<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission file number 1-9913
KINETIC CONCEPTS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1891727
- ------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
8023 Vantage Drive
San Antonio, Texas 78230 210/524-9000
- ------------------------------- ------------------------------------
(Address of principal executive (Registrant's telephone number)
offices and zip code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing require- ments for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: 44,111,562 shares as of March 31, 1995
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31,
1995 December 31,
Assets (unaudited) 1994
- ------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 47,510 $ 43,241
Accounts receivable, net 54,668 55,456
Finance lease receivables, current 9,040 8,051
Inventories 19,656 18,167
Notes receivable, current, net 3,525 6,014
Prepaid expenses 5,227 4,474
-------- --------
Total current assets 139,626 135,403
-------- --------
Net property, plant and equipment 54,305 51,357
Finance lease receivables, net of current 6,095 7,242
Notes receivable, net of current and allowance 3,187 3,187
Goodwill, net 15,003 15,476
Other assets, net 15,893 15,989
Deferred income tax benefit, net 3,904 4,077
-------- --------
$238,013 $232,731
-------- --------
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Note payable $ 2,649 $ 1,878
Current installments of long-term obligations 1,204 3,410
Accounts payable 5,397 4,079
Accrued expenses 24,104 27,280
Income taxes payable 8,681 8,025
-------- --------
Total current liabilities 42,035 44,672
-------- --------
Long-term obligations, excluding current installments 3,775 2,636
-------- --------
Total liabilities 45,810 47,308
-------- --------
Shareholders' equity:
Common stock; issued and outstanding 44,112 in
1995 and 43,921 in 1994 44 44
Additional paid-in capital 11,096 10,053
Retained earnings 179,929 175,480
Cumulative foreign currency translation adjustment 1,134 (154)
-------- --------
Total shareholders' equity 192,203 185,423
-------- --------
$238,013 $232,731
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1995 1994
-------- --------
<S> <C> <C>
Revenue:
Service and rental $ 48,422 $ 61,747
Sales and other 8,605 10,337
-------- --------
Total revenue 57,027 72,084
-------- --------
Rental expenses 33,427 44,436
Cost of goods sold 3,916 5,132
-------- --------
37,343 49,568
-------- --------
Gross profit 19,684 22,516
Selling, general and administrative expenses 10,107 13,355
-------- --------
Operating earnings 9,577 9,161
Net interest (income) expense (533) 1,854
-------- --------
Earnings before income taxes, minority interest
and cumulative effect of change in
accounting principle 10,110 7,307
Income taxes 4,012 3,825
-------- --------
Earnings before minority interest and cumulative
effect of change in accounting principle 6,098 3,482
Minority interest in subsidiary loss - 40
Cumulative effect of change in method of accounting
for inventory, net - 742
-------- --------
Net earnings $ 6,098 $ 4,264
-------- --------
Earnings per common and common equivalent share:
Earnings before cumulative effect of
change in accounting principle $ 0.14 $ 0.08
Cumulative effect of change in method of
accounting for inventory - 0.02
-------- --------
Earnings per share $ 0.14 $ 0.10
-------- --------
Shares used in earnings per share computations 45,115 43,986
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,098 $ 4,264
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 5,814 12,103
Provision for uncollectible accounts receivable (48) 803
Change in assets and liabilities:
Decrease (increase) in accounts receivable 1,115 (1,735)
Decrease in notes receivable 2,489 -
Increase in inventories (1,349) (1,456)
Decrease (increase) in prepaid expenses (782) 52
Increase in other assets - (301)
Increase (decrease) in accounts payable 1,508 (1,382)
Increase (decrease) in accrued expenses (3,054) 1,139
Increase in income taxes payable 656 3,961
Increase (decrease) in deferred income taxes 173 (750)
-------- --------
Net cash provided by operating activities 12,620 16,698
-------- --------
Cash flows from investing activities:
Additions to property, plant, and equipment (4,427) (4,022)
Increase in inventory to be converted into equipment
for short-term rental (3,750) (500)
Dispositions of property, plant, and equipment 185 434
Decrease in finance lease receivables 158 376
Increase in other assets - (468)
-------- --------
Net cash used by investing activities (7,834) (4,180)
-------- --------
Cash flows from financing activities:
Repayments of note payable and long-term obligations (296) (7,378)
Repayments of capital lease obligations (119) (807)
Proceeds from the exercise of stock options 1,043 5
Minority interest in subsidiary loss, net - (40)
Purchase of treasury stock - (41)
Cash dividends paid to shareholders (1,649) -
Other - (668)
-------- --------
Net cash used by financing activities (1,021) (8,929)
-------- --------
Effect of exchange rate changes on cash and cash equivalents 504 (5)
-------- --------
Net increase in cash and cash equivalents 4,269 3,584
Cash and cash equivalents beginning of year 43,241 10,280
-------- --------
Cash and cash equivalents end of period $ 47,510 $ 13,864
-------- --------
Supplemental disclosure of cash flow information:
Cash paid during the first three months for:
Interest $ 210 $ 1,172
Income taxes 4,048 57
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4 of 14
<PAGE> 5
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The financial statements presented herein include the accounts of Kinetic
Concepts, Inc. and all subsidiaries (the "Company"). The foregoing
financial information reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position and results of operations
for the interim periods presented. Interim period operating results are
not necessarily indicative of the results to be expected for the full
fiscal year. The financial information presented for the interim periods
is unaudited and subject to year-end audit and adjustments.
(2) INVENTORY COMPONENTS
Inventories are stated at the lower of cost (first-in, first-out) or
market (net realizable value). Inventories are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Finished goods $ 5,115 $ 3,086
Work in process 3,533 1,642
Raw materials, supplies and parts 19,008 17,689
------- -------
27,656 22,417
Less amounts expected to be
converted into equipment for
short-term rental 8,000 4,250
------- -------
$19,656 $18,167
------- -------
</TABLE>
(3) SHARES USED IN EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE COMPUTATIONS
The weighted average number of common and common equivalent shares used in
the computation of earnings per share is as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
1995 1994
------ ------
<S> <C> <C>
Average outstanding common shares 43,997 43,947
Average common equivalent shares-
dilutive effect of option shares 1,118 39
------ ------
Shares used in earnings
per share computations 45,115 43,986
------ ------
</TABLE>
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<PAGE> 6
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
Earnings per common and common equivalent share are computed by dividing
net earnings by the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Dilutive common
equivalent shares consist of stock options (using the treasury stock
method). Earnings per share computed on a fully diluted basis is not
presented as it is not significantly different from earnings per share
computed on a primary basis.
(4) CREDIT AGREEMENT
On May 8, 1995, the Company entered into a revolving credit agreement (the
"Credit Agreement") with a bank as an agent for itself and certain other
financial institutions. The Credit Agreement provides for a $50 million
one-year revolving credit facility (the "Revolver") with one (1) two-year
option to renew. Any advances under the Revolver are due at the end of the
period covered by the Credit Agreement.
The interest rate payable on borrowings under the Credit Agreement is at
the election of the Company: (i) the Bank's reference rate, or (ii) the
London inter-bank offered rate quoted to the Bank for one, two, three, or
six month Eurodollar deposits adjusted for appropriate reserves ("LIBOR")
plus 40 basis points.
The Credit Agreement requires that the Company maintain specified ratios
and meet certain financial targets. The Credit Agreement also contains
certain events of default, includes certain provisions, and establishes
various fees to be paid by the Company.
At March 31, 1995, the entire amount of the then existing Revolver was
available under the previous Credit Agreement. In addition, the Company
was in compliance with all covenants under the previous Credit Agreement.
(5) ACQUISITIONS AND DISPOSITIONS
In December of 1994, the Company adopted a plan to liquidate the assets of
Medical Retro Design, Inc. ("MRD"). Pursuant to that plan, the Company
sold certain assets of MRD to HBR Healthcare Co. ("HBR") under an Asset
Purchase Agreement effective March 27, 1995. Upon consummation of this
transaction, HBR acquired the operating assets of MRD. The sales price was
approximately $250 thousand. In conjunction with the sale, KCI and its
affiliates agreed not to refurbish certain hospital beds and related
furniture for a period of three (3) years. MRD accounted for less than
two percent (2%) of the Company's total revenue during 1994. First quarter
1995 operations of MRD were immaterial to the overall results of the
Company.
(6) COMMITMENTS AND CONTINGENCIES
The Company is party to several lawsuits generally incidental to its
business and is contesting certain adjustments proposed by the Internal
Revenue Service to prior years' tax returns. Provisions have been made in
the accompanying financial statements for estimated exposures related to
these lawsuits and adjustments. In the opinion of management, the
disposition of these items will not result in any material additional
liability to the Company.
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<PAGE> 7
Independent Auditors' Report
The Board of Directors
Kinetic Concepts, Inc.:
We have reviewed the condensed consolidated balance sheet of Kinetic Concepts,
Inc. and subsidiaries as of March 31, 1995, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended March 31, 1995 and 1994. These condensed consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Kinetic Concepts, Inc. and
subsidiaries as of December 31, 1994, and the related consolidated statements of
earnings, capital accounts, and cash flows for the year then ended (not
presented herein); and in our report dated February 14, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1994, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
San Antonio, Texas
April, 21 1995
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER OF 1995 COMPARED TO FIRST QUARTER OF 1994
The following table sets forth, for the periods indicated, the percentage
relationship of each item to total revenue as well as the percentage change of
each line item as compared to the first quarter of the prior year (in
thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1995 1994 Increase (decrease)
---- ---- -------------------
<S> <C> <C> <C>
Revenue:
Service and rental 85% 86% (22%)
Sales and other 15% 14% (17%)
--- ---
100% 100% (21%)
Rental expenses 59% 62% (25%)
Cost of goods sold 7% 7% (24%)
--- ---
Gross profit 34% 31% (13%)
Selling, general and administrative expenses 17% 18% (24%)
--- ---
Operating earnings 17% 13% 5%
Net interest (income) expense (1%) 3% (129%)
--- ---
Earnings before income taxes, minority
interest and cumulative effect of
change in accounting principle 18% 10% 38%
Income taxes 7% 5% 5%
--- ---
Earnings before minority interest and
cumulative effect of change in
accounting principle 11% 5% 75%
Minority interest in subsidiary loss - - -
Cumulative effect of change in method
of accounting for inventory - 1% -
--- ---
Net earnings 11% 6% 43%
--- ---
</TABLE>
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The comparability of the Company's financial results in the first quarters
of 1994 and 1995 was significantly impacted by the disposition of its Medical
Services Division. On September 30, 1994, KCI Therapeutic Services, Inc.
("KCTS"), a wholly-owned subsidiary of the Company, sold certain assets used
exclusively by the KCTS Medical Services Division (the "Medical Services
Division") to Mediq/PRN Life Support Services-I, Inc. under an Asset Purchase
Agreement. Revenue, gross profit and operating results related to the Medical
Services Division for the first quarter of 1994 were as follows (in thousands):
Revenue $16,348
Gross Profit 5,707
Operating Earnings 1,208
Excluding the prior-year results of the Medical Services Division, total
revenue in the first quarter of 1995 increased by 2.3% to $57.0 million from
$55.7 million in the first quarter of 1994. Revenue from the Company's
specialty patient surface business including acute care and alternate care, was
$38.0 million, down 6.9% from the first quarter of 1994. This decrease was due
substantially to sluggish industry and seasonal conditions which reduced revenue
from acute care facilities, partially offset by continuing gains in nursing,
rehabilitation and home care settings. Revenue from the Company's International
operations was $13.7 million, up 37.0% from the first quarter of 1994.
Continued growth of this market, as well as better utilization of the existing
rental fleet and improved sales efforts have contributed towards increased
revenues. Revenue from medical device operations increased 15.2% to $3.7
million in the first quarter of 1995 related primarily to greater market
penetration as this division expanded into new states.
Rental expenses were 58.6% of total revenue in the first quarter of 1995
compared to 61.6% in the first quarter of 1994. This decrease is primarily
attributable to reduced depreciation expense as well as an overall effort to
control costs.
Gross profit excluding the Medical Services Division increased 17.1% to
$19.7 million in the first quarter of 1995 from $16.8 million in the first
quarter of 1994 due to the increase in revenue from ongoing operations as well
as the decrease in rental expenses.
Selling, general and administrative expenses decreased $3.3 million or
24.3% to $10.1 million in the first quarter of 1995 from $13.4 million in the
first quarter of 1994. Selling, general and administrative expenses as a
percentage of total revenue decreased to 17.7% in the first quarter of 1995
from 18.5% in the first quarter of 1994. This decline is primarily
attributable to the elimination of various support departments and corporate
personnel following the sale of the Medical Services Division, as well as
reduced bad debt expense.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Excluding the Medical Services Division, operating earnings for the
period increased 20.4% to $9.6 million compared to $8.0 million in the prior
year quarter as a result of increased revenues.
Net interest income for the three months ended March 31, 1995 was $0.5
million, compared to net interest expense of $1.9 million in the prior year.
This change was a combination of the prior year pay-down of long term
obligations, interest earned on cash reserves and interest earned on notes
receivable.
The Company's effective income tax rate in the first quarter of 1995 was
39.7%, compared to 52.3% in the first quarter of 1994. The effective tax rate
for the first quarter of 1995 was lower than the effective rate for the first
quarter of 1994 primarily as a result of the recognition of the net operating
loss of Medical Retro Design, Inc. and recognition of foreign tax credits.
During the first quarter of 1994, the cumulative losses allocated to the
minority interest holder, Medical Retro Design, exceeded the balance of its
investment. As a result, losses of $3.8 million were absorbed entirely by the
Company in 1994. These continuing losses and diminished opportunities within
the refurbishment business led to the decision to liquidate this unit in
December of 1994 and the eventual sale of MRD assets in March 1995. First
quarter 1995 operations of the MRD unit were immaterial to the overall results
of the Company. See Note 5 of Notes to Condensed Consolidated Financial
Statements.
During the first quarter of 1994, the Company recorded a cumulative
effect of a change in accounting principle related to its inventory costing
method which resulted in a one-time after-tax earnings increase of $742,000, or
$0.02 per share.
On a comparable basis, net earnings from ongoing operations more than
doubled to $6.1 million in the first quarter of 1995 from $2.9 million in the
first quarter of 1994. Earnings per share from ongoing operations (before the
effect of the cumulative change described above) increased 100.0% to $0.14 per
share from $0.07 per share in the prior year quarter. Earnings per share as
reported increased 40% from $0.10 per share in the prior year quarter. This
increase was primarily due to a decrease in rental expenses, net interest, and
selling, general and administrative expenses and the change in revenue as
discussed above.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION
The change in revenue and expenses experienced by the Company during the
first quarter of 1995 and other factors resulted in changes to the Company's
balance sheet as follows:
Inventory at March 31, 1995 increased $1.5 million, or 8.2%, to $19.7
million from $18.2 million at December 31, 1994 primarily due to new product
introductions.
Net property, plant and equipment at March 31, 1995 increased $2.9
million, or 5.7%, to $54.3 million from $51.4 million at December 31, 1994
due to additions to rental equipment in excess of depreciation and
dispositions.
Total notes receivable at March 31, 1995 decreased $2.5 million, or
27.1%, to $6.7 million from $9.2 million at December 31, 1994 due to payments
received during the first quarter of 1995.
Note payable and current installments of long-term obligations decreased
$1.4 million to $3.9 million at March 31, 1995 from $5.3 million at December
31, 1994 primarily due to repayments made.
Accrued expenses at March 31, 1995 decreased $3.2 million, or 11.6%, to
$24.1 million from $27.3 million at December 31, 1994 primarily due to
settlements of accruals related to the sale of the Medical Services Division
and bonus payments made in the first quarter of 1995.
MARKET TRENDS
For the past decade, the health care industry has experienced increased
pressure from a variety of sources to control costs and improve patient
outcomes. This pressure intensified in 1993 as our nation debated health care
reform. Although the events of 1994 would seem to indicate that major
legislative reform of our health care system is unlikely at this time, it is
apparent that the health care industry will seek to become more cost effective
and further improve patient outcomes.
Since 1987, the Company has been positioning itself to remain competitive
in an environment which demands accountability for patient outcomes at a lower
cost. The Company's Therapeutic Service's division offers the most complete
continuum of products in the industry and helps reduce the overall cost of
patient care by allowing the health care provider to match the needs of a
particular patient with an appropriate product and therapy. In addition, the
Company continues to search for new therapies and technologies, making
investments as deemed prudent, to improve patient outcomes both now and into
the future.
The Company has also sponsored a number of medical studies which
demonstrate the clinical efficacy and cost effectiveness of its products. Over
the past several years, the Company has entered into a number of partnering
arrangements with its customers which allow its customers to obtain state of
11 of 14
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the art medical technology while at the same time lowering their overall costs.
The Company believes that these types of studies and arrangements will be
necessary in order to survive and prosper in the health care industry in the
1990's.
The Company also maintains an extensive national accounts portfolio in the
specialty bed industry and expects to benefit from further consolidation of
providers and buying groups. At the same time, as shifts in reimbursement
policy have tended to move patients into lower-cost environments, the Company
has continued to focus new efforts on the extended care and home care markets.
While future performance cannot be assured, the Company believes that it is
well positioned to compete in the dynamic health care marketplace.
LEGAL PROCEEDINGS
On February 21, 1992, Novamedix Limited filed a lawsuit against the
Company in the United States District Court for the Western District of Texas.
Novamedix holds the patent rights to the principal product which directly
competes with the PlexiPulse, which is marketed by KCI New Technologies, Inc.
The suit alleges that the PlexiPulse infringes several patents held by
Novamedix, that the Company breached a confidential relationship with
Novamedix and a variety of subsidiary claims. The Plaintiff seeks injunctive
relief and monetary damages. Discovery in this case has been substantially
completed. Although it is not possible to predict the outcome of this
litigation or the damages which could be awarded, the Company believes that
its defenses to these claims are meritorious and that the litigation will not
have a material effect on the Company's financial statements.
The Company is party to several lawsuits generally incidental to its
business and is contesting adjustments proposed by the Internal Revenue Service
to prior years' tax returns. Provisions have been made in the accompanying
financial statements for estimated exposures related to these lawsuits and
adjustments. In the opinion of management, the disposition of these items
will not have a material effect on the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1995, the Company generated net cash provided
by operating activities of $12.6 million compared to $16.7 million in the prior
year quarter, primarily due to additional payments of income taxes. The
Company believes that current cash reserves combined with operating cash flows
during the next twelve month period will be sufficient to provide for new
investments in equipment and any working capital needed during the period.
At March 31, 1995, cash and cash equivalents totaling $47.5 million were
available for general corporate purposes. Additionally, the Company
maintains a Credit Agreement with a bank as an agent for itself and certain
other financial institutions. The Credit Agreement currently permits borrowings
of up to $50.0 million. Please see Note 4 of Notes to Condensed Consolidated
Financial Statements. At March 31, 1995, the entire amount of the then existing
Credit Agreement was available.
At March 31, 1995, the Company did not have any material purchase
commitments.
