")
- ----------------- ---------------- -----------------
<S> <C> <C>
</TABLE>
2
<PAGE>
______________________________________
Signature(s)
______________________________________
Name(s) (Please Print)
______________________________________
______________________________________
Address
______________________________________
Zip Code
______________________________________
Area Code and Telephone No.
______________________________________
Date
USE THIS FORM TO INSTRUCT REGISTERED HOLDER TO TENDER OLD DEBENTURES ON YOUR
BEHALF.
3
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER FOR DELIVERY
OF BOND POWER WITH RESPECT TO
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE JANUARY 15, 2002
OF
ADVANCED MEDICAL, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Exchange Circular and related Letter of Transmittal in connection with the
Exchange Offer by the Company for its Old Debentures.
This will instruct you, with respect to the Old Debentures indicated below
held by you for the account of the undersigned, to execute (with your signature
guaranteed by an Eligible Institution) and deliver to the undersigned a bond
power.
Unless otherwise indicated, the execution and delivery of these instructions
constitutes the undersigned's instruction to you to execute and deliver a bond
power to the undersigned with respect to the entire principal amount of Old
Debentures listed below under the column heading "Principal Amount."
Old Debentures to which a bond power is to be executed and delivered unless
otherwise indicated:
<TABLE>
<CAPTION>
BOND POWER TO
7 1/4% CONVERTIBLE BE EXECUTED
SUBORDINATED AND DELIVERED
DEBENTURES DUE ("YES" OR
JANUARY 15, 2002 PRINCIPAL AMOUNT "NO")
- ------------------ ---------------- -------------
<S> <C> <C>
</TABLE>
4
<PAGE>
______________________________________
Signature(s)
______________________________________
Name(s) (Please Print)
______________________________________
______________________________________
Address
______________________________________
Zip Code
______________________________________
Area Code and Telephone No.
______________________________________
Date
USE THIS FORM TO OBTAIN A BOND POWER FROM THE REGISTERED HOLDER.
5
<PAGE>
AGREEMENT
Agreement dated as of February 3, 1995, by and among ADVANCED MEDICAL,
INC., a Delaware Corporation ("AM"), FIDELITY SELECT HEALTHCARE FUND ("Fidelity
Healthcare"), a series fund of Fidelity Select Portfolios, a Massachusetts
business trust, and FIDELITY CONVERTIBLE SECURITIES FUND ("Fidelity
Convertible") , a series fund of Fidelity Financial Trust, a Massachusetts
business trust (Fidelity Healthcare and Fidelity Convertible are referred to
collectively herein as the "Funds").
WHEREAS, Fidelity Convertible is the beneficial owner of Twenty Four
Million Sixty Five Thousand Dollars ($24,065,000.00) principal amount (the
"Fidelity Convertible Debentures") of 7 1/4% Convertible Subordinated Debentures
due 2002 (the "Debentures") issued by AM pursuant to an Indenture dated as of
January 15, 1992 (the "Old Indenture"), between AM and U.S. Trust Company of
California, N.A., such amount constituting 40.1% of the total outstanding
principal amount of the Debentures and Fidelity Healthcare is the owner of Four
Million One Hundred Eighty Thousand ($4,180,000.00) principal amount of the
Debentures (the "Fidelity Healthcare Debentures"), constituting 6.96% of the
total outstanding principal amount of the Debentures; and
WHEREAS, the Funds and AM have agreed that the Funds will convert a
certain number of their Debentures and exchange all of their remaining
Debentures (the "Non-Converted Debentures") to AM and AM will receive from the
Funds all of the Non-Converted Debentures beneficially owned by the Funds
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto, desiring to be legally bound, do hereby agree as follows:
1. ISSUANCE OF NEW DEBENTURES; CONVERSION OF DEBENTURES.
1.1 DEBENTURES. Subject to the terms and conditions set forth
herein, at the Closing, AM shall issue 15% Subordinated Debentures of AM due
1999 (the "15% Debentures") pursuant to an indenture (the "Indenture")
<PAGE>
substantially in the form attached as Exhibit 1.1 hereto: (x) to Fidelity
Convertible, in the principal amount of Twelve Million Thirty Two Thousand Five
Hundred Dollars ($12,032,500.00) and (y) to Fidelity Healthcare, in the
principal amount of Two Million Ninety Thousand Dollars ($2,090,000.00) in
consideration for: (i) the Conversions (as defined below) by the Funds pursuant
to Section 1.2 below and (ii) the surrender by each of the Funds to AM of the
Non-Converted Debentures, which shall represent all of the Debentures
beneficially owned by each of the Funds after the Conversions.
1.2 CONVERSION OF DEBENTURES. Fidelity Convertible hereby
agrees to convert Twenty Million Seven Hundred Seventeen Thousand One Hundred
Thirteen Dollars and Fifty Two Cents ($20,717,113.52) principal amount of the
Fidelity Convertible Debentures into One Million One Hundred Forty Two Thousand
Sixty Eight (1,142,068) shares of common stock, par value .01 per share of AM
(the "Common Stock") and Fidelity Healthcare hereby agrees to convert Three
Million Five Hundred Ninety Eight Thousand Four Hundred Eight Six Dollars and
Twenty Two Cents ($3,598,486.22) principal amount of the Fidelity Healthcare
Debentures into One Hundred Ninety Eight Thousand Three Hundred Seventy Three
(198,373) shares of Common Stock (collectively, the "Conversions"). Each of the
Funds agrees that it will surrender the Debentures to be converted pursuant to
this Section 1.2, duly endorsed to AM on the back thereof at the offices of
Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York,
New York, accompanied by written notice to AM in the form of Exhibit 1.2
attached hereto. The conversion of the Fidelity Convertible Debentures pursuant
to this Section 2.1 shall for all purposes be deemed to have occurred under and
in accordance with the terms and provisions of the Old Indenture, including,
without limitation, Section 1202 thereof.
2. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gordon Altman
Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New York, five
business days after the qualification of the Indenture for registration on Form
T-3 under the Trust Indenture Act of 1939. At the Closing, each of the Funds
shall deliver to AM bond powers duly endorsed in the form of Exhibit 2 hereto
for the Non-Converted Debentures and each shall conduct the Conversions pursuant
to Section 1.2 above.
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<PAGE>
3. FUTURE EXCHANGES. AM hereby agrees that both Fidelity Healthcare
and Fidelity Convertible shall, in the event of any tender or exchange offer or
any other exchange or purchase of Debentures (other than open market purchases
made in cash which are effected on the American Stock Exchange or such other
securities exchange as the Debentures may then be listed on) by AM (an "Exchange
Offer") with or from any one or more holders of the Debentures for the
acquisition of the Debentures, be provided the opportunity to obtain
consideration, on the same terms and conditions, except as otherwise provided in
this Section 3, as such other holder(s) shall receive in connection with the
closing of any such Exchange Offer, equal to a Proportionate Share (as defined
below) for each Unit (as defined below) surrendered by each Fund. The parties
hereto acknowledge and agree that AM has no obligation to engage in any Exchange
Offer. AM shall provide notice to the Funds of any such Exchange Offer promptly
after such Exchange Offer is made to such other holder(s).
"Unit" shall mean $500 in principal amount of the 15% Debentures and
47.45763852 of the shares of Common Stock each of the Funds received pursuant to
this Agreement (equitably adjusted, in the case of Common Stock, for stock
dividends, stock splits, reclassifications and similar extraordinary events).
"Proportionate Share" shall mean the total consideration received by
each holder of a Debenture through its participation in the Exchange Offer (and
compliance with all terms and conditions thereof) in respect of each $1,000 in
principal amount of Debentures exchanged, tendered, converted or otherwise
surrendered to AM. For example if, in the Exchange Offer a holder of $5,000 in
principal amount of Debentures is entitled to convert $4,000 in principal amount
thereof into 250 shares of Common Stock and surrenders the balance of such
Debentures to AM in exchange for new notes having an initial principal amount of
$2,500, then the Proportionate Share, in respect of the Exchange Offer, would be
50 shares of Common Stock and $500 in initial principal amount of new notes.
4. REPRESENTATIONS OF FIDELITY HEALTHCARE. Fidelity Healthcare
represents to AM that:
4.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Fidelity Healthcare
has all necessary power and authority to
-3-
<PAGE>
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Fidelity
Healthcare and the consummation by Fidelity Healthcare of the transactions
contemplated hereby have been duly and validly authorized and no other
proceedings on the part of Fidelity Healthcare are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Fidelity Healthcare and,
assuming this Agreement constitutes a valid and binding obligation of AM,
constitutes a valid and binding agreement of Fidelity Healthcare, enforceable
against Fidelity Healthcare in accordance with its terms.
4.2 SECURITIES. Fidelity Healthcare owns, and at the Closing
will own, the Fidelity Healthcare Debentures free and clear of all liens,
pledges, encumbrances, security interests or other claims of any nature or kind.
4.3 BINDING AGREEMENT. This Agreement constitutes the legal,
valid and binding agreement of Fidelity Healthcare, enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
4.4 FEES. Fidelity Healthcare has not paid or become obligated
to pay any fee or commission to any investment banker, broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
5. REPRESENTATIONS OF FIDELITY CONVERTIBLE. Fidelity Convertible
represents to AM that:
5.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Fidelity Convertible
has all necessary power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Fidelity Convertible and the consummation by Fidelity
Convertible of the transactions contemplated hereby have been duly and validly
authorized and no other proceedings on the part of Fidelity Convertible are
necessary to authorize this Agreement or to consummate
-5-
<PAGE>
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Fidelity Convertible and, assuming this Agreement
constitutes a valid and binding obligation of AM, constitutes a valid and
binding agreement of Fidelity Convertible, enforceable against Fidelity
Healthcare in accordance with its terms.
5.2 SECURITIES. Fidelity Convertible owns, and at the Closing
will own, the Fidelity Convertible Debentures free and clear of all liens,
pledges, encumbrances, security interests or other claims of any nature or kind.
5.3 BINDING AGREEMENT. This Agreement constitutes the legal,
valid and binding agreement of Fidelity Convertible, enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
5.4 FEES. Fidelity Convertible has not paid or become obligated
to pay any fee or commission to any investment banker, broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
6. REPRESENTATIONS OF AM. AM represents and warrants to the Funds
that, except for all matters disclosed: (x) with regard to Sections 6.2, 6.6,
6.7, 6.8, and 6.9 below, in the SEC Reports (as hereinafter defined); or (y) on
Schedule 6 provided by AM to the Funds:
6.1 ORGANIZATION. AM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. All
Significant Subsidiaries (as defined in the Indenture) of AM are corporations
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. AM and its Significant Subsidiaries
have the requisite corporate power to conduct their businesses as they are
currently conducted and are duly qualified to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
lack of such qualification would not in the aggregate have a
-5-
<PAGE>
material adverse effect on the business, results of operations or financial
condition of AM and its Significant Subsidiaries taken as a whole (a "Material
Adverse Effect"). The copies of AM's Certificate of Incorporation and By-Laws
previously delivered to the Funds are true, complete and correct as of the date
hereof.
6.2 CAPITALIZATION. As of the date hereof, the authorized capital
stock of AM consists of 75,000,000 shares of Common Stock, 3,000,000 shares of
preferred stock, par value $.01 per share and 6,000,000 shares of preferred
stock, par value $.001 per share. As of the date hereof, AM has outstanding
14,069,261 shares of Common Stock and 333,000 shares of convertible preferred
stock, par value $.01 per share, and 329,928 shares of 10% cumulative preferred
stock, par value $.01 per share, all of which shares have been duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights. AM
does not have any outstanding options, warrants, subscriptions or other rights,
agreements or commitments to purchase shares of capital stock which obligates AM
to issue, sell or transfer any shares of capital stock of AM or any other
securities convertible into or evidencing the right to subscribe for any shares
of capital stock of AM. AM owns all of the outstanding shares of capital stock
of each of its Significant Subsidiaries, and such shares are duly authorized,
validly issued, fully paid and non-assessable, and free and clear of all
preemptive rights and all liens, charges, encumbrances, equities, claims and
options whatsoever. There are not any outstanding subscriptions, options,
warrants or other rights, agreements or commitments to purchase any additional
shares of such subsidiary's capital stock or any other securities convertible
into or evidencing the right to subscribe for any capital stock of such
subsidiary. The Common Stock to be issued to each of the Funds pursuant to this
Agreement will be duly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights.