12 of 14
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
A list of all exhibits filed or included as part of this quarterly
report on Form 10-Q is as follows:
<TABLE>
<CAPTION>
EXHIBIT BY REFERENCE DESCRIPTION
------- ------------ -----------
<S> <C> <C>
10 Filed herewith Credit Agreement
dated May 8, 1995
27 Filed herewith Financial Data
Schedule
99 Filed herewith Letter from KPMG
Peat Marwick LLP dated
May 12, 1995
</TABLE>
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KINETIC CONCEPTS, INC.
(REGISTRANT)
By: JAMES R. LEININGER, M.D.
James R. Leininger, M.D.,
Chairman of the Board
By: RAYMOND R. HANNIGAN
Raymond R. Hannigan
President & Chief Executive Officer
By: BIANCA A. RHODES
Bianca A. Rhodes
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
Date: May 12, 1995
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<PAGE> 15
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
10 Credit Agreement dated May 8, 1995
27 Financial Data Schedule
99 Letter from KPMG Peat Marwick LLP dated
May 12, 1995
<PAGE> 1
CREDIT AGREEMENT
This CREDIT AGREEMENT, is entered into as of May 8, 1995, among
KINETIC CONCEPTS, INC., a Texas corporation (the "Company"), the SEVERAL
FINANCIAL INSTITUTIONS PARTIES TO THIS AGREEMENT (collectively, the "Banks";
individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent.
WHEREAS, the Company, certain of the Banks, and the Agent entered into
a Credit Agreement dated as of December 17, 1993 (hereinafter called the
"Initial Credit Agreement") whereby, upon the terms and conditions therein
stated, the Banks agreed to make available to the Company a reducing revolving
credit facility and a revolving credit facility for working capital and other
general corporate purposes, for the issuance of standby letters of credit, and
to refinance certain existing Indebtedness; and
WHEREAS, the Company, the Banks, and the Agent entered into a First
Amendment to Credit Agreement dated as of September 30, 1994 (hereinafter
called the "First Amendment") and a Second Amendment to Credit Agreement dated
as of October 7, 1994 (hereinafter called the "Second Amendment") amending
certain provisions of the Initial Credit Agreement; and
WHEREAS, the Initial Credit Agreement as amended by the First
Amendment, the Second Amendment and any other amendment, waiver or modification
is referred to herein as the "Prior Credit Agreement".
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. In addition to the terms defined elsewhere in
this Agreement, the following terms have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Affiliate" means as to any Person, any other Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person. A Person shall be
deemed to control another Person if such controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. Any director, executive officer or beneficial owner of
five percent (5%) or more of the equity of a Person shall for the purposes of
this Agreement, be deemed an Affiliate of such Person. Notwithstanding the
foregoing, under no
<PAGE> 2
circumstances shall the Agent or any Bank be deemed to be an Affiliate of the
Company or any Subsidiary of the Company.
"Agent" means Bank of America National Trust and Savings
Association in its capacity as agent for the Banks hereunder, and any successor
agent.
"Agreement" means this Credit Agreement, as amended,
supplemented or modified from time to time.
"Applicable Margin" means
(a) with respect to Eurodollar Rate Loans, at all times
four-tenths of one percent (.40%) per annum in excess of the
Eurodollar Rate.
(b) with respect to Reference Rate Loans, at all times
the applicable Reference Rate.
"Arranger" means BA Securities, Inc.
"Assignee" has the meaning specified in Section 12.1(a).
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association.
"Bank of America Illinois" means Bank of America Illinois, an
Illinois Bank.
"Bankruptcy Code" means Title 11, United States Code, as
amended from time to time, and any statute enacted in replacement thereof.
"Borrowing" means a borrowing hereunder consisting of Loans
made to the Company on the same day by the Banks pursuant to Article II.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in California, Illinois, New York or Texas
are authorized or required by law to close and, if the applicable Business Day
relates to any Eurodollar Rate Loan, means such day on which dealings are
carried on in the London interbank market.
"Capitalization" of any Person means the Net Worth of such
Person plus the total Indebtedness of such Person.
"Capital Lease Obligations" means all monetary obligations of
the Company or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, are classified as a capital lease.
2
<PAGE> 3
"Cash Collateral Account" has the meaning specified in Section
8.1.
"Cash Equivalents" means
(a) securities issued or fully guaranteed or insured by
the United States Government or any agency thereof having maturities
of not more than one year from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar
time deposits, bankers' acceptances having maturities not more than
six (6) months from the date of acquisition issued by any Bank or by
any U.S. commercial bank having combined capital and surplus of not
less than Five Hundred Million Dollars ($500,000,000) whose short
term, securities are rated at least, A-1 by Standard & Poor's
Corporation and/or P-1 by Moody's Investors Service, Inc.;
(c) repurchase agreements with a term of thirty (30) days
or less and entered into with the Agent, any Bank, or any bank that is
insured by the Federal Deposit Insurance Corporation and has a capital
and unimpaired surplus of at least Five Hundred Million Dollars
($500,000,000), if in any case such repurchase agreement is secured by
a first priority perfected lien on obligations of the type described
in clause (a) above that have a market value (exclusive of accrued
interest) at least equal to the amount of such repurchase agreement;
(d) commercial paper of an issuer rated at least, A-1 by
Standard & Poor's Corporation and/or P-1 by Moody's Investors Service
Inc. and in either case maturing within six (6) months after the date
of acquisition; and
(e) money funds (taxable or tax exempt) that invest
exclusively in securities or instruments specified in clauses (a)
through (d) above.
"Cash Flow" means, for any period, (a) EBITDA for such period
plus (b) all payments, if any, made and permitted to be made pursuant to
Section 7.10 for such period.
"Change of Control" means any of (i) the acquisition by any
Person or two or more Persons (excluding underwriters in the course of their
distribution of voting stock in an underwritten public offering) acting in
concert, of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission as in effect on the date hereof) of 25% or
more of the outstanding
3
<PAGE> 4
shares of voting stock of the Company, (ii) the sale of all or substantially
all of the assets of the Company in a single transaction or series of related
transactions to any Persons or (iii) the Company merges or consolidates with or
into any other Person, with the effect that immediately after such transaction
the stockholders of the Company immediately prior to such transaction hold less
than a controlling interest in the Person surviving such transaction.
"Change of Control Date" means (i) with respect to an event
described in clause (i) of the definition of "Change of Control", the earliest
to occur of (w) the date that the Company receives actual written notice of
such event from one or more of the Persons referred to in such clause (i), (x)
the date that one or more of the Persons referred to in such clause (i) makes a
public announcement of an event specified in such clause (i), (y) the date that
one or more of the persons referred to in such clause (i) files a statement on
Schedule 13D or Schedule 13G with the Securities and Exchange commission
indicating that an event specified in such clause (i) has occurred or (z) the
date that the Company receives a copy of a Schedule 13D or Schedule 13G from
one or more Persons referred to in such clause (i) indicating that an event
specified in such clause (i) has occurred, and (ii) with respect to an event
described in clauses (ii) or (iii) of the definition of "Change of Control",
the earlier to occur of the date that the Company has actual knowledge that an
event specified in any such clause has occurred or the date on which such event
has occurred.
"Change of Control Notice" has the meaning specified in
Section 2.7(b).
"Closing Date" means May 8, 1995.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"Commercial Letters of Credit" has the meaning specified in
Section 2.1(b).
"Commitments" means Fifty Million Dollars ($50,000,000) as of
the Closing Date, as such amount may be reduced from time to time pursuant to
the terms of this Agreement, and "Commitment" means, for each Bank, its
Revolving Commitment.
"Commitment Percentage" means as to any Bank, the percentage
of the aggregate Revolving Commitments constituted by such Bank's Commitment.
"Consolidated Current Assets" means, at a particular date, all
amounts which would, in conformity with GAAP, be included
4
<PAGE> 5
under current assets on a consolidated balance sheet of the Company and its
Subsidiaries as at such date.
"Consolidated Current Liabilities" means, at a particular
date, all amounts which would, in conformity with GAAP, be included under
current liabilities on a consolidated balance sheet of the Company and its
Subsidiaries as at such date.
"Consolidated Net Interest Expense" means, for any period,
gross consolidated interest expense for such period determined in conformity
with GAAP, plus (a) the portion of the up front costs and expenses for Interest
Rate Contracts (to the extent not included in gross interest expense) fairly
allocated to such Interest Rate Contracts as expenses for such period, less (b)
Interest Rate Contracts payments received.
"Consolidated Net Worth" means, at any time, shareholders
common equity as determined in accordance with GAAP, of the Company and its
Subsidiaries minus: (i) all capital contributions to, and all other
investments in, KCI Financial by the Company and its Subsidiaries (excluding
KCI Financial) and (ii) the aggregate outstanding principal balance of all
advances, loans, and extensions of credit payable by KCI Financial to the
Company and its Subsidiaries (excluding KCI Financial).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance
or provide funds (i) for the payment or discharge of any such primary
obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor or (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of any such primary obligation against
loss in respect thereof. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"Contractual Obligations" means as to any Person, any
provision of any security issued by such Person or of any
5
<PAGE> 6
agreement, undertaking, contract, indenture, mortgage, deed of trust or other
instrument to which such Person is a party or by which it or any of its
property is bound.
"Controlled Group" means the Company and all Persons (whether
or not incorporated) under common control or treated as a single employer with
the Company or any of its Subsidiaries pursuant to Section 414(b), (c), (m) or
(o) of the Code.
"Conversion Date" means any date on which the Company elects
to convert a Reference Rate Loan to a Eurodollar Rate Loan; or a Eurodollar
Rate Loan to a Reference Rate Loan.
"Credit Request" has the meaning specified in Section
2.3(f)(i).
"Cumulative Net Income" means, as of the date of
determination, the consolidated Net Income (without giving effect to net
losses) of the Company and its Subsidiaries (excluding KCI Financial)
calculated for the period commencing March 31, 1995 and ending on the date of
determination. For purposes of this definition of Cumulative Net Income, "Net
Income" means for any period, a Person's consolidated net income (or loss)
after income and franchise taxes determined in conformity with GAAP, but
excluding: (a) the income of any other Person (other than Subsidiaries) in
which such Person or any of its Subsidiaries has an ownership interest, unless
and only to the extent received by such person or its Subsidiary in a cash
distribution; (b) any after-tax gains or losses attributable to asset
dispositions; and (c) to the extent not included in clauses (a) and (b) above,
any after-tax extraordinary non-cash gains or extraordinary non-cash losses.
"Debt/EBITDA Ratio" has the meaning specified in Section 7.14.
"Default" means any of the events specified in Article VIII,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DOL" means the United States Department of Labor.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Lending Office" means with respect to each Bank, the
office of such Bank designated as such in the signature pages hereto or such
other office of such Bank as such Bank may from time to time specify to the
Company and the Agent.
"EBITDA" means, for any period, the sum of (a) the net income
(or net loss) of a Person for such period as determined in
6
<PAGE> 7
accordance with GAAP; (b) all amounts treated as expenses for depreciation and
interest and the amortization of intangibles of any kind for such period to the
extent included in the determination of such net income (or loss); and (c) all
taxes accrued for such period on or measured by income to the extent included
in the determination of such net income (or loss); provided, however, that net
income (or loss) shall be computed for the purposes of this definition without
giving effect to extraordinary losses or extraordinary gains for such period.
"Effective Date" means the date (which must be on or before
May 15, 1995) on which all conditions precedent set forth in Article V are
satisfied or waived by all the Banks.
"Election" has the meaning specified in Section 2.7(c).
"Environmental Claim" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability for
violation of any Environmental Law or for release or injury to the environment
or threat to public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise alleging
liability for damages, punitive damages, cleanup costs, removal costs, remedial
costs, response costs, restitution, civil or criminal penalties, injunctive
relief, or other type of relief, resulting from or based upon (a) the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental placement, spill, leaks, discharges, emissions or releases) of
any Hazardous Material at, in or from property, whether or not owned by the
Company, or (b) any other circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means any and all laws, subsequent
enactments, amendments and modifications, including, without limitation,
federal, state and local laws, statutes, ordinances, rules, regulations,
permits, licenses, approvals, interpretations and orders of courts or
Governmental Authorities relating to the protection of human health or the
environment, including, but not limited to, requirements pertaining to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials. Environmental Laws include, but without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C.Section 9601 et seq.) ("CERCLA"), the Hazardous
Material Transportation Act (49 U.S.C.Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C.Section 6901 et sec.) ("RCRA"), the
Federal Water Pollution Control Act (33 U.S.C.Section 1251 et seq.), the Clean
Air Act (42 U.S.C.Section 1251 et sec.), the Toxic Substances Control act (15
U.S.C.Section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. Section
300, et seq), the Environmental Protection Agency's regulations relating to
7
<PAGE> 8
underground storage tanks (40 C.F.R. Parts 280 and 281), and the Occupational
Safety and Health Act (29 U.S.C.Section 651 et seq.) ("OSHA"), as such laws
have been amended or supplemented and any analogous future federal, or present
or future applicable state or local, statutes and the regulations promulgated
thereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and any regulation promulgated thereunder.
"ERISA Affiliate" means, as to the Company or any Subsidiary,
all trades or businesses (whether or not incorporated) under common control
with the Company or such Subsidiary and which, together with the Company or
such Subsidiary, is treated as a single employer under Section 414(b), 414(c)
or 414(m) of the Code.
"ERISA Event" means (a) a Reportable Event with respect to a
Qualified Plan or a Multiemployer Plan; (b) a withdrawal by any member of the
Controlled Group from a Qualified Plan subject to Section 4063 of ERISA during
a plan year in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA); (c) a complete or partial withdrawal by any member of the
Controlled Group from a Multiemployer Plan; (d) the filing of a notice of
intent to terminate, the treatment of a plan amendment as a termination under
Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC
to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of
ERISA; (e) a failure to make required contributions to a Qualified Plan or
Multiemployer Plan; (f) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Qualified Plan or
Multiemployer Plan; (g) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any member of the Controlled Group; (h) an application for a
funding waiver or an extension of any amortization period pursuant to Section
412 of the Code with respect to any Qualified Plan; (i) any member of the
Controlled Group engages in or otherwise becomes liable for a non-exempt
prohibited transaction; or (j) a violation of the applicable requirements of
Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a)
of the Code by any fiduciary with respect to any Qualified Plan for which the
Company or any of its Subsidiaries may be directly or indirectly liable.
"Eurocurrency Liabilities" has the meaning assigned to such
term in Regulation D of the Federal Reserve Board, as in effect from time to
time.
"Eurodollar Lending Office" means with respect to each Bank,
the office of such Bank designated as such in the signature pages hereto or
such other office of such Bank, as such Bank may from time to time specify to
the Company and the Agent.
8
<PAGE> 9
"Eurodollar Rate" means, for each Interest Period in respect
of Eurodollar Rate Loans, comprising a part of the same Borrowing, an interest
rate per annum (rounded upward to the nearest one-sixteenth of one percent
(1/16th of 1%)) determined pursuant to the following formula:
Eurodollar Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means the maximum
reserve percentage (expressed as a decimal, rounded upward to the
nearest one-hundredth of one percent (1/100th of 1%)) in effect on the
date LIBOR for such Interest Period is determined (whether or not
applicable to any Bank) under regulations issued from time to time by
the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as Eurocurrency Liabilities) having a term comparable to
such Interest Period; and
"LIBOR" means the rate of interest per annum
determined by the Agent to be the arithmetic mean (rounded upward to
the nearest one one-hundredth of one percent (1/100th of 1%)) of the
rates of interest per annum notified to the Agent by each Reference
Bank as the rate of interest at which dollar deposits in the
approximate amount of the Loan to be made or continued as, or
converted into, a Eurodollar Rate Loan by such Reference Bank and
having a maturity comparable to such Interest Period would be offered
to major banks in the London Interbank market at their request at or
about 11:00 a.m. (London time) on the second Business Day before the
commencement of such Interest Period. If one of the Reference Banks
shall be unable or shall otherwise fail to notify the Agent of such a
rate, LIBOR shall be determined on the basis of the rates as notified
by the remaining Reference Banks.
"Eurodollar Rate Loan" means a Loan that bears interest based
on the Eurodollar Rate.
"Event of Default" means any of the events specified in
Article VIII, provided, however, that any requirement for the giving of notice,
the lapse of time, or both, or any other condition, event or act has been
satisfied.
"Federal Funds Rate" means, for any period, the rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board
9
<PAGE> 10
(including any such successor, "H.15(519)") for the previous day opposite the
caption "Federal Funds (Effective)". If on any relevant day such rate is not
yet published in H.15(519), the rate for such previous day will be the rate set
forth in the daily statistical release designated as the Composite 3:30 p.m.
Quotations for U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including any such
successor, the "Composite 3:30 p.m. Quotations") for such previous day under
the caption "Federal Funds Effective Rate". If on any relevant day the
appropriate rate for such previous day is not yet published in either H.15(519)
or the Composite 3:30 p.m. Quotations, the rate for such previous day will be
the arithmetic mean of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of
three (3) leading brokers of Federal funds transactions in New York City,
selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereof.
"Fee Letter" means the letter dated March 7, 1995 to the
Company from Bank of America.
"Financial Letters of Credit" has the meaning specified in
Section 2.1(b).
"Foreign Subsidiaries" means any Subsidiary other than a U.S.
Subsidiary.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any central bank thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any 'corporation
or other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Hazardous Materials" means any substance or material (i)
which is or becomes defined as a hazardous waste, hazardous substance,
pollutant, contaminant or toxic substance, under any Environmental Law; (ii)
which is toxic, explosive, corrosive,
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<PAGE> 11
flammable, infectious, radioactive, mutagenic or otherwise hazardous and is or
becomes regulated by any Governmental Authority; (iii) the presence of which
requires investigation or remediation under any Environmental Law or common
law; (iv) which is deemed to constitute a nuisance, a trespass or pose a health
or safety hazard to persons or neighboring properties; (v) underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance; or (vi) which contains, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substance or waste, crude oil or any fraction
thereof.
"Highest Lawful Rate" means the maximum lawful rate of
interest permitted by applicable usury laws, now or hereafter enacted, which
interest rate shall change when and as such laws change, to the extent
permitted by such laws, effective on the day such change in such law becomes
effective.
"Indebtedness" of any Person means without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued or assumed as
the deferred purchase price of property or services; (c) all reimbursement
obligations with, respect to surety bonds, letters of credit and bankers
acceptances (whether or not matured); (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or bank under such agreement
in the event of default are limited to repossession or sale of such property);
(f) all Capital Lease Obligations; (g) all net obligations with respect to
Interest Rate Contracts; (h) all obligations with respect to redeemable
preferred equity; (i) all indebtedness referred to in paragraphs (a) through
(h) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness; and (j) all direct or indirect guaranties in respect of any
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in paragraphs (a) through (h)
above, including, without limitation, Contingent Obligations.
"Insolvency or Insolvent" means, with reference to a Person
other than a partnership, (i) the sum of its debts is greater than all of its
properties, at a fair valuation, exclusive of any properties transferred,
concealed, or removed with intent to hinder, delay, or defraud creditors, or
(ii) is generally not able to pay its debts as they become due; and with
reference to a
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<PAGE> 12
partnership, a Person is insolvent hereunder if (a) its financial condition is
such that the sum of its debts is greater than the aggregate of, at a fair
valuation, (i) all of such partnership's properties exclusive of properties
transferred, concealed or removed with intent to hinder, delay or defraud
creditors of the partnership, and (ii) the sum of the excess of the value of
each general partner's non-partnership properties, exclusive of properties
transferred, concealed or removed with intent to hinder, delay or defraud
creditors, over such partner's non-partnership debts, or (b) is generally not
able to pay its debts as they become due.