6.3 AUTHORITY RELATIVE TO THIS AGREEMENT. AM has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by AM and the consummation by AM of the transactions contemplated
hereby have been duly and validly authorized by its Board of Directors and no
other corporate proceedings on the part of AM are necessary to authorize this
Agreement or to consummate the transactions so
-6-
<PAGE>
contemplated. This Agreement has been duly and validly executed and delivered
by AM and, assuming this Agreement constitutes a valid and binding obligation of
the Funds, constitutes a valid and binding agreement of AM, enforceable against
AM in accordance with its terms.
6.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
(i) As of the date hereof, the execution and delivery of this
Agreement by AM does not, and the performance of this Agreement by AM will not,
require any filing with or notification to, or any consent, approval,
authorization or permit from, any governmental or regulatory authority (a
"Governmental Entity") except (i) for applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities or "blue
sky" laws, and the filing and qualification of the Indenture under the Trust
Indenture Act or (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent AM Company from performing its obligations under this Agreement and
would not, individually or in the aggregate, have a Material Adverse Effect.
(ii) As of the date hereof, the execution and delivery of this
Agreement by AM does not, and the performance of this Agreement by AM will not
(i) conflict with or violate the Certificate of Incorporation or By-Laws of AM
or of any of its Significant Subsidiaries, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which AM or any of its Significant Subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, statue, treaty, rule or regulation
applicable to AM or any of its Significant Subsidiaries or any of their
respective properties or assets, excepting such violations, breaches, defaults,
terminations, cancellations or accelerations which would not in the aggregate
have a Material Adverse Effect.
-7-
<PAGE>
6.5 SEC REPORTS.
(i) As of the date hereof, AM has filed all required forms,
reports and documents with the Securities and Exchange Commission (the "SEC")
all of which were prepared in accordance with the applicable requirements of the
Securities Act of 1933, as amended, and the Exchange Act. For purposes of this
Agreement the term "SEC Reports" shall mean all forms, reports and documents,
including, without limitation, any proxy statements filed by AM with the SEC,
together with all exhibits to any of the foregoing, and all annual reports
provided to shareholders.
(ii) None of the SEC Reports, including without limitation any
financial statements or schedules included therein, as of the dates they were
respectively filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, and the
balance sheets (including the related notes) included in the SEC Reports fairly
present the consolidated financial position of AM and its consolidated
Significant Subsidiaries as of the respective dates thereof, and the other
related statements (including the related notes) included therein fairly present
the results of operations and cash flows of AM and its consolidated Significant
Subsidiaries for the respective fiscal periods set forth therein in accordance
with generally accepted accounting principles applied on a consistent basis,
except in the case of interim financial statements for normal recurring and
certain non-recurring adjustments necessary for a fair presentation of the
financial position and operating results of AM and its consolidated Significant
Subsidiaries for the interim periods.
6.6 ABSENCE OF CERTAIN CHANGES. As of the date hereof, since
September 30, 1994, there have not occurred any changes concerning AM or its
Significant Subsidiaries having a Material Adverse Effect. As of the date
hereof, except as disclosed in AM's filings and reports under the Exchange Act,
since September 30, 1994, there has not been (a) any declaration, setting aside
or payment of any dividend or other distribution in respect of the shares of
Common Stock or any redemption or other acquisition by AM of any such shares;
(b) any entry into any agreement, commitment or transaction by AM which is
material to AM and its Significant Subsidiaries taken as a whole, except
-8-
<PAGE>
agreements, commitments or transactions in the ordinary course of business; or
(c) any significant change by AM in accounting methods, principles or practices
except as required or permitted by generally accepted accounting principles.
6.7 ENVIRONMENTAL MATTERS. As of date hereof, AM and its Significant
Subsidiaries are in compliance with all Environmental Laws, except for any
noncompliance that either singly or in the aggregate, would not have a Material
Adverse Effect. "Environmental Laws" shall mean all federal, state and local
laws, rules, regulations, ordinances and orders which purport to regulate the
release of hazardous substances or other materials to the environment, or impose
requirements relating to environmental protection.
6.8 OUTSTANDING DEBT. At and as of the Closing and after giving
effect to the Conversion, neither AM nor any of its Significant Subsidiaries
will have outstanding any debt for borrowed money, or evidenced by bonds,
debentures, notes or other similar instruments or under capital leases, except
as reflected on the balance sheet of AM's most recent Form 10-Q filed with the
SEC.
6.9 LITIGATION. As of the date hereof, there is no litigation, suit,
action, proceeding, or compliant pending or, to the knowledge of AM, threatened
against AM or any of its Significant Subsidiaries (including, without
limitation, any litigation, suit, action, proceeding or complaint in which any
person alleges (i) the release, threat of release or placement of any hazardous
substance in connection with the business of AM or any subsidiary of AM, (ii)
the generation, transportation, storage, treatment or disposal of any hazardous
substance, hazardous waste, pollutant, contaminant or other substance listed or
regulated under the Environmental Laws in connection with the business of AM or
any subsidiary of AM, or (iii) any failure of AM or a subsidiary of AM to comply
with any of the Environmental Laws) as to which there is a reasonable likelihood
of an adverse determination and which, if adversely determined, individually or
in the aggregate with other such litigation, suits, actions, proceedings, or
complaints could reasonably be expected to (i) have a Material Adverse Effect,
(ii) materially and adversely effect AM's ability to perform its obligations
under this Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement.
-9-
<PAGE>
6.10 REGISTRATION RIGHTS. As of the date hereof, except as set forth
on Schedule 6, AM has no obligation under any registration rights agreements or
otherwise with any holders of securities of AM (the "Holders"), other than the
Funds, providing the right to cause the registration of or to have registered
any securities held by any such Holder.
6.11 MODIFICATION AGREEMENT. The agreement in the form attached
hereto as Exhibit 6.11 (the "Modification Agreement") has been duly executed and
delivered by the parties thereto.
6.12 DECISIONS DEBT. As of the date hereof, the promissory note
issued by AM to Decisions Incorporated, a Delaware corporation ("Decisions")
dated January 4, 1994 in the original principal amount of $6,000,000 (as amended
by a letter agreement (the "Letter Agreement") dated May 13, 1994), and the
promissory note issued by AM to Decisions, dated August 12, 1994 in the original
principal amount of $6,500,000 constitute all of the debt owed to Decisions by
AM (the "Decisions Debt") and no default by AM exists thereunder; and such
promissory notes together with the Letter Agreement and the Modification
Agreement constitute all of the documents evidencing the Decisions Debt.
6.13 INVESTMENT COMPANY ACT. AM is not an "investment company," or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
6.14 PUBLIC UTILITY HOLDING COMPANY ACT. AM is not a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
6.15 FEES. Neither AM nor any of its subsidiaries has paid or become
obligated to pay any fee or commission to any investment banker, broker, finder
or intermediary in connection with the transactions contemplated by this
Agreement.
7. CONDITIONS TO OBLIGATIONS OF AM. The obligations of AM under
this Agreement are subject to the
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fulfillment, or the waiver in writing by AM, of the conditions set forth in this
Section 7 on or before Closing.
7.1 PERFORMANCE. The Funds have and shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by the Funds prior to or at Closing.
7.2 [INTENTIONALLY LEFT BLANK]
7.3 SECRETARY'S CERTIFICATE. Fidelity Healthcare shall have
delivered to AM a certificate of the Secretary or Assistant Secretary of
Fidelity Select Portfolios ("FSP") certifying as to FSP's Declaration of Trust
and By-Laws, and the incumbency of certain officers of FSP and Fidelity
Healthcare. Fidelity Convertible shall have delivered to AM a certificate of
the Secretary or Assistant Secretary of Fidelity Financial Trust ("FFT")
certifying as to FFT's Declaration of Trust and By-Laws, and the incumbency of
certain officers of FFT and Fidelity Convertible.
7.4 OTHER MATTERS. All corporate or other proceedings in
connection with the transactions contemplated by this Agreement, and all
documents and instruments incident to such transactions, shall be reasonably
satisfactory in substance and form to AM and its counsel, AM and its counsel
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.
7.5 INDENTURE. The Indenture shall have been qualified for
registration on Form T-3 as required under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
8. CONDITIONS TO THE OBLIGATIONS OF FIDELITY HEALTHCARE. The
obligations of Fidelity Healthcare under this Agreement are subject to the
fulfillment, or the waiver in writing by Fidelity Healthcare, of the conditions
set forth in this Section 8 on or before Closing.
8.1 PERFORMANCE. AM has and shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by AM prior to or at Closing.
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<PAGE>
8.2 OPINION OF COUNSEL. AM shall have delivered to Fidelity
Healthcare an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein, counsel
to AM, in the form of Exhibit 8.2 hereto.
8.3 SECRETARY'S CERTIFICATE. AM shall have delivered to
Fidelity Healthcare a certificate of the Secretary or Assistant Secretary of AM,
certifying as to Certificate of Incorporation, By-Laws, corporate resolutions
and incumbency.
8.4 OTHER MATTERS. All corporate or other proceedings in
connection with the transactions contemplated by this Agreement, and all
documents and instruments incident to such transactions, shall be reasonably
satisfactory in substance and form to Fidelity Healthcare and its counsel,
Fidelity Healthcare and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
8.5 INDENTURE. The Indenture shall have been qualified for
registration on Form T-3 as required under the Trust Indenture Act.
8.6 REGISTRATION RIGHTS. AM shall have executed the Registration
Rights Agreement in the form attached hereto as Exhibit 8.6 on behalf of
Fidelity Healthcare.
8.7 MODIFICATION AGREEMENT. The Modification Agreement, as
executed, has not been amended and remains in full force and effect.
9. CONDITIONS TO THE OBLIGATIONS OF FIDELITY CONVERTIBLE. The
obligations of Fidelity Convertible under this Agreement are subject to the
fulfillment, or the waiver in writing by Fidelity Convertible, of the conditions
set forth in this Section 9 on or before Closing.
9.1 PERFORMANCE. AM has and shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by AM prior to or at Closing.
9.2 OPINION OF COUNSEL. AM shall have delivered to Fidelity
Convertible an opinion of Gordon
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Altman Butowsky Weitzen Shalov & Wein, counsel to AM, in the form of Exhibit 8.2
hereto.
9.3 SECRETARY'S CERTIFICATE. AM shall have delivered to
Fidelity Convertible a certificate of the Secretary or Assistant Secretary of
AM, certifying as to Certificate of Incorporation, By-Laws, corporate
resolutions and incumbency.
9.4 OTHER MATTERS. All corporate or other proceedings in
connections with the transactions contemplated by this Agreement, and all
documents and instruments incident to such transactions, shall be reasonably
satisfactory in substance and form to Fidelity Convertible and its counsel,
Fidelity Convertible and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
9.5 INDENTURE. The Indenture shall have been qualified for
registration on Form T-3 as required under the Trust Indenture Act.
9.6 REGISTRATION RIGHTS. AM shall have executed the Registration
Rights Agreement in the form attached hereto as Exhibit 8.6 on behalf of
Fidelity Convertible.
9.7 MODIFICATION AGREEMENT. The Modification Agreement, as
executed, has not been amended and remains in full force and effect.
10. INDEMNIFICATION.
10.1 LEGAL FEES. AM acknowledges that the letter agreement
between Goodwin, Procter & Hoar, counsel to the Funds and AM dated January 17,
1995, relating to the payment of the reasonable legal fees of Goodwin, Procter &
Hoar by AM in connection with this Agreement and the transactions contemplated
hereby, continues to be in full force and effect.