"Interest Payment Date" means the last day of each Interest
Period applicable to any Loan, and with respect to Reference Rate Loans, the
last day of each calendar quarter and the Revolving Maturity Date, and on each
date a Reference Rate Loan is converted into a Eurodollar Rate Loan; provided,
however, that if any Interest Period for a Eurodollar Rate Loan exceeds three
(3) months, interest shall also be paid on the date which falls three (3)
months after the beginning of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Rate
Loan, the period commencing on the Business Day such Loan is disbursed or
continued or on the Conversion Date on which such Loan is converted to such
Eurodollar Rate Loan and ending on the date one, two, three or six months
thereafter, as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation;
provided that:
(i) if any Interest Period pertaining to a
Eurodollar Rate Loan would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the
next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end
on the immediately preceding Business Day;
(ii) any Interest Period pertaining to a
Eurodollar Rate Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
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<PAGE> 13
(iii) no Interest Period for any Revolving Loans
shall extend beyond the Revolving Maturity Date.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"Issuing Bank" means, with respect to a Letter of Credit, Bank
of America Illinois.
"KCI Financial" means KCI Financial Services, Inc., a Delaware
corporation, and its successors and assigns.
"KCI Nonrecourse Debt" means Indebtedness of KCI Financial
that is secured by valid and perfected liens on property of KCI Financial for
the purpose of financing all or a part of such property and that is created
pursuant to documents and instruments which provide that (i) the sole and
exclusive remedy of the owner and holder of such Indebtedness in the event of a
failure to pay such Indebtedness or the occurrence of any default under the
documents and instruments creating such Indebtedness, is limited to the
foreclosure of the liens securing such Indebtedness, and (ii) the owner and
holder of the Indebtedness has no right, claim, action or recourse, of any
nature or kind whatsoever, against KCI Financial other than a foreclosure
action against the property of KCI Financial which was pledged to secure such
Indebtedness.
"Lending Office" means, with respect to any Bank, the office
or offices of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Eurodollar Lending Office", as the case may be, opposite its name
on Schedule I or such other office or offices of such Bank as such Bank may
from time to time specify to the Company and the Agent.
"Letter of Credit" means a Commercial Letter of Credit or a
Standby Letter of Credit and "Letters of Credit" means the Commercial Letters
of Credit or the Standby Letters of Credit, or all of them.
"Letter of Credit Agreement" means the properly completed and
executed standard form of application and agreement for a Letter of Credit of
the applicable Issuing Bank.
"Letter of Credit Expiration Date" means the earlier of (a)
the date of expiration of all Letters of Credit issued hereunder or (b) October
31, 1996 or such later date to which the Banks have agreed to extend the
Letters of Credit.
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<PAGE> 14
"Leverage Ratio" means with respect to any period, the ratio
of total consolidated Indebtedness to total consolidated Capitalization for
such period.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, charge of deposit arrangement, encumbrance, lien
(statutory or other) or preference, priority or other security interest or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, those created by, arising under or evidenced by any conditional
sale or other title retention agreement, the interest of a lessor under a
Capitalized Lease Obligation, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Loan" means an extension of credit by a Bank to the Company
pursuant to Section 2.1(a) and may be a Reference Rate Loan or Eurodollar Rate
Loan.
"Loan Documents" means this Agreement, the Notes, the Letter
of Credit Agreements, the Fee Letter, and all documents, instruments and
agreements executed and/or delivered in connection therewith.
"Majority Banks" means at any time Banks holding at least
sixty-six and two-thirds percent (66-2/3%) of the then aggregate unpaid
principal amount of the Loans and the Revolving Credit Exposure, or of, if no
such principal amount is then outstanding and no Revolving Credit Exposure
exists, Banks having at least sixty-six and two-thirds percent (66-2/3%) of the
Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means a material adverse change in,
or a material adverse effect upon, any of (a) the financial condition,
operations, business, properties or prospects of the Company or the Company and
its Subsidiaries taken as a whole; (b) the ability of the Company or any
Subsidiary to perform under any Loan Document; (c) the legality, validity or
enforceability of any Loan Document; (d) the rights and remedies of the Agent
and the Banks under the Loan Documents; except, in the case of clauses (c) and
(d), in the event such change or effect is caused by the action or omission of
the Agent or any Bank.
"Multiemployer Plan" means a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA) and to which any member of the
Controlled Group makes, is making, or is obligated to make contributions or has
made, or been obligated to make, contributions.
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"Net Worth" of any Person means shareholders equity (not
including redeemable preferred equity) as determined in accordance with GAAP.
"Note" means a Revolving Note and "Notes" means any of the
Revolving Notes, or all of them, substantially in the form of Exhibit A.
"Notice of Borrowing" means a notice given by the Company to
the Agent pursuant to Section 2.3, in substantially the form of Exhibit B.
"Notice of Conversion/Continuation" means a notice given by
the Company to the Agent pursuant to Section 2.4, in substantially the form of
Exhibit C.
"Notice of Election" has the meaning specified in Section
2.7(b).
"Obligations" means all Loans, obligations under the Letter of
Credit Agreements, and other Indebtedness, advances, debts, liabilities,
obligations, covenants and duties owing by the Company and/or its Subsidiaries
to any Bank, the Agent, or any other Person required to be indemnified under
any Loan Document, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement, under any other Loan Document, or in respect of any Interest Rate
Contract, whether or not for the payment of money, whether arising by reason of
an extension of credit, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute
or contingent, due or to become due, now existing or hereafter arising and
however acquired. The term "Obligations" includes, without limitation, all
interest, charges, reasonable expenses, reasonable fees, reasonable attorneys'
fees and disbursements (including the reasonable expenses and hourly fees of
in-house counsel) and any other sum chargeable to the Company under this
Agreement or any other Loan Document.
"Officer's Certificate" means the certificate required
pursuant to Section 6.2(b).
"Other Taxes" has the meaning specified in Section 3.8(b).
"Participant" has the meaning specified in Section 12.1(d).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
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"Performance Letters of Credit" has the meaning specified in
Section 2.1(b).
"Permitted Liens" means:
(a) any Lien existing on the property of the Company or
its Subsidiaries set forth in Schedule 7.1 securing Indebtedness
outstanding on March 31, 1995;
(b) the Lien on the Cash Collateral Account;
(c) Liens for taxes, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or
to the extent that non-payment thereof is permitted by Section 6.6;
(d) Liens imposed by law such as carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or
other similar Liens arising in the ordinary course of business which
are not delinquent or remain payable without penalty or which are
being contested in good faith and by appropriate proceedings;
(e) Liens on the property of the Company or any of its
Subsidiaries incurred, or pledges, or deposits required, in connection
with workmen's compensation, unemployment insurance and other social
security legislation;
(f) Liens on the property of the Company or any of its
Subsidiaries securing (i) the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, and
(ii) obligations on surety and appeal bonds, and (iii) other
obligations of a like nature incurred in the ordinary course of
business provided all such Liens in the aggregate have no reasonable
likelihood of causing a Material Adverse Effect;
(g) Easements, rights-of-way, restrictions and other
encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject thereto
or interfere with the ordinary conduct of the businesses of the
Company and its Subsidiaries;
(h) Purchase money Liens or purchase money security
interests on any asset acquired or held by the Company or any of its
Subsidiaries in the ordinary course of business, securing Indebtedness
incurred or assumed for the purpose of financing all or any part of
the cost of
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acquiring such asset; provided that any such Lien attaches to such
asset concurrently with or within thirty (30) days after the
acquisition thereof and provided that the principal amount of the
Indebtedness secured by any such purchase money Liens or purchase
money security interests shall not exceed the Indebtedness permitted
under Section 7.5;
(i) Liens on property of KCI Financial securing KCI
Nonrecourse Debt and other Indebtedness of KCI Financial; and
(j) Financing statements and Liens filed under the Prior
Credit Agreement which are in the process of being released.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company or any of its Subsidiaries sponsors or
maintains or to which the Company or any of its Subsidiaries makes or is
obligated to make contributions, or a Qualified Plan.
"Principal Payment Date" means any date on which principal of
the Loans is payable pursuant to Section 2.7(a).
"Prior Loan Documents" means that certain Credit Agreement
dated as of December 17, 1993, as amended, and executed by and among the
Company, Bank of America National Trust and Savings Association, as Agent, and
the financial institutions named therein and all documents and instruments
renewed, extended, modified and increased thereby, and together with all
promissory notes, security agreements, pledge agreements, guarantees and other
documents and instruments therein described or executed in connection
therewith, and all modifications, amendments, renewals, extensions,
arrangements and increases thereof.
"Qualified Plan" means a pension plan (as defined in Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the Code
and which any member of the Controlled Group sponsors, maintains, or to which
it makes or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding period covering at least five (5)
plan years, but excluding any Multiemployer Plan.
"Reference Banks" means (a) until such time as the Agent shall
appoint two Banks as additional Reference Banks, Bank of America (or its
applicable Lending Office, as the case may be) and (b) at such time as the
Agent shall appoint two Banks as additional
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Reference Banks, Bank of America and such two other Banks (or their applicable
Lending Offices, as the case may be).
"Reference Rate" means the higher of:
(a) the rate of interest publicly announced from time to
time by Bank of America in San Francisco, California, as its reference
rate. It is a rate set by Bank of America, based upon various factors
including Bank of America's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such
announced rate; or
(b) 0.5% per annum above the Federal Funds Rate.
Any change in the reference rate pursuant to clause (a) above
announced by Bank of America shall take effect at the opening of business on
the day specified in the public announcement of such change. Any change in the
reference rate pursuant to clause (b) above shall take effect on the effective
date of such change in the Federal Funds Rate.
"Reference Rate Loan" means a Loan that bears interest based
on the Reference Rate.
"Reimbursement Obligations" has the meaning specified in
Section 2.9(c).
"Rental Expense" means all monetary obligations of the Company
or any of its Subsidiaries under any lease or similar arrangement, including
without limitation all Capital Lease Obligations.
"Repayment Date" has the meaning specified in Section 2.7(b).
"Requirement of Law" means as to any Person, the certificate
of incorporation and bylaws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Responsible Officer" means the Chief Executive Officer, the
President, or any Senior Vice President, of the Company or, with respect to
financial matters, the Chief Financial Officer, the Vice President - Accounting
or the Treasurer of the Company.
"Revolving Commitments" means the commitments of the Banks to
make Loans pursuant to Section 2.1(a) in a maximum
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aggregate amount equal to Fifty Million dollars ($50,000,000) as such amount
may be reduced from time to time pursuant to the terms of this Agreement, and
"Revolving Commitment" shall mean for each Bank the commitment to make Loans in
an aggregate amount equal to its Commitment Percentage of the Revolving
Commitments.
"Revolving Commitment Percentage" means, for each Bank, such
Bank's Commitment Percentage of the Revolving Commitment as set forth opposite
such Bank's name in Schedule I under the heading "Revolving Commitment
Percentage" as the same may be reduced or adjusted pursuant to Section 2.5 or
as a result of one or more assignments pursuant to Article XII.
"Revolving Credit Exposure" means the sum of the aggregate
face amount of Letters of Credit outstanding plus the aggregate amount of
drafts paid under Letters of Credit for which the Company has not reimbursed
the Agent.
"Revolving Loan" has the meaning specified in Section 2.1(a).
"Revolving Maturity Date" means the earlier to occur of (a)
May 6, 1996 as such date may be extended pursuant to Section 2.10 or (b) the
date on which the Revolving Commitments shall terminate in accordance with the
provisions of this Agreement.
"Revolving Note" means a promissory note of the Company
payable to the order of a Bank in substantially the form of Exhibit A,
evidencing the aggregate indebtedness of the Company to such Bank resulting
from Revolving Loans made by such Bank.
"SEC" means the U.S. Securities and Exchange Commission, or
any other federal agency at the time administering (i) at any time, the
Securities Act of 1933 as then in effect or any similar federal statute then in
effect, or (ii) at any time, the Securities Exchange Act of 1934 as then in
effect or any similar federal statute then in effect, whichever is the relevant
statute for the particular purpose.
"Standby Letter of Credit" means any of the Financial Letters
of Credit or the Performance Letters of Credit.
"Subordinated Debt" means the Indebtedness of the Company, or
any of its Subsidiaries, or any of their respective Subsidiaries, calculated in
accordance with GAAP, heretofore or hereafter incurred, that, by the express
terms of the instrument evidencing or creating such Indebtedness or by the
terms of a subordination agreement in form and substance satisfactory to the
Majority Banks, is validly and effectively made subordinate and subject in
right to payment, to whatever extent the Majority Banks may require, to the
prior payment of the Obligations.
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"Subsidiary" means as to any Person, (i) a corporation of
which shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation are at
the time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person, (ii)
any partnership of which such Person or any Subsidiary is a general partner or
any partnership more than 50% of the equity interests of which are owned,
directly or indirectly, by such Person or by one or more other Subsidiaries, or
by such Person and one or more other Subsidiaries, (iii) a limited liability
company in which more than 50% of the percentage interests constituting the
membership are owned, or the management of which is otherwise controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries, or
by such Person and one or more other Subsidiaries, and (iv) any association or
other entity in which more than 50% of the equity interests are owned, directly
or indirectly, by such Person or by one or more other Subsidiaries, or by such
Person and one or more other Subsidiaries. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"Subsidiary Guaranty" means collectively one or more
guaranties securing the obligations of the Company to the Banks now or
hereafter executed by each U.S. Subsidiary (other than KCI Financial)
substantially in the form of Exhibit H attached hereto.
"Taxes" has the meaning specified in Section 3.8(a).
"Transferee" has the meaning specified in Section 12.1(e).
"U.S. Subsidiaries" means any Subsidiary incorporated or
formed under the laws of the United States of America or any state thereof.
"Withdrawal Liabilities" means, as of any determination date,
the aggregate amount of the liabilities, if any, pursuant to Section 4201 of
ERISA if the Controlled Group made a complete withdrawal from all Multiemployer
Plans and any increase in contributions pursuant to Section 4243 of ERISA.
"Withdrawing Bank" has the meaning specified in Section 2.7(b).
1.2 Other Definitional Provisions.
(a) Unless otherwise specified herein, all terms defined
in this Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto.
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(b) All accounting terms not expressly defined herein
shall be construed, except where the context otherwise requires, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
section, schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS
2.1 Amounts and Terms of Commitments.
(a) The Revolving Credit. Each Bank severally agrees, on
the terms and subject to the conditions hereinafter set forth, to make Loans to
the Company (each such Loan, a "Revolving Loan") from time to time, on any
Business Day during the period from the Closing Date to the Revolving Maturity
Date, in an aggregate amount not to exceed at any time outstanding such Bank's
Revolving Commitment less such Bank's Revolving Commitment Percentage of the
Revolving Credit Exposure; provided, however, that, after giving effect to any
Borrowing of Revolving Loans, the aggregate principal amount of all Revolving
Loans then outstanding shall not exceed the Revolving Commitments less the
Revolving Credit Exposure. Within the limits of each Bank's Revolving
Commitment and each Bank's Revolving Commitment Percentage, the Company may
borrow under this Section 2.1(a), request the issuance of Letters of Credit
pursuant to Section 2.1(b), prepay pursuant to Section 2.6 and reborrow
pursuant to this Section 2.1(a).
(b) Letters of Credit. Subject to the terms and
conditions hereof and of the Letter of Credit Agreement delivered in accordance
with Section 2.3(f), each Issuing Bank hereby agrees to issue letters of credit
under the Revolving Commitment ("Letters of Credit"), in form and substance
satisfactory to such Issuing Bank, for the account of the Company. The
aggregate undrawn face amount of all Letters of Credit at any time outstanding
will not exceed the Revolving Commitments less (y) the aggregate amount of
outstanding Revolving Loans plus (z) the Revolving Credit Exposure. At no time
shall the aggregate amount of outstanding Loans plus the Revolving Credit
Exposure exceed the Revolving Commitments. In the event of an actual conflict
between the terms and conditions of this Agreement and the terms and conditions
of any such Letter of Credit Agreement, the terms and conditions of this
Agreement shall prevail except that any such Letter of Credit Agreement may
provide
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for further representations relating specifically to the transaction or affairs
underlying any Letter of Credit to be issued by the relevant Issuing Bank.
Each Letter of Credit will (1) be for the account of the Company, (2) consist
of, without duplication, (A) nontransferable standby letters of credit to
support certain performance obligations of the Company ("Performance Letters of
Credit"), (B) nontransferable standby letters of credit to support certain
payment obligations of the Company that are permitted by this Agreement
("Financial Letters of Credit"), and (C) nontransferable commercial documentary
letters of credit for the purchase of certain inventory in the ordinary course
of business ("Commercial Letters of Credit"), and in each instance that are for
purposes satisfactory to the relevant Issuing Bank, and (3) shall contain such
other reasonable terms and provisions as may be required or desired by the
applicable Issuing Bank. Subject to the limitations set forth herein, (1) each
Performance Letter of Credit and Financial Letter of Credit shall be issued for
the period requested by the Company but in any event for a period not in excess
of [one (1)] year from the date of issuance, (2) each Commercial Letter of
Credit shall be issued for the period requested by the Company but in any event
for a period not to exceed one (1) year from the date of issuance, and (3) all
Letters of Credit shall expire no later than the Letter of Credit Expiration
Date.
2.2 Notes.
(a) The Revolving Loans made by each Bank shall be
evidenced by a Revolving Note payable to the order of such Bank in an amount
equal to the Revolving Commitment of such Bank.
(b) Each Bank shall endorse on the schedules annexed to
its Note, the date, amount and maturity of each Loan made by it and the amount
of each payment of principal made by the Company with respect thereto. Each
Bank is irrevocably authorized by the Company to endorse its Note and each
Bank's record shall be conclusive absent manifest or material error; provided,
however, that the failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing and Issuance of Letters of Credit.
(a) Each Borrowing of Loans shall be made upon the
irrevocable written notice of the Company in the form of a Notice of Borrowing,
delivered by facsimile (confirmed by mail) which notice must be received by the
Agent prior to 9:00 a.m. (San Francisco, California time) (i) three (3)
Business Days prior to the requested borrowing date, in the case of Eurodollar
Rate Loans
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(ii) one (1) Business Day prior to the requested borrowing date, in the case of
Reference Rate Loans specifying:
(A) the amount of each Loan, which shall be in a minimum
principal amount of One Million Dollars ($1,000,000) and in integral
multiples of Five Hundred Thousand Dollars ($500,000);
(B) the requested borrowing date which shall be a
Business Day;
(C) whether the Borrowing is to be comprised of
Eurodollar Rate Loans or Reference Rate Loans; and
(D) the duration of the Interest Period applicable to
such Loans included in such notice, subject to the definition of
Interest Period. If the Notice of Borrowing shall fail to specify the
duration of the Interest Period for any Borrowing comprised of
Eurodollar Rate Loans, such Interest Period shall be three months.
(b) Upon receipt of the Notice of Borrowing, the Agent
shall promptly notify each Bank thereof and of the amount of such Bank's
Commitment Percentage of the Borrowing.