10.2 INDEMNIFICATION OF FUNDS.
(a) AM shall, without limitation as to time (except as
otherwise provided herein) indemnify each of the Funds and their respective
affiliates, employees,
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officers, directors, agents and investment advisors (collectively, the "Funds'
Indemnified Parties") against, and hold each of the Funds' Indemnified Parties
harmless from, all losses, claim, damages, liabilities, costs (including the
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
the "Losses") incurred by such the Funds' Indemnified Parties (i) in connection
with or arising from any breach of any warranty, or the inaccuracy of any
representation made by AM or the failure of AM to fulfill any of its agreements
or undertakings under this Agreement, (ii) pursuant to any investigation or
proceeding against AM or any of the Funds' Indemnified Parties, brought by any
third-party, arising out of or in connection with this Agreement (or any other
document or instrument executed herewith or pursuant hereto) or the transactions
to which they relate, whether or not the transactions contemplated herein are
consummated, which investigation or proceeding requires the participation of, or
is commenced or filed against, such of the Funds' Indemnified Parties because of
this Agreement (or any such document or instrument executed herewith or pursuant
hereto) or the transactions contemplated hereby, or (iii) in connection with or
arising from (A) the failure of AM or any of its subsidiaries to comply with any
federal, state or local environmental, health or safety law, ordinance,
regulation, rule or other legally enforceable requirement, or (B) the presence,
treatment, recycling, storage, disposal or actual or potential release of any
hazardous waste, hazardous substance, hazardous material, or oil or any
petroleum product or pollutant or contaminant at, on or under any property owned
or operated by AM or any of its subsidiaries, or at, on or under any other place
if such hazardous waste, hazardous substance, hazardous material, oil, petroleum
product, pollutant or contaminant was transported or generated by AM or any of
its Subsidiaries. Notwithstanding the foregoing, AM shall not be liable for any
Losses resulting from action on the part of any of the Funds' Indemnified
Parties which is finally determined in such proceeding to be an act of gross
negligence, recklessness or willful misconduct by such of the Funds' Indemnified
Parties or is unrelated to any breach of any warranty, or the inaccuracy of any
representation made by AM or the failure of AM to fulfill any of its agreements
or undertakings under this Agreement, or was not taken by any of the Funds'
Indemnified Parties in reliance upon any of the warranties, covenants or
promises of AM herein or in any other documents contemplated hereby, including
certificates delivered by AM or its representatives pursuant hereto. AM
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<PAGE>
agrees to reimburse any of the Funds' Indemnified Parties promptly for all such
Losses as they are incurred by any of the Funds' Indemnified Parties, subject to
repayment by such of the Funds' Indemnified Parties in the case of any Losses
referred to in the previous sentence. The obligations of AM to each of the
Funds' Indemnified Parties hereunder shall be separate obligations to each of
the Funds' Indemnified Parties, and the liability of AM to any of the Funds'
Indemnified Parties hereunder shall not be extinguished solely because any other
of the Funds' Indemnified Parties are not entitled to indemnity hereunder. The
obligations of AM under this Section 10.2(a) shall survive the termination of
this Agreement.
(b) If the indemnification provided for in Section 10.2(a)
is unavailable to any of the Funds' Indemnified Parties in respect of any Losses
in connection with or arising from any breach of any warranty, or the inaccuracy
of any representation made by AM or the failure of AM to fulfill any of its
agreements or undertakings under this Agreement, then AM in lieu of indemnifying
such of the Funds' Indemnified Parties, shall contribute to the amount paid or
payable by such of the Funds' Indemnified Parties as a result of such Losses in
such proportions as is appropriate to reflect the relative fault of AM, on the
one hand and such of the Funds' Indemnified Parties, on the other hand, in
connection with the actions which resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of AM, on the one hand
and any of the Funds' Indemnified Parties, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, AM, on the one hand or such of the Funds' Indemnified
Parties, on the other hand, and such of the Funds' Indemnified Parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
any such action, statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10.2(b) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
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any person who was not guilty of such fraudulent misrepresentation.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of this
Section 10.2(b), any reasonable legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or proceeding. The obligations of AM under this Section 10.1(b) shall survive
the termination of this Agreement.
10.3 INDEMNIFICATION OF AM.
(a) Each of the Funds shall, without limitation as to time
(except as otherwise provided herein) indemnify AM and its respective
affiliates, employees, officers, directors, agents and investment advisors
(collectively, the "AM Indemnified Parties") against, and hold each AM
Indemnified Party harmless from, all losses, claim, damages, liabilities, costs
(including the costs of preparation and reasonable attorneys' fees) and expenses
(collectively, the "Losses") incurred by such AM Indemnified Party (i) in
connection with or arising from any breach of any warranty, or the inaccuracy of
any representation made by each of the Funds or the failure of each of the Funds
to fulfill any of its agreements or undertakings under this Agreement, or (ii)
pursuant to any investigation or proceeding against each of the Funds or any of
the AM Indemnified Parties, brought by any third-party, arising out of or in
connection with this Agreement (or any other document or instrument executed
herewith or pursuant hereto) or the transactions to which they relate, whether
or not the transactions contemplated herein are consummated, with investigation
or proceeding requires the participation of, or is commenced or filed against,
such AM Indemnified Party because of this Agreement (or any such document or
instrument executed herewith or pursuant hereto) or the transactions
contemplated hereby. Notwithstanding the foregoing, each of the Funds shall not
be liable for any Losses resulting from action on the part of any AM Indemnified
Party which is finally determined in such proceeding to be an act of gross
negligence, recklessness or willful misconduct by such AM Indemnified Party or
is unrelated to any breach of any warranty, or the inaccuracy of any
representation made by each of the Funds or the failure of each of the Funds to
fulfill any of its
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<PAGE>
agreements or undertakings under this Agreement, or was not taken by any AM
Indemnified Party in reliance upon any of the warranties, covenants or promises
of each of the Funds herein or in any other documents contemplated hereby,
including certificates delivered by each of the Funds or its representatives
pursuant hereto. Each of the Funds agrees to reimburse any AM Indemnified Party
promptly for all such Losses as they are incurred by any AM Indemnified Party,
subject to repayment by such AM Indemnified Party in the case of any Losses
referred to in the previous sentence. The obligations of each of the Funds to
the AM Indemnified Parties hereunder shall be separate obligations to each AM
Indemnified Party, and the liability of each of the Funds to AM Indemnified
Parties hereunder shall not be extinguished solely because any other of the AM
Indemnified Parties is not entitled to indemnity hereunder. The obligations of
each of the Funds under this Section 10.3(a) shall survive the termination of
this Agreement.
(b) If the indemnification provided for in Section 10.3(a)
is unavailable to any AM Indemnified Parties in respect of any Losses in
connection with or arising from any breach of any warranty, or the inaccuracy of
any representation made by AM or the failure of AM to fulfill any of its
agreements or undertakings under this Agreement, then each of the Funds in lieu
of indemnifying such AM Indemnified Party, shall contribute to the amount paid
or payable by such AM Indemnified Party as a result of such Losses in such
proportions as is appropriate to reflect the relative fault of each of the
Funds, on the one hand and such AM Indemnified Party, on the other hand, in
connection with the actions which resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of each of the Funds, on
the one hand and any AM Indemnified Party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, each of the Funds, on the one hand or such AM
Indemnified Party, on the other hand, and such AM Indemnified Party's relative
intent, knowledge, access to information and opportunity to correct or prevent
any such action, statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10.3(b) were determined by pro rata
allocation or by any
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other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of this
Section 10.3(b), any reasonable legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or proceeding. The obligations of each of the Funds under this Section 10.3(b)
shall survive the termination of this Agreement.
11. CLOSING CONDITIONS. AM shall use reasonable commercial efforts
(without any obligation to pay any money other than necessary filing fees as
required under the Trust Indenture Act and fees of the Indenture Trustee (as
defined in the Indenture) or undertake any other obligations) to cause the
conditions set forth in Sections 8 and 9 to occur. The Funds shall each use
reasonable commercial efforts (without any obligation to pay any money or
undertake any obligations) to cause the conditions set forth in Section 7 to
occur.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained herein shall survive the closing of the transactions
contemplated hereby.
13. TERMINATION. Either AM or the Funds, in the event that Closing
has not occurred either (i) within five business days after the Indenture has
been qualified for registration on Form T-3 under the Trust Indenture Act, or
(ii) within 60 days after February 6, 1995, may terminate this Agreement and
render such null and void; PROVIDED, HOWEVER, that in the event of any such
termination, all parties hereto shall remain liable for the breach of any
covenant, agreement or warranty, or the inaccuracy of any representation made by
such party under this Agreement, including, without limitation the breach of any
obligation under Section 11 hereof.
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<PAGE>
14. MISCELLANEOUS.
14.1 NOTICES. All notices, demands, requests, or other communications
which may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be mailed by first-
class, registered, certified, or express mail, return receipt requested, postage
prepaid, or transmitted by telegram, telefax or hand delivered, addressed as
follows:
(A) If to AM:
Advanced Medical, Inc.
9775 Businesspark Avenue
San Diego, CA 92131
With a copy to:
Keith L. Schaitkin, Esq.
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036-1510
(B) If to either of the Funds:
With a copy to:
Kevin Dennis, Esq.
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
or such other address as the addressee may indicate by written notice. Each
notice, demand, request, or communication which shall be given or made in the
manner described above shall be deemed sufficiently given or made for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
14.2 SEVERABILITY AND GOVERNING LAW. Should any section or any part
of a section within this Agreement be rendered void, invalid or unenforceable by
any court of law
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for any reason, such provision shall be construed to be enforceable to the
maximum extent possible, and such invalidity or unenforceability shall not void
or render invalid or unenforceable any other section or part of a section in
this Agreement. This Agreement shall be construed and governed by the laws of
the State of New York.
14.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14.4 SECTION HEADINGS. Section titles or captions contained in this
Agreement are inserted as a matter of convenience and for reference purposes
only, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
14.5 SINGULAR AND PLURAL, ETC. Whenever the singular number is used
herein and where required by the context, the same shall include the plural, and
the neuter gender shall include the masculine and feminine genders and vice
versa.
14.6 SUCCESSORS AND ASSIGNS. All rights, covenants and agreements of
the parties contained in this Agreement shall, except as otherwise provided
herein, be binding upon and inure to the benefit of their respective successors
and assigns.
14.7 THIRD PARTY BENEFICIARIES. Except as otherwise provided herein,
nothing in this Agreement is intended to, or shall be construed so as to create
any third party beneficiary in this Agreement or otherwise confer any rights
upon any person, firm or corporation that is not a party hereto.
14.8 PUBLICITY. Except as provided below, any public disclosure of
the transaction contemplated hereby and the terms hereof or results obtained
hereunder (including but not limited to press releases or other statements made
available generally by a party hereto to the public) will be reviewed and
consented to by each party prior to such disclosure. Such consent shall not be
untimely or unreasonably withheld by any party hereto. Notwithstanding the
foregoing, any party hereto may, without the prior written consent of the other
parties hereto: (a) disclose (i) the existence of this Agreement, (ii) the
general
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subject matter thereof (other than material business, technical and commercial
terms thereof or related thereto), and (iii) the identity of the parties hereto;
or (b) make public disclosure of this Agreement and of the transactions
contemplated hereby, the aggregate consideration to be paid hereunder, the terms
hereof or the results obtained hereunder to the extent that such public
disclosure is required by any law, or rule or regulation of any agency,
including, without limitation, the United States Securities and Exchange
Commission or any securities exchange on which securities of the disclosing
party are then listed (and may thereafter disclose without consent the
information so disclosed). Subject to the foregoing provisions of this Section
13.8, AM may file this Agreement and any exhibits hereto pursuant to Form 8-K.
14.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement the Documents and
the attached Exhibits contain the entire understanding of the parties and there
are no further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof. This Agreement may
be amended only by a written instrument signed by all the parties hereto.
14.10 COOPERATION AND FURTHER ASSURANCES. Each party hereto agrees to
execute, acknowledge, deliver, file and record such further certificates,
instruments and documents, and to do all such other acts and things as may be
required by law, or as may, in the reasonable opinion of a party hereto or
counsel to any of them, be necessary or advisable, to carry out the full intents
and purposes of this Agreement.