(c) Each Bank will make the amount of its Commitment
Percentage of the Borrowing available to the Agent for the account of the
Company at the office specified by the Agent in Section 14.1 for payment by
10:00 a.m. (San Francisco, California time) on the borrowing date requested by
the Company in funds immediately available to the Agent. Unless any applicable
condition specified in Article V has not been satisfied, the proceeds of all
such Loans will then be made available to the Company by the Agent at such
office by crediting the account of the Company on the books of Bank of America
with the aggregate of the amounts made available to the Agent by the Banks and
in like funds as received by the Agent.
(d) The provisions of Section 2.3(a) notwithstanding, if
the Company shall not have given a timely notice of a Borrowing to be made, or
of an election to convert or to renew to occur in accordance with Section 2.4,
on the last day of any Interest Period for outstanding Loans, then unless the
Agent shall have received notice that the Company elects not to make a
Borrowing on such day (such notice to have been received at least two (2)
Business Days prior to such Day), such outstanding Loans (reduced to the extent
necessary to reflect any reductions of the Commitments on or prior to such day)
shall automatically be converted to Reference Rate Loans.
(e) A maximum number of six (6) Interest Periods may be
outstanding at any one time; provided, however, that each Loan is
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in the minimum amount required under paragraph (A) of Section 2.3(a).
(f) (i) Each Letter of Credit shall be issued upon receipt by
the Agent and the relevant Issuing Bank of a written request of the
Company (a "Credit Request") in substantially the form of Exhibit F
together with a duly executed Letter of Credit Agreement not later
than 9:00 a.m. (San Francisco, California time) three (3) Business
Days prior to the date set for the issuance of such Letter of Credit.
The Agent will advise the Banks of the face amount of each Letter of
Credit requested within two (2) days of its receipt of the Company's
request for a Letter of Credit.
(ii) Each Credit Request shall be irrevocable and shall
specify, among other things:
(1) the proposed date of issuance of the Letter
of Credit, which shall be a Business Day;
(2) the stated amount of the Letter of Credit;
(3) the date of expiration of the Letter of
Credit;
(4) The identity of the relevant Issuing Bank if
other than Bank of America Illinois and the name and address
of the beneficiary thereof;
(5) the documents to be presented by the
beneficiary of the Letter of Credit in case of any drawing
thereunder;
(6) the full text of any certificate to be
presented by the beneficiary in case of any drawing
thereunder;
(7) the purpose of the Letter of Credit and
whether such Letter of Credit is to be a Financial Letter of
Credit, a Performance Letter of Credit, or a Commercial Letter
of Credit; and
(8) the aggregate amount of (a) the undrawn face
amount of all Letters of Credit outstanding (including such
Letter of Credit), which shall not exceed the amount specified
in Section 2.1(b), (b) Revolving Credit Exposure
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(including such Letter of Credit) to be existing on the date
of issuance of such Letter of Credit, and (c) all Revolving
Loans to be outstanding on the date of issuance of such Letter
of Credit; and shall contain a certification to the Agent and
the relevant Issuing Bank that the issuance of such
Revolving Letter of Credit will not cause the sum of the
amounts referred to in clauses (8)(b) and (8)(c) above to
exceed the Revolving Commitment.
(iii) Each Issuing Bank shall promptly notify the Agent of
each issuance of a Letter of Credit by such Issuing Bank pursuant
hereto and provide the Agent with a copy of such Letter of Credit and
the related Letter of Credit Agreement.
(iv) Any request for amendment to or extension of the
expiry date of any previously issued Letter of Credit shall be
submitted pursuant to a Credit Request by the Company to the Agent and
the relevant Issuing Bank not later than two (2) Business Days prior
to the date of the proposed amendment or extension. The Agent shall
promptly notify the Banks of each request for an amendment to or
renewal of any Letter of Credit. The relevant Issuing Bank shall not
amend or extend the expiry date of any Letter of Credit if the
issuance of a new Letter of Credit having the same terms and
conditions as such Letter of Credit as so amended or extended would be
prohibited by any provision of Section 2.1(b) or 2.3(f).
2.4 Conversions and Renewals.
(a) The Company may upon irrevocable written notice to
the Agent:
(i) elect to convert on any Business Day, any Reference
Rate Loans (or any part thereof in an amount not less than One Million
Dollars ($1,000,000) and an integral multiple of Five Hundred Thousand
Dollars ($500,000)) into Eurodollar Rate Loans;
(ii) elect to convert on any Interest Payment Date, any
Eurodollar Rate Loans maturing on such Interest Payment Date (or any
part thereof in an amount not less than One Million Dollars
($1,000,000) and an integral multiple of Five Hundred Thousand Dollars
($500,000)), into Reference Rate Loans; or
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(iii) elect to renew, on any Interest Payment Date therefor,
any Eurodollar Rate Loans (or any part thereof in an amount not less
than One Million Dollars ($1,000,000) and an integral multiple of Five
Hundred Thousand Dollars ($500,000));
provided, that if the aggregate amount of Revolving Loans that are Eurodollar
Rate Loans shall have been reduced, by payment, prepayment, or conversion of
part thereof to be less than One Million dollars ($1,000,000), the Eurodollar
Rate Loans shall automatically convert into Reference Rate Loans, and on and
after such date the right of the Company to continue such Loans as Eurodollar
Rate Loans shall terminate;
(b) The Company shall deliver by facsimile (confirmed by
mail), a Notice of Conversion/Continuation in substantially the form of Exhibit
C received by the Agent not later than 9:00 a.m. (San Francisco, California
time) at least (i) three (3) Business Days in advance of the Conversion Date
or renewal date, if the Loans are to be converted into or continued as
Eurodollar Rate Loans; and (ii) one (1) Business Day in advance of the
Conversion Date or renewal date, if the Loans are to be converted into or
renewed as Reference Rate Loans, specifying
(A) the proposed Conversion Date or renewal date;
(B) the aggregate amount of Loans to be converted or
renewed;
(C) the nature of the proposed conversion or
continuation; and
(D) the duration of the requested Interest Period,
subject to the definition of Interest Period;
(c) If upon the expiration of any Interest Period
applicable to Eurodollar Rate Loans, the Company has failed to select a new
Interest Period in accordance with the terms of this Agreement to be applicable
to such Eurodollar Rate Loans, as the case may be, or if any Event of Default
shall then have occurred and be continuing, the Company shall be deemed to have
elected to convert such Eurodollar Rate Loans into Reference Rate Loans
effective as of the expiration date of such current Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation,
the Agent shall promptly notify each Bank thereof. All conversions and
renewals shall be made pro rata according to the respective outstanding
principal amounts of the Loans held by each Bank with respect to which such
notice was given.
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(e) Notwithstanding any other provision contained in this
Agreement, after giving effect to any Borrowing, conversion or renewal of any
Loans, there shall be not more than six (6) different Interest Periods in
effect.
2.5 Voluntary Termination or Permanent Reduction of Commitments.
The Company may upon not less than three (3) Business Days
irrevocable prior notice to the Agent, terminate the Revolving Commitments or
permanently reduce the Revolving Commitments by an aggregate minimum amount of
One Million Dollars ($1,000,000) and integral multiples of Five Hundred
Thousand Dollars ($500,000) in excess thereof, provided that no such reduction
or termination shall be permitted if, after giving effect thereto and to any
prepayments of the Loans made on the effective date thereof, the then
outstanding principal amount of the Revolving Loans plus the Revolving Credit
Exposure would exceed the amount of the Revolving Commitments then in effect
and, provided, further, that once reduced in accordance with this Section 2.5,
the Revolving Commitments may not be increased. Any reduction of the Revolving
Commitments shall be applied to each Bank's Commitment in accordance with such
Bank's Commitment Percentage. If the Commitments are terminated in their
entirety, all accrued commitment fees to, but not including, the effective date
of such termination shall be payable on the effective date of such termination
without any premium or penalty.
2.6 Optional Prepayments. Subject to Section 3.12, the Company
may, at any time or from time to time, upon at least three (3) Business Days'
notice to the Agent, prepay Loans in whole or in part, in minimum amounts of
One Million Dollars ($1,000,000) and in integral multiples of Five Hundred
Thousand Dollars ($500,000). Such notice of prepayment shall specify the date
and amount of such prepayment and whether such prepayment is of Reference Rate
Loans or Eurodollar Rate Loans, or any combination thereof. Such notice shall
not thereafter be revocable by the Company and the Agent shall promptly notify
each Bank thereof and of such Bank's Commitment Percentage of such prepayment.
If such notice is given, the Company shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount prepaid
and the amounts required pursuant to Section 3.12.
2.7 Repayment.
(a) The Revolving Credit. The Company agrees to repay to
the Agent for the account of the Banks the principal amount of the Revolving
Loans on the Revolving Maturity Date.
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(b) Change of Control. If at any time a Change of
Control shall occur, then, not later than two (2) Business Days after the
applicable Change of Control Date, the Company shall give the Agent and the
Banks notice (a "Change of Control Notice") of the occurrence of such Change of
Control, specifying the applicable Change of Control Date and the nature of the
Change of Control. So long as the Notes have not been accelerated, upon and
after the occurrence of a Change of Control (whether or not any Change of
Control Notice shall have been given with respect thereto), any Bank may elect
(an "Election") to have its Commitment terminated in whole and to require the
repayment in full of its Loans and other amounts owing to it hereunder. Each
Bank making an Election (a "Withdrawing Bank") shall give the Company, the
Agent and the other Banks notice (a "Notice of Election") of its Election not
more than ten (10) Business Days after its receipt of a Change of Control
Notice. The Notice of Election of each Withdrawing Bank shall be irrevocable
and shall specify the date (the "Repayment Date") upon which such Withdrawing
Bank requires that its Loans be repaid in full. The Repayment Date for a
Withdrawing Bank shall not be earlier than five (5) Business Days after receipt
by the Company of such Withdrawing Bank's Notice of Election. The Repayment
Date for a Withdrawing Bank shall not be later than the latest date that is the
end of an Interest Period applicable to the outstanding Loans made by such
Withdrawing Bank. Upon receipt by the Agent and the Company of a Notice of
Election from a Withdrawing Bank, the unused portion of the Commitments of such
Withdrawing Bank shall automatically terminate. The Company, within five (5)
Business Days of its receipt of a Notice of Election, shall pay to such
Withdrawing Bank all fees on the amount of its Commitment so terminated,
accrued to the date of payment. In addition, on the last day of each Interest
Period applicable to the outstanding Loans of a Withdrawing Bank occurring
prior to such Withdrawing Bank's Repayment Date, the Commitments of such
Withdrawing Bank shall automatically reduce by an amount equal to the principal
amount of the Loans whose Interest Period ends on such date, and the Company
shall pay to such Withdrawing Bank the principal amount of all such Loans, all
accrued and unpaid interest thereon and fees on the amount of such Withdrawing
Bank's Commitments so terminated, accrued to the date of payment and, if
applicable, amounts pursuant to Section 3.11; provided, however, that if there
has been an acceleration of the Notes that has not been withdrawn, repayments
shall only be made pursuant to such acceleration. On the Repayment Date for
each Withdrawing Bank, the Commitments of such Withdrawing Bank shall terminate
in whole, and the Company shall pay to such Withdrawing Bank the principal
amount of all of its outstanding Loans, accrued and unpaid interest thereon,
fees on the amount of such Withdrawing Bank's Commitments so terminated,
accrued through the Repayment Date, and all other outstanding amounts
(including amounts pursuant to Sections 3.11 and 3.12), due to such Withdrawing
Bank hereunder, and an amount equal to such Withdrawing Bank's Revolving Credit
Exposure (the unused portions of such amounts equal to the Withdrawing Bank's
Revolving Credit Exposure,
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if any, shall be returned to the Company after the respective expiration dates
of the Letters of Credit and after all amounts due and payable on the Repayment
Date are paid in full); provided, however, if there has been an acceleration of
the Notes that has not been withdrawn, repayments shall only be made pursuant
to such acceleration. Upon and after each Withdrawing Bank's Repayment Date
and the repayment in full to such Withdrawing Bank of its outstanding Loans and
Revolving Credit Exposure, the accrued interest thereon, all fees and costs due
to it hereunder, such Withdrawing Bank shall not be a party to this Agreement
nor be included as a "Bank" hereunder except for purposes of Sections 3.11, 9.7
and 11.2. Notwithstanding the foregoing provisions of this Section 2.7(b), if
a Change of Control shall occur solely due to the death of James R. Leininger,
M.D., the Repayment Date for a Withdrawing Bank shall not be earlier than two
hundred seventy (270) days after receipt by the Company of such Withdrawing
Bank's Notice of Election.
2.8 Interest.
(a) Subject to Section 2.8(c), each Loan shall bear
interest on the outstanding principal amount thereof from the date when made
until it becomes due at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate, if any, and (ii) the Eurodollar Rate or the Reference Rate, as the
case may be, plus the Applicable Margin.
(b) Interest on each Loan shall be payable in arrears on
each Interest Payment Date, and for Reference Rate Loans, on each Conversion
Date in respect thereof; provided, however, that as to any Loan with respect to
which the Company has requested an Interest Period of six months, the Company
shall also pay interest at three months. Interest shall also be payable on the
date of any prepayment or repayment of Loans pursuant to Section 2.5, 2.6 and
2.7 for the portion of the Loans so prepaid and upon payment (including
prepayment) in full thereof and, after the occurrence and during the
continuance of any Event of Default, interest shall be payable on demand.
(c) During the continuation of any Event of Default or
after acceleration, the Company shall pay interest (after as well as before
judgment to the extent permitted by law) on the principal amount of all Loans
due and unpaid and all other sums due and unpaid under any Loan Document, at a
rate per annum which is equal to the lesser of (i) the Highest Lawful Rate, if
any, and (ii) a rate per annum which is determined by increasing the Applicable
Margin then in effect by two percent (2%) per annum; provided, however, that,
on and after the expiration of the Interest Period applicable to any Eurodollar
Rate Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of
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Default or after acceleration, bear interest at a rate per annum equal to the
Reference Rate plus two percent (2%).
2.9 Letter of Credit Drawings and Reimbursements.
(a) If, in accordance with its standard operating
procedures, the relevant Issuing Bank determines that a demand for payment
under a Letter of Credit conforms to the terms and conditions of such Letter of
Credit, such Issuing Bank shall, as soon as reasonably practicable, give notice
to the Company and to the Agent of the date it will make payment to the
applicable beneficiary in accordance with the terms of such Letter of Credit.
Upon receipt of such notice, the Agent shall promptly notify the Banks thereof.
The Company's obligation to reimburse the Agent as provided herein is absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement, under all circumstances whatsoever, including,
without limitation, the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, any Letter of Credit, any Letter of Credit Agreement, or
any other document;
(ii) the existence of any claim, setoff, defense or other
right which the Company may have at any time against the beneficiary
of any Letter of Credit, the Agent, the relevant Issuing Bank, the
Banks, or any other Person, whether in connection with this Agreement,
any Letter of Credit, or any Letter of Credit Agreement, the
transactions contemplated herein or any unrelated transactions;
(iii) any draft, certificate or other document presented
under any Letter of Credit proves to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein is untrue or
inaccurate in any respect whatsoever;
(iv) payment by the Issuing Bank under any Letter of
Credit against presentation of a sight draft or certificate which
complies in all material respects with the terms of a Letter of Credit
but does not strictly comply therewith;
(v) the surrender or impairment of any collateral, if any;
(vi) any failure of the Agent, the relevant Issuing Bank
or any Bank to provide notice to the Company of any drawing under a
Letter of Credit;
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(vii) the occurrence or continuance of a Default or Event
of Default; or
(viii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
(b) Immediately upon the issuance by an Issuing Bank of
any Letter of Credit in accordance with this Agreement, each other Bank shall
be deemed to have irrevocably and unconditionally purchased and received from
such Issuing Bank, without recourse or warranty, an undivided interest and
participation in such Letter of Credit, including all obligations of the
Company with respect thereto and any security therefor or guaranty pertaining
thereto, in an amount equal to the product of (i) the Commitment Percentage of
such Bank and (ii) the stated amount of such Letter of Credit. For purposes of
Section 3.2, each issuance of a Letter of Credit by an Issuing Bank shall be
deemed to utilize the Revolving Commitment of each Bank (other than such
Issuing Bank) by an amount equal to the amount of such participation and to
utilize the Revolving Commitment of such Issuing Bank by an amount equal to the
stated amount of such Letter of Credit less the aggregate amount of all
participations therein.
(c) The Company hereby unconditionally and irrevocably
agrees to reimburse the Agent for the account of each Issuing Bank for each
payment made by such Issuing Bank under any Letter of Credit issued by such
Issuing Bank (a "Reimbursement Obligation") on the date such Issuing Bank is
making such payment in accordance with Section 2.9(a) (or, if such Issuing
Bank's notice to the Company pursuant to Section 2.9(a) was given after 10:00
a.m. (San Francisco, California time) on such date, on the Business Day next
following such date), together with, (i) if applicable, interest on the amount
paid by such Issuing Bank from the date the payment was made until it becomes
due at a rate per annum equal to the lesser of (y) the Highest Lawful Rate, if
any, or (z) the Reference Rate per annum and (ii) if such reimbursement is not
made when due (whether directly, by means of Revolving Loans as provided in
Section 2.9(d) or by application of any funds then contained in the Cash
Collateral Account) interest on the amount so paid by such Issuing Bank from
and including the date on which it becomes due to but not including the date
such Issuing Bank is reimbursed therefor at a rate per annum equal to the
lesser of (i) the Highest Lawful Rate, if any, or (ii) the Reference Rate plus
two percent (2%) per annum.
(d) Subject to the conditions contained in Article V, the
Company may satisfy its Reimbursement Obligation to any Issuing Bank by
borrowing Reference Rate Loans hereunder in accordance with Section 2.1(a), the
proceeds of which Loans will be used to reimburse such Issuing Bank for the
amount of any disbursement made by it under a Letter of Credit together with
interest thereon to
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the extent provided in Section 2.9(c). If the Company shall fail to reimburse
or cause any Issuing Bank to be reimbursed directly or by application of funds
contained in the Cash Collateral Account on the same day such Issuing Bank
honors a drawing under a Letter of Credit (or, if such Issuing Bank's notice to
the Company pursuant to Section 2.9(a) was given after 10:00 a.m. (San
Francisco, California time) on such date, on the Business Day next following
such date), such Issuing Bank shall promptly notify the Agent and the Agent
shall promptly notify the other Banks thereof; provided, however, that if on
the date of such notification there shall not exist any Default under Section
8.1(g) or 8.1(h), the Company shall be deemed to have requested that Revolving
Loans, which shall be Reference Rate Loans, be made by the Banks, to be
disbursed on the date of payment by such Issuing Bank under such Letter of
Credit. In the event that any Bank fails to make available to the Agent for
the account of the relevant Issuing Bank the amount of such Bank's Revolving
Loan on the date payment is made under the Letter of Credit, such Issuing Bank
shall be entitled to recover such amount on demand from such Bank together with
interest thereon at the Federal Funds Rate.
(e) If any Reimbursement Obligation of the Company is not
repaid directly by the Company when due and cannot be repaid by means of a
Borrowing of Revolving Loans, and there shall not then be sufficient funds
available for the payment due to the relevant Issuing Bank in the Cash
Collateral Account, each other Bank will promptly pay to such Issuing Bank the
amount of such other Bank's participation in such Reimbursement Obligation
determined in accordance with Section 2.9(b).
(f) Upon and only upon receipt by the relevant Issuing
Bank or the Agent for the account of such Issuing Bank of funds from the
Company (i) in reimbursement of any payment made under a Letter of Credit with
respect to which any Bank has theretofore made a payment to the Agent for the
account of such Issuing Bank pursuant to Section 2.9(d) or 2.9(e), or (ii) in
payment of interest on any Reimbursement Obligation, such Issuing Bank (through
the Agent) or the Agent, as the case may be, will pay to each such Bank, in the
same funds as those received by such Issuing Bank or the Agent, as the case may
be, for the account of such Issuing Bank, such Bank's Commitment Percentage of
such funds.
(g) If the Agent or any Issuing Bank is required at any
time to return to the Company or to a trustee, receiver, liquidator, custodian
or other similar official any portion of the payments made by the Company to
such Issuing Bank or the Agent for the account of such Issuing Bank in
reimbursement of a payment made under any Letter of Credit or interest thereon,
each Bank shall, on demand of the Agent, forthwith return to the Agent or such
Issuing Bank its Commitment Percentage of any amounts so returned by the Agent
or such Issuing Bank, plus, to the extent such Issuing Bank is required to pay
interest to the Company or such official and
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such interest remains unreimbursed, interest thereon from the date such demand
is made to but not including the date such amounts are returned by such Bank to
the Agent or such Issuing Bank, at a rate per annum equal to the Federal Funds
Rate.
(h) The Company assumes all risks of the acts or
omissions of beneficiaries of any of the Letters of Credit with respect to
their use of the Letters of Credit. Except in the case of gross negligence or
willful misconduct on the part of the Agent, any Bank, or any Issuing Bank or
any of their respective employees, neither the Agent, any Bank, nor any Issuing
Bank nor their respective correspondents shall be responsible: for the
validity or genuineness of certificates or other documents, even if such
certificates or other documents should in fact prove to be invalid, fraudulent
or forged; for errors, omissions, interruptions or delay in the transmission or
delivery of any messages, by mail, telex or otherwise, whether or not they be
in code; for errors in the translation or for errors in interpretation of
technical terms; or for any consequences arising from causes beyond their
control or the control of their correspondents; nor shall they be responsible
for any error, neglect or default of any of their respective correspondents;
and none of the above shall affect, impair or prevent the vesting of any of
their rights or powers hereunder or under any Letter of Credit, all of which
rights shall be cumulative. The Agent, the Banks, and the Issuing Bank and
their respective correspondents may accept certificates or other documents that
appear on their face to be in order, without responsibility for further
investigation. In furtherance but not in limitation of the foregoing
provisions, the Company agrees that any action taken by the Agent, any Bank, or
any Issuing Bank or any of their correspondents in good faith in connection
with any such Letter of Credit, or any related drafts, certificates, documents
or instruments (except in the case of gross negligence or willful misconduct on
the part of the Agent, any Bank, or any Issuing Bank or any of their
correspondents), shall be binding on the Company and shall not put the Agent,
the Banks, and the Issuing Banks or their respective correspondents under any
resultant liability to the Company; and the Company makes a like agreement as
to any inaction or omission, unless in breach of good faith.
(i) The Banks severally agree to indemnify the Agent,
each Issuing Bank and each officer, director, employee, agent and Affiliate of
the Agent and any Issuing Bank ratably according to their Commitment
Percentages, to the extent not reimbursed by the Company, from and against any
and all actions, causes of action, suits, losses, liabilities, damages, and
expenses which may at any time (including at any time following the payment of
any of the Reimbursement Obligations) be imposed on, incurred by or asserted
against such Person in any way relating to or arising out of the issuance of,
transfer of, or payment or failure to pay under any Letter of Credit issued
pursuant to this Agreement or the use of proceeds of any payment made under any
Letter of Credit issued in
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accordance with the terms of this Agreement; provided, however, that no Bank
shall be liable for the payment of any portion of such actions, causes of
action, suits, losses, liabilities, damages and expenses resulting solely from
such Person's gross negligence or willful misconduct.
2.10 Extension of Commitments. On May 6, 1996 (the "Extension
Date"), the Revolving Maturity Date shall be extended to the date that is two
years thereafter, which shall then be deemed to be the Revolving Maturity Date
for the purposes hereof, provided that not less than 60 days before the
Extension Date, the Company has requested in writing that the Revolving
Maturity Date be extended and not less than 30 days before such date each of
the Banks shall have given written notice to the Agent consenting to such
extension and to extension of the Letter of Credit Expiration Date, but in no
event shall the Revolving Maturity Date be later than May 6, 1998, nor shall
the Letter of Credit Expiration Date be later than October 31, 1998.
Notwithstanding the foregoing, in the event that the Banks do not agree to
extend the Revolving Maturity Date past May 6, 1996, the Commitments will
terminate on such date.
ARTICLE III
FEES; PAYMENTS; TAXES; CHANGES IN CIRCUMSTANCES
3.1 Agency Fee. The Company agrees to pay to the Agent for its
sole account an agency fee in such amount and at such times as agreed in
writing between the Company and the Agent.
3.2 Facility Fees. The Company further agrees to pay to the Agent
for the benefit of each Bank a facility fee on such Bank's Revolving Commitment
equal to fifteen one hundredths of one percent (.15%) of each Bank's Commitment
regardless of usage.
3.3 Utilization Fees. (a) The Company further agrees to pay to
the Agent for the benefit of each Bank a utilization fee on the average daily
portion of such Bank's Commitment that is utilized by outstanding Loans or
issuance of Letters of Credit equal to one tenth of one percent (.10%) of such
utilized Commitment, provided that such fee shall be payable only for each day
on which the utilized portion of the Commitments exceeds fifty percent (50%) of
the aggregate Commitments.
(b) Such facility fees pursuant to Section 3.2 hereof
shall accrue with respect to the Revolving Commitment from the Closing Date to
the Revolving Maturity Date. Such utilization fees pursuant to Section 3.3
hereof shall accrue from the Closing Date to the Letter of Credit Expiration
Date. All accrued fees shall be payable quarterly in arrears on the last day of
each calendar quarter commencing on that date which is the last day of the
calendar quarter in which the Closing Date occurs and ending on the
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Letter of Credit Expiration Date or the Revolving Maturity Date, as the case
may be.
3.4 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the pro rata
benefit of the Banks a letter of credit fee, to be computed from the date of
issuance of each Letter of Credit of (i) four-tenths of one percent (.40%) per
annum of the face amount of each Standby Letter of Credit and (ii) thirty-seven
and one-half one hundredths of one percent (.375%) of the face amount of each
Commercial Letter of Credit.
The letter of credit fee is payable quarterly in advance. The first payment
shall be due on the date of issuance of such Letter of Credit, and subsequent
payments shall be due on the last day of each calendar quarter thereafter until
the expiration date of such Letter of Credit.
(b) The Company shall pay to each Issuing Bank for its
account in connection with the issuance of any Standby Letter of Credit an
issuance fee in the amount of twenty-five one hundredths of one percent (.25%)
of the face amount of each Standby Letter of Credit payable on the date of
issuance of such Letter of Credit.
(c) The Company shall pay to each Issuing Bank for its
account in connection with the negotiation of any drawing under a Commercial
Letter of Credit a negotiation fee in the amount of fifteen one hundredths of
one percent (.15%) of the amount of each drawing under such Commercial Letter
of Credit payable on the date of negotiation of the documents accompanying such
drawing.
(d) The Company shall pay to each Issuing Bank for its
account, amendment fees, and such other fees and charges in connection with the
Letters of Credit, as the Company and each Issuing Bank shall agree, all such
fees and charges to be payable as agreed between the Company and each Issuing
Bank.
3.5 Computation of Fees and Interest.
(a) All computations of interest payable in respect of
Reference Rate Loans shall be made on the basis of a year of three hundred
sixty-five (365) or three hundred sixty-six (366) days, as the case may be, for
actual days elapsed. All other computations of fees and interest under this
Agreement shall be made on the basis of a three hundred sixty (360) day year
for actual days elapsed. Interest and fees shall accrue during each period
during which interest or such fees are computed from, and including, the first
day thereof to, but excluding, the last day thereof.
(b) The Agent shall, as soon as practicable, notify the
Company and the Banks of each determination of a Eurodollar Rate,
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provided that any failure to do so shall not relieve the Company of any
liability hereunder. Any change in the interest rate on a Loan resulting from
a change in the Eurodollar Reserve Percentage, Eurocurrency Liabilities or the
Reference Rate shall become effective as of the opening of business on the day
on which such change in the Eurodollar Reserve Percentage, Eurocurrency
Liabilities or the Reference Rate shall become effective. The Agent shall as
soon as practicable notify the Company and the Banks of the effective date and
the amount of each such change provided that any failure to do so shall not
relieve the Company of any liability hereunder.
(c) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Company and the Banks in the absence of manifest or material error.
(d) If any Reference Bank's Commitment shall terminate
(otherwise than on termination of all the Commitments), or for any reason
whatsoever such Reference Bank shall cease to be a Bank hereunder, such
Reference Bank shall thereupon cease to be a Reference Bank, the Eurodollar
Rate shall be determined on the basis of the rates as notified by the remaining
Reference Banks.
(e) Each Reference Bank shall use its best efforts to
furnish quotations of rates to the Agent as contemplated hereby. If any of the
Reference Banks shall be unable or otherwise fails to supply such rates to the
Agent upon its request, the rate of interest shall be determined on the basis
of the quotations of the remaining Reference Banks or Reference Bank.
3.6 Payments by the Company.
(a) All payments (including prepayments) to be made by
the Company on account of principal, interest and fees shall be made without
set-off or counterclaim and shall be made to the Agent, for the account of the
Banks (except as otherwise provided in Section 2.9, 3.1, 3.3, 3.4, 3.10, 3.11,
or 3.12), at the Agent's office set forth in Section 14.1, in Dollars and in
immediately available funds no later that 12:00 noon (San Francisco, California
time). The Agent shall distribute such payments pro rata to each Bank in
accordance with its Commitment Percentage of such principal, interest, fees or
other amounts, promptly upon receipt in like funds as received. Any payment
which is received by the Agent later than 12:00 noon (San Francisco, California
time) shall be deemed to have been received on the immediately succeeding
Business Day.
(b) Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time
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shall in such case be included in the computation of interest or fees, as the
case may be; provided, however, that if such extension would cause payment of
interest on or principal of Eurodollar Rate Loans to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(c) Unless the Agent shall have received notice from the
Company prior to the date on which any payment is due to the Banks hereunder
that the Company will not make such payment in full, the Agent may assume that
the Company has made such payment in full to the Agent on such date and the
Agent may (but shall not be required to), in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company shall not have
made such payment in full to the Agent, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank, together with
interest thereon for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate as in effect on such date.
3.7 Payments by the Banks to the Agent.
(a) Each Bank shall make available to the Agent in
immediately available funds for the account of the Company the amount of its
Commitment Percentage of any Borrowing and any Letter of Credit.
(b) Unless the Agent shall have received notice from a
Bank on the Closing Date or, with respect to each Borrowing after the Closing
Date, at least one (1) Business Day prior to the date of any proposed Borrowing
that each Bank will not make available to the Agent for the account of the
Company the amount of such Bank's Commitment Percentage of such Borrowing, the
Agent may assume that each Bank has made such amount available to the Agent on
such borrowing date and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Bank shall not have made such
full amount available to the Agent and the Agent in such circumstances makes
available to the Company such amount, such Bank shall within two (2) Business
Days following the date of such Borrowing make such amount available to the
Agent, together with interest at the Federal Funds Rate for each day during
such period. A certificate of the Agent submitted to any Bank with respect to
amounts owing under this Section 3.7(b) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Agent shall
constitute such Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent within two (2)
Business Days following the date of such Borrowing, the Agent shall notify the
Company of such failure to fund and, upon demand by the Agent, the Company
shall pay to the Agent such amount, together
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with interest thereon for each day elapsed since the date of such Borrowing, at
a rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(c) The failure of any Bank to make any Loan on any date
of Borrowing shall not relieve any other Bank of its obligation, if any,
hereunder to make a Loan on the date of such Borrowing pursuant to the
provisions contained herein, but no Bank shall be responsible for the failure
of any other Bank to make the Loan to be made by such other Bank on the date of
any Borrowing.
3.8 Taxes.
(a) Subject to Section 3.8(g), any and all payments by
the Company to each Bank, the Arranger, or the Agent under this Agreement shall
be made free and clear of, and without deduction or withholding for, any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Agent, (i) such taxes (including income taxes or franchise
taxes) as are imposed on or measured by each Bank's, the Arranger's, or the
Agent's, as the case may be, net income by the jurisdiction under the laws of
which such Bank or the Agent, as the case may be, is organized or maintains a
Lending Office or any political subdivision thereof and (ii) such taxes that
would not have been imposed but for the existence of a connection between such
Bank or the Agent and the jurisdiction imposing such taxes (other than a
connection arising principally by reason of this Agreement or the other Loan
Documents) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes"); provided, however, nothing in this Agreement shall be construed to
require the Company to pay any Other Taxes if the payment of such Other Taxes
by the Company is prohibited by applicable laws.
(c) Subject to Section 3.8(i), the Company will indemnify
and hold harmless each Bank and the Agent for the full amount of Taxes or Other
Taxes (including without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 3.8) paid by such Bank or
the Agent (as the case may be) and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within
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thirty (30) days from the date such Bank or the Agent, as the case may be,
makes written demand therefor.
(d) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then, subject to Section 3.8(i),
(i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section
3.8) such Bank or the Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been
made,
(ii) the Company shall make such deductions, and
(iii) the Company shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(e) Within thirty (30) days after the date of any payment
by the Company of Taxes or Other Taxes, the Company will furnish to the Agent
the original or a certified copy of a receipt evidencing payment thereof, or
other evidence of payment satisfactory to the Agent.
(f) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code, and such Bank claims exemption from U.S.
withholding tax under Section 1441 or 1442 of the Code, such Bank shall deliver
to the Agent:
(i) if such Bank claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed Internal Revenue Service ("IRS") Forms 1001 and W-8 before
the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement; or
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during
which interest may be paid under this Agreement, and IRS Form W-9; and
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(iii) such other forms or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction. In addition, in the event any Bank claims exemption from, or
reduction of, withholding tax under a United States tax treaty by providing IRS
Form 1001 and such Bank sells, assigns, grants a participation in, or otherwise
transfers all or part of the obligations of the Company to such Bank under this
Agreement, such Bank agrees to notify the Agent of the percentage amount in
which it is no longer the beneficial owner of obligations of the Company to
such Bank under this Agreement. To the extent of such percentage amount, the
Agent will treat such Bank's IRS Form 1001 as no longer valid. In the event
any Bank claiming exemption from United States withholding tax by filing IRS
Form 4224 with the Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the obligations of the Company to such Bank
under this Agreement, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(g) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest payment to
such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subparagraph (f) are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(h) If the IRS or any authority of the United States or
other jurisdiction asserts a claim that the Agent did not properly withhold tax
from amounts paid to or for the account of any Bank (because the appropriate
form was not delivered, was not properly executed, or because such Bank failed
to notify the Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Bank shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this subparagraph (h), together with all costs, expenses and
attorneys' fees (including allocated costs for in-house legal services).
(i) The Company will not be required to pay any
additional amounts in respect of United States Federal income tax pursuant to
Section 3.8(d) to any Bank for the account of any Lending Office of such Bank:
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(i) if the obligation to pay such additional amounts
would not have arisen but for a failure by such Bank to comply with
its obligations under Section 3.8(f) in respect of such Lending Office;
(ii) if such Bank shall have delivered to the Company a
Form 4224 in respect of such Lending Office pursuant to Section 3.8(f)
and such Bank shall not at any time be entitled to exemption from
deduction or withholding of United States Federal income tax in
respect of payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or in the official interpretation of such law or
regulations by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 4224; or
(iii) if such Bank shall have delivered to the Company a
Form 1001 in respect of such Lending Office pursuant to Section 3.8(f)
and such Bank shall not at any time be entitled to exemption from
deduction or withholding of United States Federal income tax in
respect of payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or any applicable tax treaty or regulations or in the
official interpretation of any such law, treaty or regulations by any
Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Form 1001.
(j) If, at any time, the Company requests any Bank to
deliver any forms or other documentation pursuant to Section 3.8(f), then the
Company shall, on demand of such Bank through the Agent, reimburse such Bank
for any costs or expenses reasonably incurred by such Bank in the preparation
or delivery of such forms or other documentation.
(k) If the Company is required to pay additional amounts
to any Bank or the Agent pursuant to Section 3.8(d), then such Bank shall use
its best efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue if such change in the
judgment of such Bank is not otherwise disadvantageous to such Bank.
(l) The agreements and obligations of the Company
contained in this Section 3.8 shall survive the payment in full of principal
and interest hereunder and under the Notes.
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3.9 Sharing of Payments, Etc. If, other than as provided in
Section 2.9, 3.1, 3.3, 3.4, 3.10, 3.11, or 3.12, any Bank shall obtain on
account of the Loans made by it any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) in excess of its
Commitment Percentage of payments on account of the Loans obtained by all the
Banks, such Bank shall forthwith purchase from the other Banks such
participations in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase by such Bank from
each other Bank shall be rescinded and each other Bank shall repay to the
purchasing Bank the purchase price paid thereto to the extent of such recovery
together with an amount equal to such paying Bank's Commitment Percentage
(according, to the proportion of (a) the amount of such paying Bank's required
repayment to (b) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of
the total amount so recovered. The Company agrees that any Bank so purchasing
a participation from another Bank pursuant to the provisions of this Section
3.9 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in the amount of
such participation.
3.10 Illegality.
(a) If the introduction of any Requirement of Law or any
change in or in the interpretation or administration thereof shall make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Bank or its Lending Office to make Eurodollar Rate
Loans, then, on notice thereof by such Bank to the Company through the Agent,
(i) the obligation of such Bank to make Eurodollar Rate Loans shall be
suspended until such notifying Bank shall have notified the Agent and the
Company that the circumstances giving rise to such determination no longer
exists;
(b) If it shall be unlawful to maintain any Eurodollar
Rate Loan, the Company shall prepay in full all Eurodollar Rate Loans of such
Bank then outstanding, together with interest accrued thereon, either on the
last day of the Interest Period thereof if such Bank may lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if such Bank
may not lawfully continue to maintain such Eurodollar Rate Loans together with
any amounts required to be paid in connection therewith pursuant to Section
3.12.
(c) If the Company is required to prepay any Eurodollar
Rate Loan immediately as provided in Section 3.10(b), then concurrently with
such prepayment, the Company shall borrow from
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the affected Bank, in the amount of such repayment, a Reference Rate Loan.
(d) Before giving any notice to the Agent pursuant to
this Section 3.10, the affected Bank shall designate a different Lending Office
with respect to its Eurodollar Rate Loans if such designation will avoid the
need for giving such notice or making such demand and will not, in the judgment
of such Bank, be illegal or otherwise disadvantageous to such Bank.