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IN WITNESS WHEREOF, the parties have hereunto set their hands as of
the date first above written.
ADVANCED MEDICAL, INC.
By: /s/ Joseph W. Kuhn
-------------------------
Name: Joseph W. Kuhn
Title: President
FIDELITY SELECT HEALTHCARE
FUND
By: /s/ John Costello
-------------------------
Name: John Costello
Title: Assistant
Treasurer
FIDELITY CONVERTIBLE
SECURITIES FUND
By: /s/ John Costello
-------------------------
Name: John Costello
Title: Assistant
Treasurer
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
Exhibit Description
- ------- -----------
Exhibit 1.1 Form of Indenture
Exhibit 1.2 Form of Written Notice
Exhibit 2 Form of Bond Powers
Exhibit 6.11 Modification Agreement
Exhibit 8.2 Opinion of AM's Counsel
Exhibit 8.6 Registration Right Agreement
Schedule Description
- ------- -----------
Schedule 6 Schedule related to AM Representations
<PAGE>
EXCHANGE AGENT AGREEMENT
This Exchange Agent Agreement ("Agreement") is entered into as of
April 19, 1995, between Advanced Medical, Inc., a Delaware corporation ("AM"),
with its principal offices at 9775 Businesspark Avenue, San Diego, California
92131, and Mellon Securities Trust Company ("Mellon") with its principal offices
at 85 Challenger Road, Overpeck Centre, Ridgefield Park, New Jersey 07660.
Terms used herein and not otherwise defined shall have the meaning ascribed to
them in the Exchange Circular (as such term is defined below).
R E C I T A L:
AM is offering to exchange, upon the terms and subject to the
conditions set forth in that certain exchange circular dated April 19, 1995 (the
"Exchange Circular") and in the related letter of transmittal (the "Letter of
Transmittal"), copies of which are annexed hereto as Exhibits A and B,
respectively, as they may be amended from time to time (which together
constitute the "Offer"), its 15% Subordinated Debentures due July 15, 1999 ("New
Debentures") and shares of its common stock, $.01 par value per share ("Common
Stock"), for its 7-1/4% Convertible Subordinated Debentures due January 15, 2002
("Old Debentures") in the ratio of $500 principal amount of New Debentures and
47 shares of Common Stock for each $1,000 principal amount of Old Debentures
tendered, and AM wishes to retain the services of Mellon as Exchange Agent in
connection with the Offer.
Accordingly, the parties hereto agree as follows:
I. SERVICES
A. In performing under this Agreement, Mellon will act in accordance with
the terms and subject to the conditions set forth below and in
accordance with the Letter of Transmittal, which is to be used by
Holders to accept the Offer and which contains instructions with
respect to the delivery of certificates for Old Debentures. The Offer
shall expire at 5:00 P.M., New York City time, on May 19, 1995 (the
"Initial Expiration Date"), or at any subsequent time or date to which
AM shall have extended the period of time for which the Offer is open
by notice to Mellon (the later of
<PAGE>
the Initial Expiration Date and the latest time and date at which the
Offer as so extended shall expire being hereinafter called the
"Expiration Date"). Mellon's duties, liabilities and rights are
exclusively set forth herein.
B. In acting as Exchange Agent, Mellon will perform the following
services:
1. Mellon is to examine the Letters of Transmittal, certificates for
Old Debentures and any other required documents delivered,
transmitted or mailed to it by or for Holders to ascertain
whether (i) the Letters of Transmittal are duly executed and
properly completed in accordance with the instructions as set
forth therein, (ii) any other required documents are duly
executed and properly completed and (iii) whether the Old
Debentures have otherwise been properly tendered.
Notwithstanding the foregoing, Old Debentures that AM shall
approve as having been properly tendered shall be considered to
be properly tendered. In each case where a Letter of Transmittal
or other document has been improperly executed or completed, or
for any other reason is not in proper form, or any of the
certificates for the Old Debentures are not in proper form for
transfer, or some other irregularity in connection with the
acceptance of the Offer exists, and if the time available to
Mellon so permits, Mellon will take such action as it considers
appropriate to notify the tendering Holder of such irregularity.
Mellon is further authorized, upon consultation with AM, to
request additional documents from any person tendering Old
Debentures as Mellon deems appropriate, but is not authorized
unless otherwise instructed by AM to accept any alternative,
conditional or contingent tender, or any other tender which
Mellon deems to be defective for any reason. AM shall have full
discretion to determine whether any tender is complete and proper
and have the absolute right to reject any or all tenders of any
particular Old Debentures determined by it not to be in
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proper form and to determine whether the acceptance of such
tenders may, in the opinion of counsel for AM, be unlawful; it
being specifically agreed that Mellon shall neither have the
discretion nor responsibility with respect to these
determinations. AM also reserves the absolute right, subject to
applicable law and the terms set forth in the Exchange Circular,
to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Old Debentures.
2. Within two days from the date hereof, Mellon will make a request
to establish accounts with respect to the Old Debentures at The
Depository Trust Company ("DTC"), the Midwest Securities Trust
Company ("MSTC") and the Philadelphia Depository Trust Company
("PDTC" and together with DTC and MSTC, the "Book-Entry Transfer
Facilities") for purposes of the Offer. Any financial
institution that is a participant in a Book-Entry Transfer
Facility's system may make book-entry delivery of the Old
Debentures by causing DTC, MSTC or PDTC to transfer such Old
Debentures into the account maintained by Mellon pursuant to this
paragraph in accordance with such Book-Entry Transfer Facility's
procedure for such transfer. However, although delivery of the
Old Debentures may be effected through book-entry transfer at the
Book-Entry Transfer Facilities, the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed with any
required signature guarantees and any other required documents
must, in any case, be transmitted to and received by Mellon at
one of its addresses set forth on the back cover of the Exchange
Circular, on or prior to the Expiration Date, or the guaranteed
delivery procedure described in the Exchange Circular must be
complied with in order for the Old Debentures to be properly
tendered.
3. With the written approval, or oral approval confirmed in writing,
of an executive officer
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<PAGE>
of or attorney for AM designated by AM, Mellon is authorized to
waive any irregularities in connection with the acceptance of the
Offer.
4. Mellon is authorized and directed to allow persons to tender Old
Debentures without making immediate delivery of certificates for
such Old Debentures and any other documents required to be
tendered pursuant to the Offer if, prior to the Expiration Date,
a firm or other entity identified in Rule 17A(d)-15 under the
Exchange Act, including any (i) bank, (ii) broker, dealer,
municipal securities dealer, municipal securities broker,
government securities dealer or governmental securities broker,
(iii) credit union, (iv) national securities exchange, registered
securities association or clearing agency, or (v) savings
association (each of the foregoing being referred to as an
"Eligible Institution") has furnished Mellon with a properly
completed and duly executed notice of guaranteed delivery,
substantially in the form of Exhibit C annexed hereto. The
notice of guaranteed delivery may be delivered by hand or
transmitted by telegram, facsimile transmission or mail to Mellon
and must include a guarantee by an Eligible Institution. In all
cases, the New Debentures and Common Stock issuable in exchange
for Old Debentures tendered and accepted for exchange pursuant to
the Offer will be made only after timely receipt by Mellon of the
certificates representing such Old Debentures, or of confirmation
of a book-entry delivery thereof, the Letter of Transmittal (or a
facsimile thereof) properly completed and duly executed with any
required signature guarantees, and any other documents required
by the Letter of Transmittal. Mellon shall have no duty to
enforce any guarantees given pursuant to this paragraph.
5. As promptly as practicable following the close of each business
day up to and including the Initial Expiration Date or any
subsequent Expiration Date (in any case
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<PAGE>
before 11:00 A.M., New York City time on the following business
day), Mellon shall advise by telephone or facsimile transmission
(confirmed in writing on the business day following any oral
communication) AM and such other persons as AM may request, as to
(i) the number of Old Debentures tendered, (ii) the number of Old
Debentures defectively tendered, (iii) the number of Old
Debentures validly tendered, (iv) the number of Old Debentures
validly tendered represented by certificates physically held by
Mellon or as to which Mellon has received confirmation as to
book-entry transfer in Mellon's account at a Book-Entry Transfer
Facility, (v) the number of Old Debentures represented by
appropriate Notices of Guaranteed Delivery on such day and (vi)
the number of Old Debentures delivered which have been previously
tendered pursuant to Notices of Guaranteed Delivery. In
addition, Mellon will also provide the aforementioned persons,
upon oral request made from time to time prior to the Expiration
Date, with such other information as such persons may reasonably
request.
6. AM will be deemed to have accepted for exchange, and thereby
exchanged, Old Debentures properly tendered as, if and when AM
gives oral or written notice to Mellon, as agent for the
tendering Holders, of AM's acceptance for exchange of such Old
Debentures pursuant to the Offer. The exchange of the Old
Debentures accepted for exchange pursuant to the Offer for the
New Debentures and Common Stock issuable in respect thereof will
be made promptly after the Acceptance Date. Mellon will act as
agent for the tendering Holders, for the purposes of (i) causing
or directing the transmission of certificates representing the
New Debentures; (ii) causing or directing the transmission of new
certificate(s) representing the balance, if any, of Old
Debentures which were not tendered or accepted for exchange to
tendering Holders (or in the case of Old Debentures delivered
-5-
<PAGE>
by book-entry transfer into Mellon's account at a Book-Entry
Transfer Facility, credit the tendering Holder's account at such
Book-Entry Transfer Facility); and (iii) transmitting
certificates representing the Common Stock to tendering Holders.
Mellon shall thereupon deliver or cause to be delivered to U.S.
Trust Company of California, N.A., 515 South Flower Street, Suite
2700, Los Angeles, California 90071, Attn: Corporate Trust
Department, for application and cancellation all certificates for
Old Debentures accepted for exchange by AM. Mellon is authorized
and directed to provide upon request and collect the forms for
statements certifying a Holder's foreign status for purposes of
the back-up withholding exemptions and to collect Substitute Form
W-9s from Holders.
7. All tenders of Old Debentures pursuant to the Offer are
irrevocable, except that Old Debentures tendered may be withdrawn
at any time prior to the Expiration Date, and unless theretofore
accepted for exchange pursuant to the Offer, may also be
withdrawn at any time after June 19, 1995. For a withdrawal to
be effective, a written, telegraphic, or facsimile transmission
notice of withdrawal must be received by Mellon at one of its
addresses set forth on the back cover of the Exchange Circular.
Any notice of withdrawal must specify the name of the person who
tendered the Old Debentures to be withdrawn and identify the Old
Debentures to be withdrawn (including the certificate number or
numbers and principal amount of such Old Debentures). Any notice
of withdrawal must be signed by the Holder in the same manner as
the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the
tender has succeeded to the ownership of the Old Debentures. If
Old Debentures have been tendered pursuant to the book-entry
tender procedure, any notice of withdrawal must specify, in lieu
of certificate numbers, the name and account
-6-
<PAGE>
number at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Old Debentures. All questions as to
the form and validity (including time of receipt) of notices of
withdrawal will be determined by AM in its sole discretion, which
determination shall be final and binding.
8. If, pursuant to the Offer, tendered Old Debentures are withdrawn
or AM does not accept the Old Debentures tendered for any reason,
or if certificates submitted represent more Old Debentures than
are tendered, Mellon shall cause or direct the return to the
party who deposited them the deposited certificates for such
unexchanged Old Debentures (or in the case of Old Debentures
delivered by book-entry transfer into Mellon's account at a Book-
Entry Transfer Facility, credit the tendering Holder's account at
such Book-Entry Transfer Facility) as promptly as practicable
after such withdrawal, or the expiration, termination or
withdrawal of the Offer, as the case may be.
9. All certificates for Old Debentures withdrawn or not accepted for
exchange and certificates for Common Stock issuable in connection
with the Offer shall be forwarded by first class mail under
Mellon's blanket surety bond, protecting Mellon and AM from loss
or liability arising out of the non-receipt or non-delivery of
such certificates or by registered mail insured separately for
the replacement value of such certificates. (However, it is
understood that, under this Agreement, certificates may, from
time to time, be transported by a common carrier. In such cases,
it is understood that Mellon will rely (after reasonable
investigation) on the carrier's insurance policies to provide
coverage in lieu of the aforementioned coverages).
10. As Exchange Agent hereunder, Mellon:
-7-
<PAGE>
(a) shall have no duties or obligations other than those
specifically set forth herein or in the Exhibits attached
hereto and made a part hereof;
(b) will be regarded as making no representation and having no
responsibilities as to the validity, sufficiency, value or
genuineness of any certificates evidencing Old Debentures
deposited with it hereunder, and will not be required to and
will make no representation as to the validity, value or
genuineness of the Offer;
(c) may rely on and shall be protected in acting in reliance
upon any certificate, instrument, opinions, notice, letter,
telegram or other document or security delivered to it and
believed by it to be genuine and to have been signed by the
proper party or parties;
(d) may rely on and shall be protected in acting upon the
written instructions of Joseph Kuhn, an officer of AM, and
any other person identified by him by written notice to the
Exchange Agent;
(e) shall not at any time advise any person tendering hereunder
as to the wisdom in making such tender or as to the market
value or decline or increase in market value of the Old
Debentures; and
(f) shall stamp all Letters of Transmittal, telegrams, telexes,
facsimile transmissions, notices and letters submitted to it
pursuant to the Exchange Circular to indicate the date and
time of the receipt thereof and these documents, or copies
thereof, shall be preserved by Mellon for a reasonable time
not to exceed one year or the term of this Agreement,
whichever is longer, and thereafter shall be delivered by
Mellon to AM.
-8-
<PAGE>
11. If at any time the Offer shall be terminated in accordance with
the terms thereof, AM shall promptly notify Mellon of such
termination and the time of such termination. If such
termination shall occur, all Old Debentures tendered to Mellon
prior to the time of such termination (except such of the Old
Debentures as shall have been accepted for exchange by AM prior
to the effectiveness of such termination), and all items then or
thereafter in the possession of Mellon which relate to such Old
Debentures shall be promptly returned to or upon the order of the
tendering Holders without expense to such Holders.
12. Mellon is not authorized to offer or to pay any concessions to
brokers, dealers, commercial banks, trust companies or other
persons or to engage or utilize any person to solicit tenders.
13. Any extension of the Offer shall be upon oral (to be confirmed in
writing promptly thereafter) or written notice to Mellon from AM,
given prior to 9:00 A.M., New York City time, on the business day
next succeeding the Initial Expiration Date or any then current
Expiration Date or at any time prior thereto.
C. Mellon may consult legal counsel of its own selection including
attorneys in its employ ("Counsel"), with respect to any questions
relating to its duties and responsibilities hereunder. Mellon shall
not be held liable for any advice taken or omitted by it in good faith
in reliance upon such advice of Counsel. Mellon shall be under no
obligation to institute or defend any action, suit or legal proceeding
in connection herewith or to take any other action likely to involve
it in expense, unless first indemnified by AM to Mellon's reasonable
satisfaction.
II. FEES
In consideration of Mellon's agreement to act as Exchange Agent
hereunder, AM shall pay for
-9-
<PAGE>
Mellon's services in accordance with the schedule of charges set forth
on Exhibit D, attached hereto, together with reasonable expenses and
disbursements, including, but not limited to, postage, insurance,
telephone charges and reasonable Counsel fees which may be required in
this connection, except such expenses arising from Mellon's own
negligence, bad faith or willful failure to perform its obligations
hereunder.
III. INDEMNIFICATION AND CLAIMS
AM covenants and agrees to indemnify Mellon and hold it harmless
against any claim, liability or expense (including, without
limitation, reasonable legal counsel and other fees and expenses)
arising out of or in connection with the performance of Mellon's
duties hereunder; provided, however, that Mellon shall not be
indemnified against any such claim, liability or expense arising out
of its bad faith, gross negligence or willful failure to perform its
obligations hereunder. In no case shall AM be liable under this
indemnity with respect to any claim against Mellon unless AM shall be
notified by Mellon, by letter or by telecopy, confirmed by letter, of
such written assertion of a claim against it or any action commenced
against it promptly after Mellon shall have received any such written
assertion of a claim or shall have been served with summons or other
legal process giving information as to the nature and basis of the
claim, but Mellon's failure to give such notice within such time
period shall not operate to relieve AM from any liability for
indemnity hereunder except to the extent that AM is actually
prejudiced by Mellon's failure to give such notice within such time
period. AM shall be entitled to participate at its own expense in the
defense against any such claim or legal action, and if AM so elects at
any time after receipt of such notice, or Mellon in such notice so
directs, AM shall assume, at its own expense, the defense of any suit
brought to enforce any such claim. In no event shall AM be liable to
Mellon for any settlement amount agreed to by Mellon without AM's
prior consent (which consent shall not be unreasonably withheld) in
-10-
<PAGE>
connection with any claim as to which AM is required to indemnify
Mellon under this Agreement.
IV. GOVERNING LAW
This Agreement and Mellon's appointment as Exchange Agent shall be
construed and enforced in accordance with the laws of the State of New
York and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of the
parties hereto.
V. MODIFICATION
This Agreement may be modified or supplemented in writing by any vice
president or high ranking officer of AM authorized to give notice,
approval or waiver on its behalf upon written agreement by Mellon to
such modification or supplement.
VI. COUNTERPARTS
This Agreement may be executed in one or more counterparts which in
the aggregate shall be one Agreement.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first written above.
ADVANCED MEDICAL, INC.
By: /s/ Joseph W. Kuhn
------------------------------
Name: Joseph W. Kuhn
Title: President
MELLON SECURITIES TRUST COMPANY
By: /s/ James D. Aramanda
------------------------------
Name: James D. Aramanda
Title: Senior Vice President
<PAGE>
EXHIBIT D
MELLON SECURITIES TRUST COMPANY
FEE SCHEDULE
FLAT FEE OF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000.00
will include the following services:
EXAMINATION OF LETTER OF TRANSMITTAL
PROCESSING OF GOOD ORDER TENDERS
DEFECTIVE TENDERS
DEFECTIVE TENDERS REQUIRING LEGAL ANALYSIS
PROTECT ITEMS (GUARANTEED DELIVERY/BROKERS AND BANKS)
WITHDRAWALS
RETURN OF LATE ITEMS (IF APPLICABLE)
DELIVERY OF DEBITS TO TRUSTEE
ADDITIONAL FEES:
Additional Expiration dates through 5:00 PM
New York City time . . . . . . . . . . . . . . . . . . . .$500.00 per expiration
after 5:00 PM through Midnight New York City
time . . . . . . . . . . . . . . . . . . . . . . . . . .$1,500.00 per expiration
OUT-OF-POCKET EXPENSES:
Any expenses of this nature, which include but are not limited to telephone,
facsimile transmissions, postage, insurance, messenger, stationary, fees and
expenses of counsel, etc., will be billed in addition to the fees stated above.
<PAGE>
April 17, 1995
Mr. Joseph W. Kuhn
President
Advanced Medical, Inc.
9775 Businesspark Avenue
San Diego, California 92131
Dear Mr. Kuhn:
This Letter Agreement sets forth the terms and conditions pursuant to
which Advanced Medical, Inc. (the "Company") has retained D. F. King & Co., Inc.
("King") in connection with the proposed exchange offer described below.
The Company proposes to offer to exchange (the "Exchange Offer") its
15% Subordinated Debentures due July 15, 1999 and shares of its common stock,
$.01 par value per share ("Common Stock"), for its 7-1/4% Convertible
Subordinated Debentures due January 15, 2002 ("Old Debentures") in the ratio of
$500 principal amount of New Debentures and 47 shares of Common Stock for each
$1,000 principal amount of Old Debentures tendered by holders of the Old
Debentures.
1. The Company hereby retains King as Information Agent for advisory
and consulting services in connection with the Exchange Offer and requests and
authorizes King to contact, and to provide information with respect to the
Exchange Offer to, holders of the Old Debentures. For this purpose, King is
authorized to use, and will be supplied by the Company with as many copies as
King may reasonably request of, the following materials filed with the
Securities and Exchange Commission (the "Commission") or publicly released (or
to be filed or publicly released) by the Company in connection with the Exchange
Offer (collectively, the "Exchange Offer Materials"): (i) Exchange Circular;
(ii) Letter of Transmittal; (iii) press releases and newspaper advertisements
relating to the Exchange Offer; (iv) cover letter to holders of Old Debentures;
(v) letter to securities dealers, banks and trust companies relating to the
Exchange Offer; (vi) letter from securities dealers, banks and trust companies
to their customers relating to the Exchange Offer; (vii) notice of guaranteed
delivery; and (viii) any and all amendments or supplements to any of the
foregoing.
2. The Company agrees to pay King as compensation for its services a
fee of $7,500, $2,500 of which is due
<PAGE>
Mr. Joseph W. Kuhn
April 17, 1995
Page 2
upon execution of this Letter Agreement, and the balance of which is due upon
the completion, expiration or termination, as the case may be, of the Exchange
Offer. Further, the Company agrees to pay King $2.90 for each completed
outgoing telephone contact and $1.90 for each incoming telephone contact in
connection with the Exchange Offer. In the event the Company requests King to
provide additional services, the Company agrees to pay King reasonable and
customary compensation, in an amount, if any, to be mutually agreed upon. The
Company further agrees to reimburse King for all out-of-pocket expenses
(including reasonable counsel's fees and disbursements) incurred by King in
connection with its retention hereunder. The Company will meet these expenses
from an Expense Advance Account (the "Account") established with King by an
immediate advance of $2,500. The Account will be replenished by the Company
from time-to-time, promptly upon King's request, accompanied by a summary of
prior expenses. Any unused portion of the Account will be returned promptly to
the Company at the end of the term of the engagement covered by this Letter
Agreement. The Company agrees and acknowledges that its obligation under this
paragraph 2 is not in any way conditional upon the successful consummation of
the Exchange Offer or dependent upon the amount of Old Debentures acquired by
the Company pursuant to the Exchange Offer.
3. The Company agrees that King shall have the right to pass upon and
approve any and all references to King in the Exchange Offer Materials. The
Company shall not file with the Commission, any other governmental or regulatory
authority or body or any court or otherwise make public, any document containing
any reference to King unless and until King shall have approved such reference.
4. The Company represents and warrants to King that:
(i) this Letter Agreement is a valid and binding agreement on
the Company's part;
(ii) all necessary corporate action will be duly taken by the
Company prior to the commencement of the Exchange Offer to authorize the
Exchange Offer, and the
<PAGE>
Mr. Joseph W. Kuhn
April 17, 1995
Page 3
purchase of Old Debentures in connection with the Exchange Offer;
(iii) all Exchange Offer Materials will comply, in all material
respects, with the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder, and none of the Exchange Offer
Materials, and no other report, filing, document, release or communication
published or filed in connection with the Exchange Offer, will contain any
untrue or misleading statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading;
(iv) the Exchange Offer, and the exchange of Old Debentures in
connection with the Exchange Offer, will comply, in all material respects, with
all applicable requirements of law including the applicable rules or regulations
of any governmental or regulatory authority or body, and no material consent or
approval of, or filing with, any governmental or regulatory authority or body
(other than any required filings under the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder)
is required in connection with the making or consummation of the Exchange Offer
(or, if any such material consent, approval or filing is required it will be
duly obtained or made prior to the commencement of the Exchange Offer); and
(v) the Exchange Offer and the execution, delivery and
performance of this Letter Agreement, will not conflict with or result in a
breach of or constitute a default under the Company's certificate of
incorporation or by-laws, or any material agreement, indenture, mortgage, note
or other instrument by which the Company is bound.
5. The Company will advise King promptly of the occurrence of any
event which would cause the Company not to proceed with, or to withdraw or
abandon the Exchange Offer. The Company will also advise King promptly of any
proposal or requirement to amend or supplement any of the Exchange Offer
Materials in a material way.