3.11 Increased Cost and Reduced Return.
(a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements included in the Eurodollar Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Bank of agreeing to make or making, funding or maintaining any
Eurodollar Rate Loans, then the Company shall be liable for, and shall from
time to time, upon demand therefor by such Bank (with a copy of such demand to
the Agent), pay to the Agent for the account of such Bank, additional amounts
as are sufficient to compensate such Bank for such increased costs.
(b) If due to the introduction of any applicable law,
rule, regulation or guideline regarding capital adequacy, or any change therein
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank (or its
Lending Office) or any corporation controlling such Bank with any request,
guideline or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, affects
or would affect the amount of capital required or expected to be maintained by
such Bank or any corporation controlling such Bank, and such Bank (taking, into
consideration such Bank's or such corporation's, policies with respect to
capital adequacy and such Bank's desired return on capital) determines that the
amount of such capital is increased as a consequence of such Bank's obligation
under this Agreement, then, upon demand of such Bank, the Company shall
immediately pay to such Bank, from time to time as specified by such Bank,
additional amounts sufficient to compensate such Bank for such increase.
3.12 Funding Losses. The Company agrees to reimburse each Bank and
to hold such Bank harmless from any loss or expense which such Bank may sustain
or incur as a consequence of:
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(a) failure of the Company to make any payment or
prepayment of principal with respect to any Eurodollar Rate Loan (including
payments made after any acceleration thereof),
(b) failure of the Company to borrow, continue or convert
a Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation,
(c) failure of the Company to make any prepayment after
the Company has given a notice in accordance with Section 2.6, or
(d) payment or prepayment of a Eurodollar Rate Loan on a
day which is not the last day of the Interest Period with respect thereto,
including, without limitation, any such loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain its Eurodollar
Loans hereunder or from fees payable to terminate the deposits from which such
funds were obtained. A certificate of the respective Bank with respect to
amounts owing under this Section 3.12 shall be conclusive absent manifest or
material error.
This covenant shall survive termination of this Agreement and the Loan
Documents and repayment of the Loans.
3.13 Eurodollar Rate Protection. In the event that (a) the Majority
Banks shall have determined (which determination shall be conclusive and
binding upon the Company) that for any reason adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for any requested Interest
Period with respect to a proposed Loan that the Company has requested be made
as a Eurodollar Rate Loan or (b) the Majority Banks shall determine (which
determination shall be conclusive and binding upon the Company) that the
Eurodollar Rate applicable pursuant to Section 2.8(a) for any requested
Interest Period with respect to a proposed Loan that the Company has requested
be made as a Eurodollar Rate Loan do not adequately and fairly reflect the cost
to such Banks of funding such Loan, the Agent shall forthwith give notice of
such determination to the Company and each Bank at least one day prior to the
proposed borrowing date for such Eurodollar Rate Loan. If such notice is
given, any requested Eurodollar Rate Loan shall be made as a Reference Rate
Loan having an Interest Period of 30 days or such shorter period as may be
agreed by the Company and the Agent in consultation with the Banks. Until such
notice has been withdrawn by the Agent, no further Eurodollar Rate Loans may be
requested by the Company and on the Interest Payment Date of any Eurodollar
Rate Loan then outstanding and so affected, such outstanding Loan shall be
converted into a Reference Rate Loan.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Agent and each Bank,
with the full knowledge that the Agent and each Bank are relying on the
following representations and warranties in executing the Agreement and
extending the credit contemplated hereby, that:
4.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as applicable;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own, to pledge, mortgage
and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged;
(c) is duly qualified as a foreign corporation or other
foreign entity, as the case may be, licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification; and
(d) is in compliance with all Requirements of Law,
except, in each case referred to in clause (b), (c) or this clause (d), to the
extent that the failure to do so would not have a Material Adverse Effect.
4.2 Authorization; No Contravention. The execution, delivery and
performance by the Company and its U.S. Subsidiaries of this Agreement, and
any other Loan Document to which such Person is a party:
(a) are within such Person's corporate power and
authority and have been duly authorized by all necessary corporate action or,
if such Person is not a corporation, are within such Person's power and
authority and have been duly authorized by all necessary actions;
(b) do not contravene the terms of such Person's charter
documents, including, without limitation, such Person's, certificate or
articles of incorporation, as applicable, or certificates or articles of
organization, as applicable, or Bylaws or regulations, as applicable, or any
amendments thereof;
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(c) will not conflict with or result in any breach or
contravention of or the creation of any lien under any indenture, agreement,
lease, instrument, injunction, order, decree or undertaking to which such
Person is a party;
(d) do not require any waivers, consents or approvals by
any of the creditors of such Person; and
(e) do not require any consents or approvals by any
shareholders, members or equity holders, as applicable, of such Person.
4.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery, performance or enforcement against the Company or any of
its U.S. Subsidiaries of this Agreement or any other Loan Document or any other
instrument or agreement required hereunder to be made by the Company or any of
its Subsidiaries.
4.4 Binding Effect. This Agreement and each other Loan Document
to which the Company or any of its Subsidiaries is a party constitute the
legal, valid and binding obligations of the Company and any of its Subsidiaries
to the extent it is a party thereto, enforceable against such Person in
accordance with their respective terms.
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement, the Loan Documents, and the Borrowings hereunder, the issuance of
the Letters of Credit and the use of the proceeds thereof, will not violate or
contravene any Requirement of Law or any Contractual Obligation of the Company
or any of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any Requirement of Law except for Permitted Liens. No contract
between the Company or its Subsidiaries and any Governmental Authority forbids
assignment.
4.6 Litigation. There are no actions, suits, proceedings, claims
or disputes pending, or to the best knowledge of the Company, threatened or
contemplated at law, in equity, in arbitration or before any Governmental
Authority against the Company or its Subsidiaries or any of their respective
properties:
(a) with respect to this Agreement, or any Loan Document,
or any of the transactions contemplated hereby or thereby; or
(b) which, if determined adversely to the Company or its
Subsidiaries might have a Material Adverse Effect. No injunction, writ,
temporary restraining order or any order of any nature has
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been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery and performance of this Agreement or any
Loan Document or directing that the transactions provided for herein not be
consummated as herein provided.
4.7 No Default. No event has occurred and is continuing or would
result from the incurring of obligations by the Company under this Agreement or
any Loan Document which constitutes a Default or an Event of Default. Neither
the Company nor any of its Subsidiaries, is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could have a reasonable likelihood of having a Material
Adverse Effect.
4.8 ERISA Compliance.
(a) Schedule 4.8 lists all Plans maintained or sponsored
by the Company or to which the Company is obligated to contribute, and
separately identifies Plans intended to be qualified under Section 401 of the
Code ("Qualified Plans") and Multiemployer Plans. Each of such Plans or
written descriptions thereof provided to the Agent are true and complete in all
material respects.
(b) Each such Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law, including all requirements under the Code or ERISA for filing
reports (which are true and correct in all material respects as of the date
filed), and benefits have been paid in accordance with the provisions of each
such Plan.
(c) Each such Qualified Plan has been determined by the
IRS to qualify under Section 401 of the Code, or an application for initial
qualification has been timely filed and is pending before the Internal Revenue
Service and the trusts created thereunder are in the Company's opinion exempt
from tax under the provisions of Section 501 of the Code, and to the best
knowledge of the Company nothing has occurred which would cause the loss of
such qualification or tax-exempt status except as set forth in Schedule 4.8.
(d) Except as set forth in Schedule 4.8, there is no
outstanding liability under Title IV of ERISA with respect to any Plan
maintained or sponsored by the Company or any ERISA Affiliate (as to which the
Company is or may be liable), nor with respect to any Plan to which the Company
or any ERISA Affiliate (wherein the Company is or may be liable) contributes or
is obligated to contribute.
(e) Except as set forth on Schedule 4.8, none of the
Qualified Plans subject to Title IV of ERISA has any Unfunded Pension Liability
(as to which the Company is or may be liable).
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(f) Except as set forth in Schedule 4.8, no Plan
maintained or sponsored by the Company provides medical or other welfare
benefits or extends coverage, relating to such benefits beyond the date of a
participant's termination of employment with the Company, except to the extent
required by Section 4980B of the Code and at the sole expense of the
participant or the beneficiary of the participant to the fullest extent
permissible under such Section of the Code. The Company has complied in all
material respects with the notice and continuation coverage requirements of
Section 4980B of the Code.
(g) Except as set forth in Schedule 4.8, no ERISA Event
has occurred or is reasonably expected to occur with respect to any Plan
maintained or sponsored by the Company or to which the Company is obligated to
contribute.
(h) There are no pending or, to the best knowledge of the
Company, threatened claims, actions or lawsuits, other than routine claims for
benefits in the usual and ordinary course, asserted or instituted against (i)
any Plan maintained or sponsored by the Company or its assets, (ii) any member
of the Controlled Group with respect to any Qualified Plan of the Company, or
(iii) any fiduciary with respect to any Plan for which the Company may be
directly or indirectly liable, through indemnification obligations or
otherwise.
(i) Except as set forth in Schedule 4.8, the Company has
not incurred or reasonably expects to incur (i) any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than
premiums due and not delinquent under Section 4007 of ERISA) with respect to a
Plan.
(j) Except as set forth in Schedule 4.8, the Company has
not transferred any Unfunded Pension Liability outside of the Controlled Group
or otherwise engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
(k) The Company has not engaged, directly or indirectly,
in a non-exempt prohibited transaction (as defined in Section 4975 of the Code
or Section 406 of ERISA) in connection with any Plan which has a reasonable
likelihood of having a Material Adverse Effect.
4.9 Use of Proceeds, Margin Regulations. The proceeds of the
Loans shall be used solely for the purposes set forth in Section 6.11. No
portion of the Loans will be used, directly or indirectly, in violation of
Regulations G, T, U or X of the Federal Reserve Board or in violation of
Section 13 of the Securities Exchange Act. No proceeds of any Loans will be
used to acquire any
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security in any transaction which is subject to Section 14 of the Securities
Exchange Act.
4.10 Title to Properties. Each of the Company and its Subsidiaries
has good record and indefeasible title in fee simple to or valid leasehold
interests in all its property, except for such defects in title as could not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect. On and after the Closing Date the Company's and its
Subsidiaries' property will be free and clear of all security interests or
Liens, except Permitted Liens. On and after the Closing Date, the Company's
and its Subsidiaries' property (other than property leased from third parties)
will be free and clear of rights of others, except Permitted Liens. The
Company's and its Subsidiaries' property that is leased from third parties is
free and clear of rights of others except for such rights of others that could
not reasonably be expected to have a Material Adverse Effect.
4.11 Taxes. The Company and its Subsidiaries have filed all
Federal, state and other tax returns and reports required to be filed and have
paid all Federal, state and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any of its Subsidiaries which would, if the assessment were
made, have a Material Adverse Effect.
4.12 Financial Condition.
(a) The audited consolidated financial statements of the
Company and its Subsidiaries dated December 31, 1994, consisting of a balance
sheet and the related, consolidated statements of earnings, capital accounts,
and cash flows for the fiscal year ended on that date
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
noted therein,
(ii) are complete, accurate and a fair presentation of the
financial condition of the Company and its Subsidiaries as of the date
thereof and results of operations for the period covered thereby; and
(iii) show all material indebtedness and other liabilities,
direct or contingent, of the Company and its Subsidiaries as of the
date thereof (including, without limitation, liabilities for taxes and
material commitments).
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(b) Since December 31, 1994, the date of the audited
consolidated financial statements of the Company and its Subsidiaries referred
to in Section 4.12(a), there has been no Material Adverse Effect.
4.13 Environmental Matters.
(a) Except as identified in Schedule 4.13, the operations
of the Company and each of its Subsidiaries comply in all respects with all
Environmental Laws and all other applicable Requirements of Law concerning
environmental health and safety except such non-compliance which would not
result in liability in excess of Twenty Five Thousand dollars ($25,000) in the
aggregate.
(b) Except as identified in Schedule 4.13, the Company
and each of its Subsidiaries has obtained all environmental, health and safety
permits necessary for its operations, and all such permits are in good
standing, and the Company and each of its Subsidiaries is in compliance with
all terms and conditions of such permits.
(c) Except as identified in Schedule 4.13, the Company
and each of its Subsidiaries and all of their present property or operations
are not subject to any outstanding written order from or agreement with any
Governmental Authority or other Person nor subject to any judicial or docketed
administrative proceeding, respecting (i) any environmental, health or safety
Requirement of Law; (ii) any action required to clean up, remove, treat or in
any other way address Hazardous Material in the indoor or outdoor environment;
or (iii) any Environmental Claim arising from the spill, leak, placement,
emission, discharge, release or threatened release of Hazardous Material into
the environment.
(d) Except as identified in Schedule 4.13, to the best of
the Company's knowledge, after due inquiry, there are no conditions or
circumstances associated with any property of the Company or any of its
Subsidiaries or any of their predecessors or with the former operations,
including off-site disposal practices which may give rise to material
Environmental Claims.
(e) Except as identified in Schedule 4.13, to the best of
the Company's knowledge, after due inquiry, there are no conditions or
circumstances which may give rise to any Environmental Claim arising from the
operations of the Company or its Subsidiaries, including Environmental Claims
associated with any operations of the Company or its Subsidiaries. Without
limiting the generality of the foregoing, except as identified in Schedule
4.13, to the best of the Company's knowledge, after due inquiry, (i) neither
the Company nor any of its Subsidiaries has any underground storage tanks (x)
that are not properly registered or permitted under applicable Environmental
Laws or (y) that are leaking or disposing of Hazardous Materials off-site and
(ii) the
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Company and its Subsidiaries have notified all of their employees of the
existence, if any, of any health hazard arising from the conditions of their
employment and have met all notification requirements under Title III of CERCLA
and under OSHA.
4.14 Public Utility; Investment Company; Holding Company. Neither
the Company nor any of its Subsidiaries is (i) subject to regulation as a
"public utility" or "public service corporation" or the equivalent under any
applicable federal or state law, (ii) an "investment company" or a company
"controlled" by an "investment company" or an "investment advisor" within the
meaning of the Investment Company Act of 1940, as amended, or (iii) 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" within
the meaning of the Public Utilities Holding Company Act of 1935, as amended.
4.15 Full Disclosure. All factual information heretofore or
contemporaneously furnished in writing by or on behalf of the Company or any of
its Subsidiaries in writing to any Bank (including without limitation, all
information contained in the Loan Documents) for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all other
such factual information hereafter furnished in writing by or on behalf of the
Company in writing to any Bank will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
made incomplete by omitting to state any fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. There is no fact known to the Company or
any of its Subsidiaries which has resulted in a Material Adverse Effect or
which would (so far as the Company and its Subsidiaries can now foresee) in the
future result in a Material Adverse Effect.
4.16 No Burdensome Restrictions. Neither the Company nor any of
its Subsidiaries is a party to or bound by any Contractual Obligation or
subject to any charter or corporate restriction or any Requirement of Law which
could have a Material Adverse Effect.
4.17 Solvency. On and as of the Effective Date the Company and its
Subsidiaries, taken as a whole, and the Company, individually, and each of its
U.S. Subsidiaries on a going concern basis and taking into account their
respective rights of contribution and reimbursement from the Company and, if
applicable, the other Subsidiaries, are not Insolvent and after giving effect
to the Loans and transactions contemplated by this Agreement, the Company and
its Subsidiaries, taken as a whole, and the Company, individually, and each of
its U.S. Subsidiaries on a going concern basis and taking into account their
respective rights of contribution and reimbursement from the Company and, if
applicable, the other Subsidiaries, will not become Insolvent as a result
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thereof. Each of the Company and its Subsidiaries is and will be able to pay
its respective debts as they become due, and has and will have capital
sufficient to carry on its respective businesses and all businesses in which it
is about to engage; owns and will own property (which, with respect to each
Subsidiary, shall include its rights of contribution) having a value, at fair
valuation, greater than the amount required to pay its debts; and, after giving
effect to the Loans and the transactions contemplated hereby and the other Loan
Documents, neither the Company nor any of its Subsidiaries will have incurred,
intended to incur, or believe that it has incurred debts beyond its ability to
pay as such debts become due. The Company and each of its Subsidiaries have
received at least a reasonable equivalent value in exchange for incurring the
obligations contemplated hereby.
4.18 Labor Relations. Neither the Company nor any of its
Subsidiaries is engaged in unfair labor practice that could have a Material
Adverse Effect. There is (i) no significant unfair labor practice complaint
pending against the Company nor any of its Subsidiaries or, to the best
knowledge of the Company, threatened against any of them, before the National
Labor Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Company or any of its Subsidiaries or, to the best
knowledge of the Company, threatened against any of them, (ii) no significant
strike, labor dispute, slowdown or stoppage pending against the Company or any
of its Subsidiaries or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries and (iii) to the best knowledge
of the Company, no union representation question existing with respect to the
employees of the Company or any of its Subsidiaries and, to the best knowledge
of the Company, no union organizing activities are taking place, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as could not have a Material Adverse
Effect.
4.19 Copyrights, Patents, Trademarks and Licenses, etc. Each of
the Company and its Subsidiaries own or are licensed or otherwise have the
right to use all of the patents, trademarks, service marks, and copyrights that
are reasonably necessary for the operations of their respective businesses,
without knowledge of any conflict with the rights of any other Person with
respect thereto. To the best knowledge of the Company, no product, process,
method, substance, part or other material now employed, or now contemplated to
be employed by the Company or any of its Subsidiaries infringes upon any
patent, trademark, service mark or copyright owned by any other Person; no
claim or litigation regarding any of the foregoing is pending or threatened,
and no patent, invention, device, application, principle or any statute, law,
rule, regulation, standard or code is pending or, to the knowledge of the
Company, proposed, which, in either case, would be likely to result in a
Material Adverse Effect.
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4.20 Subsidiaries. As of the Effective Date, neither the Company
nor any of its Subsidiaries has any Subsidiaries other than those listed on
Schedule 4.20 hereto and has no equity investments in any other corporation or
entity other than those listed on Schedule 4.20 hereto. On and after the
Closing Date each of the Company and its Subsidiaries will be the owner, free
and clear of all liens and encumbrances, of all of the issued and outstanding
voting stock of each of its Subsidiaries. All shares of such stock have been
validly issued and are fully paid and nonassessable, and no rights to subscribe
to additional shares have been granted to exist.
4.21 Transaction Fees. Neither the Company nor any of its
Subsidiaries has any obligation to any Person in respect of any finder's,
broker's or investment banker's fee in connection herewith.
4.22 Prior Loan Documents. No event of default or event that with
the passage of time or giving of notice would become an event of default has
occurred or is in existence under the Prior Loan Documents.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to the Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the condition that the Agent
shall have received on or before the Effective Date one or more originals of
all of the following, in form and substance satisfactory to the Agent and the
Banks and in sufficient copies for each Bank:
(a) Agreement. This Agreement, the Notes and the Loan
Documents to which the Company is a party duly executed and delivered by the
Company, and where applicable by the Company's Subsidiaries, the Agent and the
Banks.
(b) Resolutions; Incumbency.
(i) Certified copies of the resolutions of the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance by the Company of this Agreement, the other
Loan Documents and the transactions contemplated thereby and
authorizing the borrowing of the Loans and the request for Letters of
Credit, certified by the Secretary or an Assistant Secretary of the
Company;
(ii) Certified copies of the resolutions of the Board of
Directors of each U.S. Subsidiary of the Company approving and
authorizing the execution, delivery and
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performance by each respective Subsidiary of the Company of the Loan
Documents to which it is a party and the transactions contemplated
thereby, certified by the Secretary or an Assistant Secretary; and
(iii) A certificate of the Secretary or Assistant Secretary
of the Company and each U.S. Subsidiary of the Company certifying the
names and true signatures of the officers of the Company and each of
its U.S. Subsidiaries authorized to execute and deliver, as
applicable, this Agreement, and all other Loan Documents to be
delivered hereunder.
(c) Articles of Incorporation and Bylaws; Good Standing.
Each of the following documents:
(i) The charter documents (including, without limitation,
the articles or certificates of incorporation or certificates or
articles of organization or regulation, as applicable), of the Company
and each of the Company's U.S. Subsidiaries that is a party to a Loan
Document as in effect on the date of this Agreement, certified by the
Secretary of State of its state of incorporation or other
jurisdiction, as applicable, and by its Secretary or Assistant
Secretary as of the date of this Agreement and the bylaws of each of
the Company's Subsidiaries as in effect on the date of this Agreement,
certified by its Secretary or Assistant Secretary as of the date of
this Agreement; and
(ii) A good standing and existence certificate for each of
the Company and its U.S. Subsidiaries from the Secretary of State of
its state of incorporation or organization, dated within twenty (20)
days of the Effective Date and within thirty (30) days after the
Effective Date for each state listed on Schedule 5.1(c) where each of
the Company and its Subsidiaries is qualified to do business as a
foreign corporation, with respect to the good standing and existence
for each of the Company and its U.S. Subsidiaries.
(d) Legal Opinions. Opinions of Cox & Smith
Incorporated, counsel to the Company and its U.S. Subsidiaries, addressed to
the Agent and the Banks, in form and substance acceptable to the Banks and the
Agent to be delivered as of the Effective Date.
(e) Payment of Fees. The Company shall have paid all
costs, accrued and unpaid fees and expenses (including, without limitation,
legal fees and expenses) referred to in Sections 3.1, 3.2, 3.3, 3.4 and 11.1 to
the extent then due and payable on the Effective Date.
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(f) Certificate. A certificate of the Company signed by
a Responsible Officer, dated as of the Effective Date, stating that:
(1) the representations and warranties contained in
Article IV are true and correct on and as of such date, as though made
on and as of such date;
(2) no event has occurred and is continuing, or would
result from the borrowing which constitutes a Default or Event of
Default; and
(3) there has occurred since December 31, 1994, no
Material Adverse Effect.
(g) Financial Statements. A copy of the financial
statements of the Company and its Subsidiaries referred to in Section 4.12.
(h) The Subsidiary Guaranty.
The Subsidiary Guaranty duly executed by each U.S. Subsidiary
of the Company (other than KCI Financial).
(i) Financial Condition. A certificate from a
Responsible Officer of the Company, in substantially the form of Exhibit I
together with all exhibits referenced therein, to the effect that, as of the
Effective Date and after giving effect to the Loans and the transactions
contemplated in this Agreement, the Company is not and will not be, and each of
the Company and each of its Subsidiaries, is not and will not be Insolvent,
completed in form and substance acceptable to the Banks.
(j) Environmental Review. A copy of any and all
environmental reports obtained by or in the possession of each of the Company
and its Subsidiaries, not previously delivered to the Banks, with respect to
any of their real property interests (whether fee, leasehold or otherwise and
whether currently or previously owned with respect to which the Company or any
of its Subsidiaries may have liability under Environmental Laws), satisfactory
to the Majority Banks, and further information, not previously delivered to the
Banks in writing, with respect to the disclosures set forth in Schedule 4.13
sufficient to evidence that the matters disclosed therein will not have a
material adverse effect upon any of (a) the financial condition, operations,
business, properties or prospects of the Company or any of its Subsidiaries;
(b) the ability of the Company or any Subsidiary to perform under any Loan
Document; or (c) the rights and remedies of the Agent and the Banks under the
Loan Documents.
(k) Other Documents. Such other approvals, opinions or
documents as any Bank through the Agent may reasonably request.
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5.2 Conditions to all Borrowings. The obligation of each Bank to
make any Loan to be made by it hereunder (including its initial Loan) and the
obligation to issue any Letter of Credit hereunder (including the initial
Letter of Credit) is subject to the satisfaction of the following conditions
precedent on the relevant borrowing or issuing date:
(a) Borrowing Certificate; Credit Request. The Agent
shall have received a Notice of Borrowing or a Credit Request, as the case may
be.
(b) Continuation of Representations and Warranties. The
representations and warranties made by the Company contained in Article IV
shall be true and correct on and as of such borrowing or issuance date with the
same effect as if made on and as of such borrowing or issuance date.
(c) No Existing Default. No Default or Event of Default
shall have occurred and be continuing hereunder on the borrowing date with
respect to such Loan or Letter of Credit or after giving effect to the Loans to
be made and, or, the Letters of Credit to be issued, on such borrowing date.
(d) Illegality. The making of the Loans and the issuance
of Letters of Credit shall be permitted by the laws and regulations of each
jurisdiction to which the Agent, the Banks, the Company or any of its
Subsidiaries are subject (including, without limitation, Regulation G, T, U or
X promulgated by the Federal Reserve Board), and shall not subject the Banks or
the Agent to any penalty.
Each Borrowing by the Company hereunder shall constitute a
representation and warranty by the Company and its Subsidiaries hereunder as of
the date of each such Borrowing that the conditions in Section 5.2 have been
satisfied.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Bank
shall have any Commitment hereunder, or any Loan or other amount shall remain
unpaid, or any Letter of Credit shall remain outstanding, unless the Majority
Banks waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent,
with copies for each Bank, in form and substance satisfactory to them:
(a) as soon as available, but not later than ninety (90)
days after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its
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Subsidiaries as at the end of such year and the related consolidated statements
of earnings, capital accounts and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, all
in reasonable detail and accompanied by the opinion of KPMG Peat Marwick or
another nationally recognized independent public accounting firm which report
shall state that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years;
(b) as soon as available, but in any event not later than
one hundred twenty (120) days after the end of each fiscal year of the Company,
an unaudited consolidating balance sheet of the Company and each of its
Subsidiaries as at the end of such fiscal year and the related consolidating
statement of earnings for such fiscal year, all in reasonable detail certified
by an appropriate Responsible Officer as having been used in connection with
the preparation of the financial statements referred to in paragraph (a) of
this Section;
(c) as soon as available, but in any event not later than
sixty (60) days after the end of each fiscal quarter a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such quarter and the related consolidated statements of earnings, capital
accounts and cash flows for the period commencing on the first day of the
fiscal quarter and ending on the last day of such quarter and consolidated
balance sheet and related consolidated statements of earnings, capital accounts
and cash flows for the period commencing on the first day of the fiscal year
and ending on the last day of each such quarter all in reasonable detail and
certified by an appropriate Responsible Officer being complete and correct and
fairly presenting, in accordance with GAAP, the financial position and the
results of operations of the Company and the Subsidiaries; and
(d) as long as KCI Financial is a Subsidiary, as soon as
available, but in any event not later than sixty (60) days after the end of
each fiscal quarter a copy of the unaudited balance sheet of KCI Financial and
its Subsidiaries as of the end of such quarter and the related statements of
earnings, capital accounts and cash flows for the period commencing on the
first day of the fiscal quarter and ending on the last day of such quarter and
balance sheet and related statements of earnings, capital accounts and cash
flows for the period commencing on the first day of the fiscal year and ending
on the last day of each such quarter all in reasonable detail and certified by
an appropriate Responsible Officer as being complete and correct and fairly
presenting, in accordance with GAAP, the financial position and the results of
operations of KCI Financial and its Subsidiaries.
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6.2 Certificates; Other Information. The Company shall furnish to
each Bank:
(a) concurrently with the delivery of the financial
statements referred to in Section 6.1(a) above, a certificate of the
independent certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial
statements referred to in Section 6.1(a) and (c) above, an Officer's
Certificate in the form of Exhibit D, certified by a Responsible Officer (i)
stating that, to the best of such officer's knowledge, each of the Company and
its Subsidiaries, during such period, has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in
this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate, and (ii) showing
in detail the calculations supporting such statement in respect of Sections
7.12, 7.13 and 7.14;
(c) promptly after the same are sent, but in any event
within ten (10) days after the issuance thereof, copies of all notices, proxy
statements, financial statements and reports which the Company or any of the
Subsidiaries sends or makes available to its stockholders, and promptly after
the same are filed, copies of all financial statements and regular, periodical
or special reports which the Company may make to, or file with, the Securities
and Exchange Commission or any successor or analogous Governmental Authority;
(d) promptly upon receipt thereof, copies of all reports
(including, without limitation, so-called management letters) submitted to any
of the Company and its Subsidiaries by its independent public accountants in
connection with each annual, interim or special audit in respect of the
financial statements or accounts of any of them made by such accountants; and
(e) as soon as practicable, such additional financial and
other information as any Bank may from time to time reasonably request.
6.3 Preservation of Corporate Existence. The Company shall, and
shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate existence (or, if not a corporation, its existence); provided,
however, that nothing in this Subsection (a) shall prevent a consolidation or
merger permitted by Section 7.3;
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(b) preserve and maintain in full force and effect its
good standing under the laws of the state or jurisdiction of incorporation, as
applicable, and its qualification as a foreign corporation and its good
standing in each jurisdiction in which it is required to be qualified;
provided, however, that nothing in this Subsection (b) shall prevent the
withdrawal by any of the Company or its Subsidiaries of its qualification as a
foreign corporation in any jurisdiction if, in the judgment of the Company or
the respective Subsidiary, such withdrawal is in the best interests of the
Company or the respective Subsidiary and is not disadvantageous in any material
respect to the holders of the Notes;
(c) preserve and maintain in full force and effect all
rights, privileges, qualifications, licenses and franchises necessary for the
normal conduct of its business;
(d) comply with all of its Contractual Obligations except
to the extent failure to do so would not have a Material Adverse Effect;
(e) use its reasonable efforts, in the ordinary course
and consistent with past practice to preserve its business organization and
preserve the goodwill and business of the customers, suppliers and others
having business relations with it; and
(f) preserve or renew all of its registered trademarks,
trade names and service marks, the non-preservation of which has a reasonable
likelihood of having a Material Adverse Effect.
6.4 Maintenance of Property. The Company shall maintain, and
shall cause each of its Subsidiaries to maintain, and preserve all its
properties which are used or useful in its business in good working order and
condition, ordinary wear and tear excepted and make all necessary repairs
thereto and renewals and replacements thereof except where the failure to do so
would not have a Material Adverse Effect.
6.5 Insurance. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable insurers,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons of established reputation
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances, by
such other Persons, including without limitation, workers' compensation
insurance, public liability and property and casualty insurance. The Company
shall maintain, and shall cause each Subsidiary to maintain, flood insurance on
any of its improved real estate (other than leasehold estates), if the law so
requires. The Company may self insure itself and its Subsidiaries with respect
to workers'
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compensation claims to the extent permitted by applicable laws and so long as
no Default or Event of Default has occurred and is continuing or would occur as
a result thereof. Upon the request of any Bank, the Company shall furnish the
Agent, with copies for each Bank, a certificate of a Responsible Officer of the
Company (and, if requested by a Bank, of any insurance broker of the Company)
setting forth the nature and extent of all insurance maintained by the Company
and its Subsidiaries in accordance with this Section (and which, in the case of
a certificate of a broker, were placed through such broker) along with copies
of such policies. In the event the Company fails to provide and maintain
insurance as provided in this Section, after the occurrence and during the
continuation of a Default, the Agent may, at its option and without any
obligation to do so, obtain and provide such insurance, and in such event, the
Company promises to promptly reimburse the Agent on demand for any
disbursements made by the Agent for such purpose. Any such payments and
expenditures, together with interest thereon at the rate equal to the lesser of
(i) the Highest Lawful Rate, if any, or (ii) the per annum rate equal to the
sum of (x) the Reference Rate plus (y) two percent (2%), which the Company
agrees to pay, shall constitute additional Obligations and shall be secured and
entitled to the benefits of this Agreement and the other Loan Documents.
6.6 Payment of Obligations. The Company shall, and shall cause
each of its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities if the failure to do
so could reasonably be executed to have a Material Adverse Effect, including
without limitation:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
and
(b) all other lawful claims which, if unpaid, might by
law become a Lien upon its property.
6.7 Compliance with Laws. The Company shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it
or its business, except such
(a) as may be contested in good faith by appropriate
proceedings and for which adequate reserves have been established and are
maintained in accordance with GAAP and deemed adequate by the Company, and
(b) as to which such failure to comply would not have a
Material Adverse Effect.
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6.8 Inspection of Property and Books and Records. The Company
will maintain, and will cause each of its Subsidiaries to maintain, proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and the assets and business of the Company and such Subsidiaries;
provided, however that the Foreign Subsidiaries are not required to comply with
GAAP for purposes of this Section 6.8. The Company will permit, and will cause
each of its Subsidiaries to permit, representatives of the Agent or any Bank to
visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers employees and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to a
Responsible Officer of the Company; provided, however, during the continuation
of an Event of Default the Agent or any Bank may visit and inspect at the
expense of the Company and its Subsidiaries such properties at any time during
business hours and without advance notice.
6.9 Environmental Laws.
(a) The Company will conduct, or cause to be conducted,
and cause each of its Subsidiaries to conduct or cause to be conducted, the
ongoing operations of the Company and its Subsidiaries, and will keep and
maintain their respective properties, in a manner that will not give rise to
the imposition of liability, or require expenditures, under or in connection
with any Environmental Law, except for any liabilities or expenditures which,
in the aggregate, would not have a reasonable likelihood of having a Material
Adverse Effect.
(b) Upon written request of the Agent or any Bank, the
Company will submit, and cause each of its Subsidiaries to submit, to the Agent
and such Bank, at the Company's and the Subsidiaries' sole cost and expense at
reasonable intervals (but not more frequently than once per calendar year), a
report providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue and any other environmental, health or
safety compliance obligation, remedial obligation or liability, that could
result in a Material Adverse Effect.
6.10 Notices. The Company shall, and shall cause each of its
Subsidiaries to, promptly give notice to the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default
accompanied by a certificate specifying the nature of such Default or Event of
Default, the period of existence thereof and the action that each of the
Company and its Subsidiaries has taken or proposes to take with respect
thereto;
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(b) of any (i) breach or non-performance of, or any
default under any Contractual Obligation of the Company or any of its
Subsidiaries that could reasonably be expected to result in a Material Adverse
Effect; or (ii) material dispute, litigation, investigation, proceeding or
suspension which may exist at any time between the Company or any of its
Subsidiaries and any Governmental Authority;
(c) of the commencement of, or any material development
in, any litigation or proceeding affecting the Company or any Subsidiary (i) in
which the amount of damages claimed is $5,000,000 (or its equivalent in another
currency or currencies) or more, (ii) in which injunctive or similar relief is
sought and which, if adversely determined, could have a Material Adverse
Effect; or (iii) in which the relief sought is an injunction or other stay of
the performance of this Agreement or any Loan Document or the operations of the
Company or its Subsidiaries;
(d) upon, but in no event later than ten (10) days after,
becoming aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Company or any Subsidiary or any of their properties pursuant to any
applicable Environmental Laws which have or may have a Material Adverse Effect,
(ii) all claims made or threatened by any third party against the Company or
any Subsidiary with respect to or because of its or their property relating to
damage, responsibility, contribution, cost recovery compensation, loss or
injury resulting from any Hazardous Materials which have or may have a Material
Adverse Effect (the matters set forth in clauses (i) and (ii) above are
hereinafter referred to as "Environmental Claims"), and (iii) any environmental
or similar condition on any real property adjoining or in the vicinity of the
property of the Company or any Subsidiary that could reasonably be anticipated
to cause such property or any part thereof to be subject to any restrictions on
the ownership, occupancy, transferability or use of such property under any
Environmental Laws;
(e) of any other litigation or proceeding affecting the
Company or any of its Subsidiaries which the Company would be required to
report to the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, within four days after reporting the same to the
Securities and Exchange Commission;
(f) any ERISA Event affecting the Company or any member
of its Controlled Group (but in no event more than ten (10) days after such
ERISA Event) together with (i) a certificate of the Company setting forth the
details of such ERISA Event and the action which the Company or such member
proposes to take with respect thereto; (ii) a copy of any notice with respect
to such ERISA Event that may be required to be filed with the PBGC; or
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(iii) any notice delivered by the PBGC to the Company or any member or its
Controlled Group with respect to such ERISA Event;
(g) promptly upon becoming aware of any Material Adverse
Effect subsequent to the date of the most recent audited financial statements
of the Company delivered to the Banks pursuant to Section 6.1(a), notice
thereof; and
(h) promptly following any change in accounting policies
with respect to changes in financial reporting practices, notice thereof and a
reasonably detailed description of such change.
Each notice pursuant to this Section shall be accompanied by a
statement by a Responsible Officer of the Company setting forth details of the
occurrence referred to therein and stating what action the Company or its
applicable Subsidiary proposes to take with respect thereto.
6.11 Use of Proceeds. The Company will use the proceeds of the
Loans for working capital and other general corporate purposes of the Company
and its Subsidiaries, including non-hostile acquisitions; but will not use the
proceeds of the Loans to pay dividends or purchase stock of the Company.
6.12 Solvency. The Company will not be, and will not permit any of
its Subsidiaries to be Insolvent.
6.13 Further Assurances.
The Company will ensure and will cause each of its
Subsidiaries to ensure, that all written information, exhibits and reports
furnished to the Agent and the Banks do not and will not contain any untrue
statement of a material fact and do not and will not omit to state any material
fact or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and will, and will
cause each of its Subsidiaries to, promptly disclose to the Banks and correct
any defect or error that may be discovered therein or in any Loan Document or
in the execution, acknowledgement or recordation thereof.
ARTICLE VII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Bank
shall have any Commitment hereunder, or any Loan or other amount shall remain
unpaid, or any Letter of Credit shall remain outstanding, unless the Majority
Banks (and when expressly provided in this Article VII, 100% of the Banks)
waive compliance in writing:
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7.1 Limitation on Liens. Without the prior written consent of all
of the Banks, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer
to exist any Lien upon or with respect to any part of its property or assets,
whether now owned or hereafter acquired, or offer or agree to do so, other than
the Permitted Liens.
7.2 Disposition of Assets. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) all or a substantial part of its assets, business or property
(including without limitation, accounts and notes receivable (with or without
recourse)) or enter into any agreement to do any of the foregoing except:
(a) dispositions of inventory, or used, worn-out or
surplus property, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is traded in for credit against the purchase price of similar
replacement equipment or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment; and
(c) the sale of KCI Financial or all of its assets.