<PAGE>
Mr. Joseph W. Kuhn
April 17, 1995
Page 4
6. The Company hereby agrees to indemnify and hold harmless King,
King's controlling persons, officers, directors, employees, agents and
representatives (collectively, the "Indemnified Persons") from and against any
and all losses, claims, damages, liabilities and expenses whatsoever (including
but not limited to, all reasonable counsel fees, disbursements and other out-of-
pocket expenses) incurred by such Indemnified Persons in investigating,
preparing to defend or defending (or appearing or preparing for appearance as a
witness in connection with) any claim, litigation, proceeding, investigation, or
governmental or stock exchange, inquiry, commenced or threatened or any claim
whatsoever: (i) arising out of or based upon any facts or circumstances
constituting a violation of, or in conflict with, any of the representations
and warranties set forth in paragraph 4 above; or (ii) arising out of, relating
to or in connection with the Exchange Offer except for the Indemnified Person's
willful misconduct or gross negligence. The Company shall reimburse such
Indemnified Persons for such reasonable counsel fees and disbursements and other
out-of-pocket expenses at such time as they are paid or incurred by such
Indemnified Persons. The foregoing indemnity shall be in addition to any
liability which the Company might otherwise have to the Indemnified Persons.
7. King agrees to notify the Company promptly of the assertion of any
claim against any of the Indemnified Persons in connection with the Exchange
Offer.
8. The representations and warranties contained in paragraph 4 above
and the indemnity agreement contained in paragraphs 6 and 7 above shall remain
operative and in full force and effect regardless of: (i) the termination,
expiration or consummation of the Exchange Offer; and (ii) any investigation
made by or on behalf of any party.
9. This Letter Agreement shall be construed and enforced in
accordance with the laws of the State of New York. It is agreed that any action,
suit or proceeding arising out of or based upon this Letter Agreement shall be
brought in the United States District Court for the Southern District of New
York or any court of the State of New York of competent jurisdiction located in
such District, and the
<PAGE>
Mr. Joseph W. Kuhn
April 17, 1995
Page 5
parties hereto hereby consent to the IN PERSONAM jurisdiction and venue of any
such court and to service or process by certified mail, return receipt
requested.
If any provision of this Letter Agreement shall be held illegal or
invalid by any court, this Letter Agreement shall be construed and enforced as
if such provision had not been contained herein and shall be deemed an agreement
between the parties hereto to the fullest extent permitted by law.
If the foregoing correctly sets forth the understanding between the
Company and King, please indicate acceptance thereof in the space provided below
for such purpose, whereupon this Letter Agreement shall constitute a binding
agreement between the parties hereto.
D.F. KING & CO., INC.
By:/s/ Thomas A. Long
-------------------------
Thomas A. Long
Senior Vice President
Accepted as of the date
first above written:
ADVANCED MEDICAL, INC.
By: /s/ Joseph W. Kuhn
-------------------------
Joseph W. Kuhn
President
<PAGE>
- --------------------------------------------------------------------------------
ADVANCED MEDICAL, INC.
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
___________________
Indenture
Dated as of _________, 1995
__________________
$30,000,000
15% Subordinated Debentures Due 1999
- --------------------------------------------------------------------------------
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318(a) of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ----------
Section 310(a)(1) ................... 609
(a)(2) ................... 609
(a)(3) ................... Not Applicable
(a)(4) ................... Not Applicable
(a)(5) ................... 609
(b) ................... 608
610
Section 311(a) ................... 613
(b) ................... 613
Section 312(a) ................... 701
702(a)
(b) ................... 702(b)
(c) ................... 702(c)
Section 313(a) ................... 703(a)
(b) ................... 703(a)
(c) ................... 703(a)
(d) ................... 703(b)
Section 314(a) ................... 704
(a)(4) ................... 101
1004
(b) ................... Not Applicable
(c)(1) ................... 102
(c)(2) ................... 102
(c)(3) ................... Not Applicable
(d) ................... Not Applicable
(e) ................... 102
Section 315(a) ................... 601
(b) ................... 602
-i-
<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------- ----------
(c) ................... 601
(d) ................... 601
(e) ................... 514
Section 316(a) ................... 101
(a)(1)(A) ................... 502
512
(a)(1)(B) ................... 513
(a)(2) ................... Not Applicable
(b) ................... 508
(c) ................... 104(c)
Section 317(a)(1) ................... 503
(a)(2) ................... 504
(b) ................... 1003
Section 318(a) ................... 107
- ------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . . 8
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . . 8
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . 9
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . 10
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . 11
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . 11
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . . 12
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 12
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . 12
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . 12
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 202. Form of Face of Security. . . . . . . . . . . . . . . . . . . 13
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . 15
SECTION 204. Form of Trustee's Certificate of Authentication . . . . . . . 17
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . . . 19
SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . . . 19
SECTION 305. Registration, Registration of Transfer and Exchange . . . . . 20
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . . . 21
SECTION 307. Payment of Interest; Interest Rights Preserved. . . . . . . . 22
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SECTION 308. Persons Deemed Owners.. . . . . . . . . . . . . . . . . . . . 23
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . 24
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . 24
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . . 26
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . . 28
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . 30
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . . 31
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 31
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest to Redeem. . . . . . . . . . . . . . . . 32
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . . 33
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . 33
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . 33
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . . 33
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 34
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 34
SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . 34
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . 35
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . 35
SECTION 604. Not Responsible for Recitals or Issuance of Securities. . . . 37
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . 37
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . 37
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . . 37
-iv-
<PAGE>
Page
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SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . 38
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . 39
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . 39
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . . 40
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 613. Preferential Collection of Claims Against Company . . . . . . 41
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . 41
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . 43
SECTION 702. Preservation of Information; Communications to Holders. . . . 44
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 704. Reports by Company. . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. . . . . 45
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . 46
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders. . . . . . 46
SECTION 902. Supplemental Indentures With Consent of Holders . . . . . . . 47
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . . 48
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . 48
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . 48
SECTION 906. Reference in Securities to Supplemental Indentures. . . . . . 48
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ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . . 49
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . 49
SECTION 1003. Money for Security Payments to Be Held in Trust . . . . . . . 49
SECTION 1004. Statement by Officers as to Default . . . . . . . . . . . . . 51
SECTION 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . 51
SECTION 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . 52
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . . . 52
SECTION 1102. Applicability of Article. . . . . . . . . . . . . . . . . . . 52
SECTION 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . 52
SECTION 1104. Selection by Trustee of Securities to Be Redeemed . . . . . . 53
SECTION 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . 53
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . 54
SECTION 1107. Securities Payable on Redemption Date . . . . . . . . . . . . 54
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . . . 55
ARTICLE TWELVE
[Intentionally left blank.]
ARTICLE THIRTEEN
Subordination of Securities
SECTION 1301. Securities Subordinate to Senior Indebtedness . . . . . . . . 55
SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . 55
SECTION 1303. Prior Payment to Senior Indebtedness Upon Acceleration of
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 1304. No Payment When Senior Indebtedness in Default. . . . . . . . 57
SECTION 1305. Payment Permitted If No Default . . . . . . . . . . . . . . . 58
SECTION 1306. Subrogation to Rights of Holders of Senior Indebtedness . . . 59
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SECTION 1307. Provisions Solely to Define Relative Rights . . . . . . . . . 59
SECTION 1308. Trustee to Effectuate Subordination . . . . . . . . . . . . . 60
SECTION 1309. No Waiver of Subordination Provisions . . . . . . . . . . . . 60
SECTION 1310. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1311. Reliance on Judicial Order or Certificate of Liquidating
Agent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1312. Trustee Not Fiduciary for Holders of Senior Indebtedness. . . 62
SECTION 1313. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights. . . . . . . . . . . . . . . 62
SECTION 1314. Article Applicable to Paying Agents . . . . . . . . . . . . . 63
SECTION 1315. Rights of Holders of Senior Indebtedness. . . . . . . . . . . 63
SECTION 1316. Consent to Amendments of Subordination Provisions . . . . . . 63
ARTICLE FOURTEEN
Right to Require Repurchase
SECTION 1401. Right to Require Repurchase . . . . . . . . . . . . . . . . . 64
SECTION 1402. Notice; Method of Exercising Repurchase Right . . . . . . . . 64
SECTION 1403. Deposit of Repurchase Price . . . . . . . . . . . . . . . . . 65
SECTION 1404. Securities Not Repurchased on Repurchase. . . . . . . . . . . 65
SECTION 1405. Securities Repurchased in Part. . . . . . . . . . . . . . . . 65
SECTION 1406. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 66
SECTION 1407. Adjustment of Reference Price . . . . . . . . . . . . . . . . 67
SECTION 1408. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . 70
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<PAGE>
INDENTURE, dated as of ________, 1995, between Advanced Medical, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 9775
Businesspark Avenue, San Diego, California 92131, and United States Trust
Company of New York, a New York banking corporation, as Trustee (herein called
the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 15%
Subordinated Debentures Due 1999 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE>
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) the words "herein", "hereof " and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.
"Board of Directors" means either the board of directors of the
Company or any committee of that board duly authorized to act for it hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
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<PAGE>
"Change in Control" has the meaning ascribed to it in Section 1406.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company and which is not subject to redemption by the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 114 West 47th Street, 15th Floor, New York, New York 10036-1532, Attention:
Corporate Trust Department.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Decisions" shall mean Decisions Incorporated, a Delaware corporation,
and its successors and assigns.
"Defaulted Interest" has the meaning specified in Section 307.
"Event of Default" has the meaning specified in Section 501.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
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<PAGE>
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Securities.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, EXCEPT:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities; PROVIDED that,
if such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to
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<PAGE>
this Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such Securities
are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, limited liability company,
partnership, association, joint stock company, joint venture, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture and includes any Repurchase Date as defined in Section 1401.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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<PAGE>
"Reference Price" shall initially be equal to $18.14 per share of
Common Stock and is subject to adjustment as provided in Section 1407.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 1 or July 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee, means
the Chairman or any Vice-Chairman of the Board, the Chairman or any Vice-
Chairman of the Executive Committee of the Board, the Chairman of the Trust
Committee, the President or any other officer or assistant officer assigned by
the Trustee to administer its corporate trust matters, or any person reporting
directly to any such person.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest on (a) the (i) promissory note issued by the Company to Decisions
Incorporated, a Delaware corporation, dated January 4, 1994 in the original
principal amount of $6,000,000 (as amended by a letter agreement dated May 13,
1994 and further amended by a modification agreement dated February 3, 1995) and
(ii) promissory note issued by the Company to Decisions Incorporated, a Delaware
corporation, dated August 12, 1994 in the original principal amount of
$6,500,000 (as amended by the aforesaid modification agreement dated February 3,
1995); (b) any and all other indebtedness and obligations of the Company
(including indebtedness of others guaranteed by the Company) other than the
Securities, whether or not contingent and whether outstanding on the date of
this Indenture or thereafter created, incurred or assumed, which (i) is for
money borrowed or (ii) is evidenced by any bond, note, debenture or similar
instrument or (iii) represents the unpaid balance on the purchase price of any
property, business, or asset of any kind, or (iv) is an obligation of the
Company as lessee under any and all leases of property, equipment or other
assets under generally accepted accounting principles; and (c) deferrals,
amendments, renewals, extensions, modifications and refundings of any of the
foregoing contemplated in clauses (a) and (b) above, unless in any case in the
instrument creating or evidencing any such indebtedness or obligations or
pursuant to which the same is outstanding it is provided that such indebtedness
or obligation is not superior in right of payment to the Securities.
Notwithstanding the foregoing, the (i) 7-1/4% Convertible Subordinated
Debentures Due 2002 (the "Convertible Debentures") of the Company issued
pursuant to that certain indenture dated as of January 15, 1992 between the
Company and U.S.
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Trust Company of California, N.A., as trustee, is not Senior Indebtedness; (ii)
15% Subordinated Debentures Due 1999 (the "Non-Convertible Debentures") of the
Company issued pursuant to that certain indenture dated as of March 31, 1995
between the Company and the Trustee, as trustee, is not Senior Indebtedness; and
(iii) Securities shall rank equally with and shall not be superior in right of
payment to the Convertible Debentures and the Non-Convertible Debentures.
"Significant Subsidiary" means a Subsidiary which meets any of the
following conditions:
(1) The Company and its other Subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the Subsidiary
exceeds 10 percent of the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year.
The Company and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 10 percent of the total assets of the
Company and its Subsidiaries consolidated as of the end of the most
recently completed fiscal year.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
instalment of interest thereon, means the date specified in such Security as the
fixed date on which the principal of (and premium, if any, on) such Security or
such instalment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; PROVIDED, HOWEVER,
that in the event the Trust Indenture
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<PAGE>
Act of 1939 is amended after such date, "Trust Indenture Act" means, to the
extent required by any such amendment, the Trust Indenture Act of 1939 as so
amended.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under this
Indenture and under the Trust Indenture Act. Each such certificate or opinion
shall be given in the form of an Officers' Certificate, if to be given by an
officer of the Company, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it
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<PAGE>
is not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a
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<PAGE>
witness of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be. With regard to
any record date, only the Holders on such date (or their duly designated
proxies) shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Paying Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its
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<PAGE>
Corporate Trust Office, Attention: Corporate Trust Division; or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
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<PAGE>
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent, the holders of Senior Indebtedness and the Holders
of Securities) any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity,
PROVIDED that no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
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ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 202. FORM OF FACE OF SECURITY.
ADVANCED MEDICAL, INC.
CUSIP ___________
15% Subordinated Debenture Due 1999
No. _________ $_______
Advanced Medical, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _________________, or registered assigns,
the principal sum of _________________ DOLLARS on July 15, 1999, and to pay
interest thereon from _________, 1995 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually on
January 15 and July 15 in each year, commencing July 15, 1995 at the rate of 15%
per annum, until the principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for, on any
Interest
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Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the January 1 or July 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; PROVIDED, HOWEVER, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
[Corporate seal] ADVANCED MEDICAL, INC.
By:_______________________
Attest:
________________________
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SECTION 203. FORM OF REVERSE OF SECURITY.
ADVANCED MEDICAL, INC.
15% Subordinated Debenture Due 1999
This Security is one of a duly authorized issue of Securities of the
Company designated as its 15% Subordinated Debentures Due 1999 (herein called
the "Securities"), limited in aggregate principal amount to $30,000,000, issued
and to be issued under an Indenture, dated as of _________, 1995 (herein called
the "Indenture"), between the Company and United States Trust Company of New
York, as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the Holders of the Securities
and of the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Securities are subject to redemption upon not less than 20 nor
more than 60 days' notice by mail, on or after March 31, 1996 as a whole or in
part, at the election of the Company, at the following Redemption Prices
(expressed as percentages of the principal amount): If redeemed during the
twelve-month period beginning March 31 of the years indicated,
Redemption
Year Price
- ---- ----------
1996 110%
1997 105%
and at 100% if redeemed on or after, March 31, 1998, at the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest instalments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
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In the event there shall occur any Change in Control (as defined in
the Indenture) each Holder of Securities shall have the right, at the Holder's
option but subject to the terms of the Indenture, to require the Company to
purchase on the Repurchase Date all or any part of such Holder's Securities at a
price equal to 100% of the principal amount, together in the case of any such
repurchase with accrued interest to the Repurchase Date in the manner specified
in the Indenture.
In the event of redemption or repurchase of this Security in part
only, a new Security or Securities for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to
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pay the principal of (and premium, if any) and interest on this Security at the
times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $500 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer,
exchange or redemption, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The following form shall be included on the front side of the
Security:
This is one of the Securities referred to in the within-mentioned
Indenture.
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United States Trust Company of New York,
as Trustee
By ________________________
Authorized Signatory
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $30,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906, 1108 or 1402.
The Securities shall be known and designated as the "15% Subordinated
Debentures Due 1999" of the Company. Their Stated Maturity shall be July 15,
1999, and they shall bear interest at the rate of 15% per annum, from _________,
1995 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may be, payable semi-annually on January
15 and July 15, commencing July 15, 1995 until the principal thereof is paid or
made available for payment.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; PROVIDED, HOWEVER,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Thirteen.
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The Securities shall be subject to repurchase by the Company, at the
option of the Holders, as provided in Article Fourteen.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $500 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
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Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be
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exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange or redemption shall (if so required by the Company or the
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906, 1108 or 1402 not
involving any transfer.
The Company shall not be required to (i) issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing; (ii) register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part; or (iii) register the transfer
of or exchange any Security between a Record Date and the next succeeding
Interest Payment Date.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of
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them harmless, then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the Company shall
execute and the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securi-
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ties (or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
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Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
SECTION 310. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
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(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust (as provided in
Section 1003)), have been delivered to the Trustee for cancellation;
or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest to the date
of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
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SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Thirteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; PROVIDED, HOWEVER, that if the last day of such 30-day period is not
a Business Day, then such period shall be extended until the next
succeeding Business Day; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) a default in the payment of the Repurchase Price (as defined in
Section 1401) in respect of any Security on the Repurchase Date (as defined
in Section 1401) therefor in accordance with the provisions of Article
Fourteen; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
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certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries or under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any Significant
Subsidiary, whether such indebtedness now exists or shall hereafter be
created, which default shall have resulted in the maturity of $1,000,000 or
more of such indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable,
without such acceleration having been rescinded or annulled or such
indebtedness having been discharged within a period of 30 days after there
shall have been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities a written notice
specifying such default and requiring the Company to cause such
acceleration to be rescinded, annulled or discharged and stating that such
notice is a "Notice of Default" hereunder; PROVIDED, HOWEVER, that, subject
to the provisions of Sections 601 and 602, the Trustee shall not be deemed
to have knowledge of such default unless either (A) a Responsible Officer
of the Trustee shall have actual knowledge of such default or (B) the
Trustee shall have received written notice thereof from the Company, from
any Holder, from the holder of any such indebtedness or from the trustee
under any such mortgage, indenture or other instrument; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or (B) a decree or order adjudging the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Significant Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary, as the case may be, or of any
substantial part of its property, or ordering the
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winding up or liquidation of its affairs, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
(7) the commencement by the Company or any Significant Subsidiary of
a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding, to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
the Company or any Significant Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company or any
Significant Subsidiary, or the filing by the Company or any Significant
Subsidiary of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by it to
the filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Significant Subsidiary, as the
case may be, or of any substantial part of their property, or the making by
the Company or any Significant Subsidiary of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company or any Subsidiary, as the case may be, in furtherance of any
such action.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal of all the Securities to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
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(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the principal of
Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days; PROVIDED, HOWEVER, that if the last day of such 30-day
period is not a Business Day, then such period shall be extended until the
next succeeding Business Day, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
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borne by the Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
(irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand of the Company for the payment of
overdue principal, premium, if any, or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have claims of the
Holders and the Trustee allowed in any such proceeding. In particular, the
Trustee shall be authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
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No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Thirteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607; and
SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Securities in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities for principal (and premium, if any) and
interest, respectively.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to
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this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST TO REDEEM.
Notwithstanding any other provision in this Indenture other than
Article Thirteen, the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal of (and premium,
if any) and (subject to Section 307) interest on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date), to redeem such Security in accordance with Article
Fourteen and to institute suit for the enforcement of any such payment and right
to redeem and such rights shall not be impaired without the consent of such
Holder.
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SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, PROVIDED that
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(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Trustee or the Company.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
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lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any default hereunder
known to a Responsible Officer of the Trustee as and to the extent provided by
the Trust Indenture Act; PROVIDED, HOWEVER, that in the case of any default of
the character specified in Section 501(4), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. For the purpose of
this Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebted-
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ness or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by
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this Indenture other than any liabilities arising out of the negligence or
willful misconduct of the Trustee; and
(i) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
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(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of (or premium, if any) or interest
on the Securities. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. However, failure by the Trustee to so promptly
notify the Company shall not relieve the Company of its obligations under this
Section except to the extent such failure shall have materially prejudiced the
Company. The Company shall, unless the Trustee requests separate counsel,
defend any such claim and the Trustee shall cooperate in the defense of such
claim. If the Trustee is advised by counsel that it may have available to it
defenses that are in conflict with any defenses available to the Company, the
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay any settlement made
without its consent, which consent shall not be unreasonably withheld.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall, within 90 days after
ascertaining that it has such conflicting interest, either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
In the event that the Trustee shall fail to comply with the foregoing
provisions of this subsection, the Trustee shall, within 10 days after the
expiration of such 90-day period, transmit
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notice of such failure to the Holders in the manner and to the extent provided
in the Trust Indenture Act.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such, has
a combined capital and surplus of at least $50,000,000 and has an office in the
Borough of Manhattan, The City of New York. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of
applicable supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
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(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transfer-
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ring to such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder. Upon request of
any such successor Trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption or pursuant to Section 306, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and
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obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent.
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No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
____________________________,
As Trustee
By____________________________,
As Authenticating Agent
By____________________________,
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
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(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. REPORTS BY COMPANY.
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The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; PROVIDED that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust,
shall be organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest on
all the Securities and the performance or observance of every covenant of
this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default, and
no event
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which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
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(3) to secure the Securities; or
(4) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, PROVIDED that such action pursuant to this Clause (4)
shall not adversely affect the interests of the Holders.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption or
repurchase thereof, or change the place of payment where, or the coin or
currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or adversely affect the right
to redeem any Security as provided in Article Fourteen, or modify the
provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot
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be modified or waived without the consent of the Holder of each Outstanding
Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared
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and executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange, where Securities may be surrendered for repurchase and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED, HOWEVER,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
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If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
in writing of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall
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thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
The Company will deliver to the Trustee, within fifteen days after the
occurrence thereof, written notice of any event which after notice or lapse of
time or both would become an Event of Default pursuant to Clause (4) of Section
501.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be
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necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, (i) desirable in the conduct of its business or the
business of any Subsidiary and (ii) not disadvantageous in any material respect
to the Holders.
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. RIGHT OF REDEMPTION.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time on or after March 31, 1996, at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to the Redemption Date.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
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The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities to
be redeemed.
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and in accordance with the rules of self-regulatory organizations
and which may provide for the selection for redemption of portions (equal to
$500 or any integral multiple thereof) of the principal amount of Securities of
a denomination larger than $500.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 20 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial
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redemption of any Securities, the principal amounts) of the particular
Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; PROVIDED, HOWEVER, that instalments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
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SECTION 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing) and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
[Intentionally left blank.]
ARTICLE THIRTEEN
Subordination of Securities
SECTION 1301. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of (and premium,
if any) and interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness.
SECTION 1302. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and
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liabilities of the Company, then and in any such event the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness, or provision shall be
made for such payments in cash or otherwise in a manner satisfactory to the
holders of Senior Indebtedness, before the Holders of the Securities are
entitled to receive any payment on account of principal of (or premium, if any)
or interest on the Securities, and to that end the holders of Senior
Indebtedness shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or deliverable in respect of the
Securities in any such case, proceeding, dissolution, liquidation or other
winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, before all Senior Indebtedness is paid
in full or payment thereof provided for, and if such fact shall, at or prior to
the time of such payment or distribution, have been made known to the Trustee
or, as the case may be, such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which are subordinated
in right of payment to all Senior Indebtedness which may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or which acquires by conveyance
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or transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1303. PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF
SECURITIES.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Indebtedness
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Indebtedness, or provision shall be made for such payment in cash or
otherwise in a manner satisfactory to the holders of Senior Indebtedness, before
the Holders of the Securities are entitled to receive any payment (including any
payment which may be payable by reason of the payment of any other indebtedness
of the Company being subordinated to the payment of the Securities) by the
Company on account of the principal of (or premium, if any) or interest on the
Securities or on account of the purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1302 would be applicable.
SECTION 1304. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior
Indebtedness, or in the event that any event of default with respect to any
Senior Indebtedness shall have occurred and be continuing, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
or (b) in the event any judicial proceeding shall be pending with respect to any
such default in payment or event of default, then no payment shall be made by
the Company on account of principal of (or premium, if any) or interest on the
Securities or on account of the purchase or other acquisition of Securities.
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In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1302 would be applicable.
SECTION 1305. PAYMENT PERMITTED IF NO DEFAULT.
Subject to the limitations set forth in the following paragraphs of
this Section, nothing contained in this Article or elsewhere in this Indenture
or in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other marshalling of
assets and liabilities of the Company referred to in Section 1302 or under the
conditions described in Section 1303 or 1304, from making payments at any time
of principal of (and premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of (and premium, if any) or interest
on the Securities or the retention of such payment by the Holders, if, at the
time of such application by the Trustee, it did not have knowledge that such
payment would have been prohibited by the provisions of this Article.
Each Holder of a Security, by his acceptance thereof, acknowledges
that pursuant to the provisions of the instruments evidencing the indebtedness
included within Clause (a) of the definition of Senior Indebtedness and
agreements associated therewith (the "Decisions Debt") the Company is obligated
to provide to Decisions at least ten days' advance written notice ("Company
Notice") in the event the Company shall desire to make a principal (and, if
applicable, premium) payment on account of any of the Securities, and Decisions
has the right within five days following its receipt of a Company Notice to
deliver a written notice ("Decisions Notice") to the Company declaring all or
any portion of the outstanding interest and principal of the Decisions Debt to
be immediately due and payable. Each Holder of a Security, by his acceptance
thereof, agrees and further acknowledges that in the event that Decisions shall
deliver timely a Decisions Notice, then the Company shall make no payment on
account of any of the Securities until the amount (the "Decisions Amount") of
the Decisions Debt declared to be due and immediately payable in such Decisions
Notice is paid to Decisions by the Company. The failure
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of the Company to deliver timely a Company Notice or any payment by the Company
on account of any of the Securities prior to the payment in full of the
Decisions Amount, in each case shall constitute an event of default under the
instruments evidencing the Decisions Debt and agreements associated therewith.
In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall receive a payment from the Company (i) at a time
when an event of default shall have occurred and be continuing under the
instruments evidencing the Decisions Debt and agreements associated therewith or
(ii) that is otherwise prohibited by the foregoing provisions of this Section,
then and in each such event such payment shall be paid over and delivered
forthwith to the Company.
SECTION 1306. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to
indebtedness of the Company to substantially the same extent as the Securities
are subordinated and is entitled to like rights of subrogation) to the rights of
the holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be paid
in full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Indebtedness.
SECTION 1307. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to
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or shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
Holders of the Securities the principal of (and premium, if any) and interest on
the Securities as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1308. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1309. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
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Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 1310. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received
the notice provided for in this Section at least five Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within five Business Days prior to such date; nor shall the
Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and until
the Trustee shall have received an Officer's Certificate to such effect.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness
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held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1311. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1312. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and shall not be liable
to any such holders if it shall in good faith mistakenly pay over or distribute
to Holders of Securities or to the Company or to any other Person cash, property
or securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article or otherwise.
SECTION 1313. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION
OF TRUSTEE'S RIGHTS.
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The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1314. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that Section 1313 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1315. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
The subordination provisions contained herein are for the benefit of
the holders of Senior Indebtedness and may be enforced directly by them against
the Holders of the Securities and the Trustee. The holders of the Senior
Indebtedness have relied upon and will rely upon the subordination provided for
herein in entering into the agreements to which they are a party. No holder of
Senior Indebtedness shall be required by the Holders of the Securities or the
Trustee to give notice of or prove reliance hereon.
SECTION 1316. CONSENT TO AMENDMENTS OF SUBORDINATION PROVISIONS.
Any other provision of this Indenture notwithstanding, the provisions
of this Article Thirteen may not be amended, modified or eliminated without the
prior written consent of the holders of all Senior Indebtedness then
outstanding.
ARTICLE FOURTEEN
Right to Require Repurchase
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SECTION 1401. RIGHT TO REQUIRE REPURCHASE.
In the event of any Change in Control, each Holder of the Securities
shall have the right, at such Holder's option, to require the Company to
repurchase, and upon the exercise of such right the Company shall purchase, all
or any part of such Holder's Securities (in increments of $500 principal amount)
on the date (the "Repurchase Date") that is 45 calendar days after the date of
notice of such Change in Control at the price (the "Repurchase Price") specified
in the form of security hereinbefore set forth, plus accrued and unpaid interest
to the Repurchase Date. This right to require repurchase at the option of the
Holder is subject to the restriction that the Company may not repurchase any
Security at any time when the subordination provisions of this Indenture would
not permit the Company to make a payment of principal, premium or interest on
the Securities. Except where inconsistent with the provisions of this Article
Fourteen, the redemption provisions of Article Eleven shall be applicable to
repurchases under this Article Fourteen.
SECTION 1402. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT.
(a) On or before the 30th calendar day after any Change in Control,
the Company shall give or cause to be given notice of a Change in Control and of
the repurchase right set forth herein arising as a result thereof by first class
mail, postage prepaid, to each Holder of the Securities at such Holder's address
appearing in the Security Register. The Company shall also cause a copy of such
notice of a repurchase right to be published in a newspaper of general
circulation in the Borough of Manhattan, The City of New York. The Company
shall notify the Trustee in writing of the occurrence of any event constituting
a Change in Control as promptly as practical after such occurrence.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the Repurchase Price,
(3) the date by which the repurchase right must be exercised, and
(4) a description of the procedure which a Holder must follow to
exercise a repurchase right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right.
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(b) To exercise a repurchase right, a Holder shall deliver to the
Company (or an agent designated by the Company for such purpose in the notice
referred to in (a) above) on or before the 30th calendar day after the date of
the Company notice provided under this Section 1402 (i) written notice of the
Holder's exercise of such right, which notice shall set forth the name of the
Holder, the principal amount of the Securities (or portion of a Security) to be
repurchased and a statement that the option to exercise the repurchase right is
being made thereby, and (ii) the Securities with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable. If the Repurchase Date falls between any
Regular Record Date and the next succeeding Interest Payment Date, Securities to
be repurchased must be accompanied by payment from the Holder of an amount equal
to the interest thereon which the registered Holder is to receive on such
Interest Payment Date.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the price
payable with respect to the Security or Securities as to which the repurchase
right has been exercised in cash to the Holder of such Security or Securities on
the Repurchase Date. In the event that a repurchase right is exercised with
respect to less than the entire principal amount of a surrendered Security, the
Company shall execute and deliver to the Trustee and the Trustee shall
authenticate for issuance in the name of the Holder a new Security or Securities
in the aggregate principal amount of the unrepurchased portion of such
surrendered Security.
SECTION 1403. DEPOSIT OF REPURCHASE PRICE.
Prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Repurchase Price of the Securities which are to be
repaid on the Repurchase Date.
SECTION 1404. SECURITIES NOT REPURCHASED ON REPURCHASE.
If any Security surrendered for repurchase shall not be so paid on the
Repurchase Date, the principal shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at a rate per annum borne
by such Security.
SECTION 1405. SECURITIES REPURCHASED IN PART.
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Any Security which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of any authorized denomination as requested
by such Holder, in aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Security so surrendered.
SECTION 1406. CERTAIN DEFINITIONS.
As used only in this Article Fourteen: (a) As used herein, a "Change
in Control" of the Company shall be deemed to have occurred at such time as any
Person (other than Decisions and its Affiliates), together with its Affiliates
or Associates, is or becomes the beneficial owner, directly or indirectly,
through a purchase, merger or other acquisition transaction, of shares of
capital stock of the Company entitling such person to exercise 75% or more of
the total voting power of all shares of capital stock of the Company entitled to
vote in elections of directors, provided that a Change in Control shall not be
deemed to have occurred if either (i) the last reported sale price of the Common
Stock as reported on the American Stock Exchange (or, if not listed on the
American Stock Exchange, as reported on such other national securities exchange
on which the Common Stock is listed for trading or, if not so listed, as quoted
on the National Association of Securities Dealers Automated Quotations National
Market System or, if the Common Stock is not listed or admitted to trading on
any national securities exchange or quoted on such National Market System, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose and is acceptable to the Trustee),
for any five trading days during the ten trading days immediately preceding the
Change in Control is at least equal to 105% of the Reference Price in effect on
such day or (ii) at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change in
Control consists of shares of common stock traded on a national securities
exchange or through National Association of Securities Dealers Automated
Quotations National Market System or another comparable quotation system;
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(b) an "Associate" of, or a Person "associated" with, any Person, means (i)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity and (ii) any relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person; and
(c) the term "beneficial owner" shall be determined in accordance with Rule
13d-3 promulgated by the Commission under the Securities Exchange Act of 1934.
SECTION 1407. ADJUSTMENT OF REFERENCE PRICE.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock,
the Reference Price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying
such Reference Price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall be the sum
of such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(2) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (6) of this Section) of the
Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants (other than pursuant to a
dividend reinvestment plan), the Reference Price in effect at the opening
of business on the day following the date fixed for such determination
shall be reduced by multiplying such Reference Price by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the
number of shares of Common Stock
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which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2) the number of shares
of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company will not issue any rights or warrants in respect of shares of
Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Reference Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Reference
Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2) of this Section, any dividend or distribution paid in cash
out of the earned surplus of the Company and any dividend or distribution
referred to in paragraph (1) of this Section), the Reference Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Reference Price in effect immediately prior to the close of business on
the date fixed for the determination of stockholders entitled to receive
such distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (6) of this
Section) of the Common Stock on the date fixed for such determination less
the then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution filed
with the Trustee) of the portion of the assets or evidences of
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indebtedness so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening
of business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution. In any case in which
this paragraph (4) is applicable, paragraph (2) of this Section shall not
be applicable.
(5) The reclassification of Common Stock into securities including
securities other than Common Stock shall be deemed to involve (a) a
distribution of such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination"
within the meaning of paragraph (4) of this Section), and (b) a subdivision
or combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which
such subdivision or combination becomes effective" within the meaning of
paragraph (3) of this Section).
(6) For the purpose of any computation under paragraphs (2) and (4)
of this Section, the current market price per share of Common Stock on any
day shall be deemed to be the average of the daily closing prices for the
five consecutive trading days (I.E., Business Days on which the Common
Stock is traded) selected by the Board of Directors commencing not more
than 20 trading days before, and ending not later than, the earlier of the
day in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. For this purpose, the
term "'ex' date", when used with respect to any issuance or distribution,
shall mean the first date on which the Common Stock trades regular way on
the applicable exchange or in the applicable market without the right to
receive such issuance or distribution. The closing price for each day
shall be the reported last sale price regular way or, in case no such
reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way, in either case on the American Stock
Exchange or, if the Common Stock is not listed or admitted to trading on
such Exchange, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if not listed or admitted
to trading on any
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national securities exchange, on the National Association of Securities
Dealers Automated Quotations National Market System or, if the Common Stock
is not listed or admitted to trading on any national securities exchange or
quoted on such National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of
Directors for that purpose and is acceptable to the Trustee.
No adjustment in the Reference Price shall be required unless
such adjustment (plus any adjustments not previously made by reason of this
paragraph (7)) would require an increase or decrease of at least 1% in such
price; PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph (7) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this paragraph (7) shall be made to the nearest cent.
SECTION 1408. TRUSTEE'S DISCLAIMER.
The Trustee has no duty to determine when an adjustment under this Article
should be made, how it should be made or what it should be.
______________________
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
Advanced Medical, Inc.
By: ____________________
Name: Jeffry M. Picower
Title: Chairman of the Board
Attest:
By: _________________
Name: Joseph W. Kuhn
Title: Secretary
United States Trust Company of
New York
By: ____________________
Name:
Title:
Attest:
By: _________________
Name:
Title:
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of _____ 1995, before me personally came Jeffry M.
Picower, to me known, who, being by me duly sworn, did depose and say that he is
Chairman of the Board of Advanced Medical, Inc., one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
-------------------
Notary Public
(notary seal)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of _____ 1995, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that he is ________________ of United States Trust Company of New York,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
-------------------
Notary Public
(notary seal)
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