7.3 Consolidations and Mergers. The Company shall not, and shall
not permit any of its Subsidiaries to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) any or all of its assets (whether now owned or
hereafter acquired) or enter into any joint venture or partnership with, any
Person except:
(a) any Subsidiary of the Company (other than KCI
Financial) may merge, consolidate or combine with or into, or transfer assets
to, (i) the Company (provided that the Company shall be the continuing or
surviving corporation) or (ii) any one or more Subsidiaries of the Company
(other than KCI Financial) provided that if any transaction shall be between a
Subsidiary and a wholly-owned Subsidiary, the wholly-owned Subsidiary shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise)
to the Company or another wholly-owned Subsidiary of the Company (other than
KCI Financial), if immediately after giving effect thereto, no Default or Event
of Default would exist;
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(c) the Company may merge, consolidate or combine with
another entity if (i) the Company is the corporation surviving the merger, and
(ii) immediately after giving effect thereto, no Default or Event of Default
would exist; and
(d) any Foreign Subsidiary may form a partnership or
joint venture with another Foreign Subsidiary of the Company.
7.4 Acquisitions and Investments.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, make, have outstanding, or make a commitment for,
any advances, loans, extensions of credit, or capital contributions to, or any
other investments (by way of transfers of property or assets, contributions to
capital, acquisitions of stock, other securities, equity interests, obligations
or other security interests, or evidences of indebtedness, acquisitions of
businesses or acquisitions of assets other than in the ordinary course of
business, or otherwise) in, any Person, except the following:
(a) each of the Company and its Subsidiaries may acquire
the business or assets of, or make an investment in, any Person, provided, that
for any 12-month period the aggregate of all amounts expended and liabilities
assumed by the Company and its Subsidiaries for all acquisitions and
investments during such 12-month period shall not, without the prior written
consent of the Majority Banks, exceed ten percent (10%) of Consolidated Net
Worth unless (y) on the basis of pro forma financial statements prepared on a
consolidated basis for the Company and its Subsidiaries and their respective
Subsidiaries for the term of this Agreement following any such acquisition or
investment no Default or Event of Default would occur hereunder during or with
respect to such period and (z) such acquisition or investment is in the
ordinary course of the Company's business in the healthcare industry as
presently conducted;
(b) receivables owing to the Company or any of its
Subsidiaries created in the ordinary course of business and payable in
accordance with customary terms prevailing in the industry;
(c) the Company or any of its Subsidiaries may acquire
and hold Cash Equivalents;
(d) loans and advances to and equity investments in any
of (i) the Company's U.S. Subsidiaries (excluding KCI Financial) in accordance
with Section 7.6; and (ii) the Company's Foreign Subsidiaries in accordance
with Section 7.6, so long as the aggregate amount of all loans, advances and
equity investments in the Company's Foreign Subsidiaries does not exceed
$10,000,000 in any one fiscal year of the Company.
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(e) the Company or any of its Subsidiaries may advance
funds, not exceeding Three Million Dollars ($3,000,000) in the aggregate at any
one time outstanding, to its employees for the purpose of covering the expenses
of such employees incurred in the ordinary course of business, provided that,
as a sublimit thereof, the Company may continue advances of not more than
$100,000 in the aggregate that have been advanced prior to the date of this
Agreement for the purposes of exercising stock options of such employees for
the purchase of stock in the Company; and
(f) advances and loans from the Company to, and equity
investments of the Company in (for purposes of this Section 7.4(f) and the
definition of "Consolidated Net Worth", the terms equity investments and
investments includes the amount of equity that the Company agrees to provide to
KCI Financial pursuant to support agreements, make- well agreements and other
similar agreements; which amount shall constitute Indebtedness of the Company),
KCI Financial so long as after giving effect thereto the Company's Consolidated
Net Worth shall not be less than the sum of (i) $150,000,000 plus (ii) 50% of
consolidated Cumulative Net Income.
7.5 Limitation on Indebtedness. The Company shall not and shall
not permit its Subsidiaries to, create, incur, assume, guaranty, suffer to
exist, or otherwise become or remain directly or indirectly liable with respect
to, any Indebtedness, except the following, provided that in no event shall the
aggregate amount of all of the following Indebtedness under subclauses (f),
(g), and (h) below exceed ten percent (10%) of Consolidated Net Worth:
(a) Indebtedness incurred pursuant to this Agreement;
(b) unsecured current liabilities incurred in the
ordinary course of business, not evidenced by any note or other instrument, and
not incurred through (i) the borrowing of money, or (ii) the obtaining of
credit, except for credit on an open account basis customarily extended and in
fact extended in connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 6.6;
(d) endorsements for collection, deposit or negotiation
and warranties of products or services, in each case incurred in the ordinary
course of business;
(e) Subordinated Debt to the extent that, (i) no Default
or Event of Default has occurred and is continuing, and (ii) on the basis of
pro forma financial statements prepared on a consolidated basis for the Company
and its Subsidiaries and certified by a
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Responsible Officer of the Company, for the 12 month period following the
creation, assumption or incurrence of any Subordinated Debt, no Default or
Event of Default would result from such creation, assumption or incurrence, or
occur during such 12 month period;
(f) Indebtedness existing on March 31, 1995, and set
forth, but only to the extent so set forth, in Schedule 7.5;
(g) Indebtedness secured by Liens described in subsection
(h) in the definition of "Permitted Liens";
(h) Indebtedness incurred in connection with leases
permitted pursuant to Section 7.10;
(i) Indebtedness represented by Interest Rate Contracts
or Contingent Obligations permitted by Section 7.7; and
(j) KCI Nonrecourse Debt and other Indebtedness of KCI
Financial.
7.6 Transactions with Affiliates. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction with
any Affiliate of the Company or of any such Subsidiary except as contemplated
by this Agreement or in the ordinary course of business and pursuant to the
reasonable requirements of the business of the Company, or such Subsidiary and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of the Company or such Subsidiary.
7.7 Contingent Obligations. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Interest Rate Contracts;
(c) the Subsidiary Guaranties;
(d) the Company's obligations under that one certain
Amended and Restated Guaranty dated as of September 30, 1994 in favor of
Citicorp North America, Inc. ("Citicorp") whereby the Company guaranteed KCI
Therapeutic Services, Inc.'s ("KCITS") and Mediq Incorporated's obligations
under the certain Master Lease Agreement No. 753283 dated as of September 29,
1989 between KCITS as lessee therein and Citicorp as lessor therein;
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(e) the Company's make-well agreement to provide up to
$1,000,000 of equity in the aggregate to KCI Financial; and
(f) the Company's specific guaranty for the benefit of
Norwest Financial Leasing, Inc. guaranteeing the performance of the
representations and warranties of KCI Financial under that certain Master
Assignment of Equipment Rental Agreements dated November 8, 1991 between KCI
Financial and Norwest Financial Leasing, Inc. as in effect on November 8, 1991.
7.8 Compliance with ERISA. The Company shall not directly or
indirectly, and shall not permit any ERISA Affiliate to directly or indirectly,
(i) terminate, any Plan subject to Title IV of ERISA so as to result in any
material (in the opinion of the Majority Banks) liability to the Company or any
of its Subsidiaries or any ERISA Affiliate, (ii) permit to exist any ERISA
Event or any other event or condition, which presents the risk of a material
(in the opinion of the Majority Banks) liability of the Company or any of its
Subsidiaries or any ERISA Affiliate, or (iii) make a complete or partial
withdrawal (within the meaning of ERISA Section 4201 from any Multiemployer
Plan so as to result in any material (in the opinion of the Majority Banks)
liability to the Company or any of its Subsidiaries or any ERISA Affiliate,
(iv) enter into any new Plan or modify any existing Plan so as to increase its
obligations thereunder except in the ordinary course of business consistent
with past practice which could result in any material (in the opinion of the
Majority Banks) liability to the Company or any of its Subsidiaries or any
ERISA Affiliate, or (v) permit the present value of all nonforfeitable accrued
benefits under each Plan (using the actuarial assumptions utilized by the PBGC
upon termination of a Plan) to exceed materially (in the opinion of the
Majority Banks) the fair market value of Plan assets allocable to such
benefits, all determined as of the most recent valuation date for each such
Plan.
7.9 Use of Proceeds. No portion of the Loans will be used,
directly or indirectly, for any purpose that could result in a violation of
Regulations G, T, U, or X of the Federal Reserve Board.
7.10 Lease Obligations. Neither the Company nor any of its
Subsidiaries shall, nor shall it permit any of its Subsidiaries to, create or
suffer to exist any obligations for the payment of rent for any property under
lease or agreement to lease except for
(a) leases of the Company and its Subsidiaries in
existence on the Closing Date and any renewal, extension or refinancing
thereof, and after the Closing Date, any operating leases entered into by the
Company or any of its Subsidiaries in the ordinary course of business in a
manner and to an extent consistent with past practice, provided that the
aggregate annual
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rental payments for all such leases shall not exceed ten percent (10%) of
Consolidated Net Worth; and
(b) after the Closing Date, any leases (including capital
leases) entered into by the Company or any of its Subsidiaries in the ordinary
course of business in a manner and to an extent consistent with past practice
so long as no Default or Event of Default has occurred and is continuing and
after giving effect thereto no Default or Event of Default would exist.
7.11 Subordinated Debt. The Company shall not, and shall not
permit any of its Subsidiaries to:
(a) make any voluntary or optional payment or prepayment
on any Subordinated Debt now or hereafter outstanding or make any redemption,
retirement, purchase or other acquisition, direct or indirect, of any
Subordinated Debt or set aside money or securities for a sinking or similar
fund for the payment of principal of a premium or interest on any Subordinated
Debt or set apart money for the defeasance of any Subordinated Debt; and
(b) amend, modify or change, or consent or agree to any
amendment, modification or change to, any of the terms relating to Subordinated
Debt (other than any such amendment, modification or change which would extend
the maturity or reduce the amount of any payment of principal thereof or which
would reduce the rate or extend the date of payment of interest thereon).
7.12 Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time to be less than the sum of (i) $150,000,000
plus (ii) 50% of consolidated Cumulative Net Income for each quarter ending
after December 31, 1994 without giving effect to any losses.
7.13 Leverage Ratio. The Company will not permit the Leverage
Ratio of the Company and its Subsidiaries (excluding KCI Financial) for the
immediately preceding calendar quarter to be greater, as calculated on the last
day of each calendar quarter during the term of this Agreement, than 0.55 to
1.0.
7.14 Debt/EBITDA Ratio. The Company will not permit the Company's
and its Subsidiaries' ratio (the "Debt/EBITDA Ratio") of (a) Indebtedness on a
consolidated basis (excluding KCI Financial) to (b) EBITDA, determined on a
consolidated basis, calculated as of the last day of each calendar quarter
during the term of this Agreement for the preceding four calendar quarters, to
be greater than 3.0 to 1.0.
7.15 Change in Business. The Company shall not, and shall not
permit any of its Subsidiaries to, engage in any type of business other than
the types of businesses in which each of the Company and its Subsidiaries,
respectively, is currently engaged.
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7.16 Tax Election. Except with respect to the contemplated sale of
KCI Financial with respect to which the Company intends to make an election
under Section 338(h)(10) of the Code, the Company shall not make, and shall not
permit any of its Subsidiaries to make, any election under Section 338 of the
Code other than a protection carryover election pursuant to the Treasury
Regulations issued thereunder without the prior consent of the Banks not to be
unreasonably withheld.
7.17 Change in Structure. Except as permitted under Section 7.3,
the Company shall not, and shall not permit any of its Subsidiaries to, make
any changes in its capital structure (including, without limitation, in the
terms of its outstanding stock) or amend its articles or certificate of
incorporation or bylaws if, as a result, there would be a reasonable likelihood
of having a Material Adverse Effect.
7.18 Accounting Changes. The Company shall not, and shall not
permit any of its Subsidiaries to, make any significant change in accounting
treatment and reporting practices, except as allowed by GAAP or change the
fiscal year of the Company or any of its U.S. Subsidiaries.
7.19 Subsidiaries. The Company shall not, and shall not permit
any of its Subsidiaries to, form or acquire any new Subsidiaries; provided,
however, the Company and its Subsidiaries may acquire Subsidiaries pursuant to
Section 7.4(b) and form new Subsidiaries so long as (i) no Default or Event of
Default has occurred and is continuing, (ii) no Default or Event of Default
would occur as a result thereof, (iii) in the case of a U.S. Subsidiary, within
ten (10) days of the formation or acquisition of a U.S. Subsidiary, such U.S.
Subsidiary enters into a valid, binding and enforceable Subsidiary Guaranty in
the form of Exhibit H, and (iv) in each instance with respect to a U.S.
Subsidiary, such newly acquired or formed U.S. Subsidiary promptly delivers an
opinion of local counsel acceptable to the Majority Banks in form and substance
acceptable to the Majority Banks with respect thereto.
7.20 Foreign Subsidiaries. The Company shall not permit any of its
Foreign Subsidiaries to own any assets or other property, real or personal,
tangible or intangible, in the United States without the consent of the
Majority Banks.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Events of Default. Upon the occurrence and during the
continuation of any of the following events:
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(a) Non-Payment. The Company shall (i) fail to pay when
due any portion of principal of any Loan or fail to make any mandatory
repayment hereunder when due; or (ii) fail to pay when due any portion of
interest, fees or any other amount payable hereunder or pursuant to any other
Loan Document; or
(b) Representation or Warranty. Any representation or
warranty made or deemed made by the Company or any of its Subsidiaries herein,
in any Loan Document or which is contained in any certificate, document or
financial or other statement furnished at any time under this Agreement, or in
or under any Loan Document, shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Company shall fail to perform
or observe any term, covenant or agreement contained in Sections 6.3(a),
6.3(c), 6.3(d), 6.3(e), 6.3(f), 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, or 6.13
or Article VII; or
(d) Section 6.5 Defaults. The Company shall fail to
perform or observe any term, covenant or agreement contained in Section 6.5 and
such default shall continue unremedied for a period of ten (10) days after the
earlier of (i) the date upon which a Responsible Officer of the Company knew or
should have known of such failure or (ii) the date upon which written notice
thereof has been given to the Company by the Agent or any Bank; or
(e) Other Defaults. The Company or any Subsidiary shall
fail to perform or observe any other term or covenant contained in this
Agreement or any Loan Document, and such default shall continue unremedied for
a period of twenty (20) days after the earlier of (i) the date upon which a
Responsible Officer of the Company or applicable Subsidiary knew or should have
known of such failure or (ii) the date upon which written notice thereof has
been given to the Company by the Agent or any Bank; or
(f) Cross-Default. The Company or any of its
Subsidiaries shall (i) fail to make any payment in respect of any Indebtedness
(including any Subordinated Debt) or Contingent Obligation, when due (whether
by scheduled maturity, required prepayment, acceleration demand, or otherwise)
having an aggregate outstanding principal amount of $1,000,000 for all such
Indebtedness or Contingent Obligations; or (ii) default in the observance or
performance of any other condition or covenant or any other event shall occur
or condition exist under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, if the effect of such event or condition
is to cause, or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause,
with the giving of notice if required,
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such Indebtedness to be declared to be due and payable prior to its stated
maturity or such Contingent Obligation to become payable; or
(g) Bankruptcy or Insolvency. The Company or any of its
Subsidiaries shall (i) become insolvent or generally fail to pay, or admit in
writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise, (ii)
voluntarily cease to conduct its business in the ordinary course substantially
as it is conducted on the date hereof or on the Effective Date, (iii) commence
any proceeding or file any petition or answer under any liquidation or
reorganization with creditors or any other relief under any bankruptcy,
reorganization, arrangement, insolvency, or other proceeding, whether Federal
or State, relating to the relief of debtors, (iv) acquiesce in the appointment
of a receiver, trustee, custodian or liquidator for itself or a substantial
portion of its property, assets or business or effect a plan or other
arrangement with its creditors, (v) admit the material allegations of a
petition filed against it in any bankruptcy, reorganization, arrangement,
insolvency or other proceeding, whether Federal or State, relating to the
relief of debtors, or (vi) take action to effectuate any of the foregoing; or
(h) Involuntary Proceedings. Involuntary proceedings or
any involuntary petition shall be commenced or filed against the Company or any
Subsidiary under any bankruptcy, insolvency or similar law or seeking the
dissolution, liquidation or reorganization of the Company or any Subsidiary or
the appointment of a receiver, trustee, custodian or liquidator for the Company
or any Subsidiary or any writ, judgment, warrant of attachment, execution or
similar process, shall be issued or levied against a substantial part of the
Company's or any Subsidiary's assets and any such proceedings or petition shall
not be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within sixty
(60) days after commencement, filing or levy; or
(i) ERISA. The Company or any ERISA Affiliate shall fail
to pay when due an amount or amounts which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to terminate a Plan or Plans
having Unfunded Pension Liabilities shall be filed under Title IV of ERISA, or
the PBGC shall institute proceedings under Title IV of ERISA to terminate a
Plan or Plans, or a proceeding shall be instituted by a fiduciary of any such
Plan or Plans against any such Person to enforce Section 515 of ERISA to
collect contributions; or a condition shall exist by reason of which the PBGC
would be entitled under Section 4042 of ERISA to obtain a decree adjudicating
that a Plan or Plans having aggregate Unfunded Pension Liabilities must be
terminated; or
(j) Monetary Judgments. One or more final judgments or
decrees shall be entered against the Company or any of its
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Subsidiaries involving in the aggregate liability (not paid or fully covered by
insurance) of $5,000,000 or more and the same shall not have been vacated,
satisfied, undischarged, stayed or bonded pending appeal within sixty (60) days
from the entry thereof; or
(k) Non-Monetary Judgments. Any non-monetary judgment or
order shall be rendered against the Company or any of its Subsidiaries which
does or could be expected to (i) cause a material adverse change in the
condition (financial or otherwise), operations, properties or prospects of the
Company or any such Subsidiary or (ii) have a material adverse effect on the
rights and remedies of the Agent under any Loan Document, and either (A)
enforcement proceedings shall have been commenced by any Person upon such
judgment or order or (B) there shall be any period of ten (10) consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
then, and in any such event,
(A) the Agent shall at the request of, or may
with the consent of, the Majority Banks, declare the
Commitments of each Bank to make Loans and to issue Letters
of Credit, to be terminated, whereupon such Commitments shall
forthwith be terminated; and/or
(B) the Agent shall at the request of, and may
with the consent of, the Majority Banks, declare the unpaid
principal amount of all outstanding Loans, all interest
accrued and unpaid thereon and all other amounts payable
hereunder to be immediately due and payable, without
presentment, demand, protest, notice of protest, notice of
intent to accelerate, notice of acceleration, or other notice
of any kind, all of which are hereby expressly waived by the
Company and its Subsidiaries; and/or
(C) with respect to all Letters of Credit that
shall not have matured or with respect to which presentment
for honor shall not have occurred, the Agent shall at the
request of, and may with the consent of, the Majority Banks,
demand that the Company deposit in a cash collateral account
at the Agent, for the benefit of the Banks (the "Cash
Collateral Account"), an amount equal to the aggregate undrawn
amount of the Letters of Credit, whereupon, the Company shall
forthwith
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deposit such amounts in the Cash Collateral Account (the
unused portions thereof, if any, shall be returned to the
Company after the respective expiration dates of the Letters
of Credit and after all Notes and Obligations hereunder and
under the Letter of Credit Agreements are paid in full);
and/or
(D) the Agent may, and shall at the request of the
Majority Banks, exercise all rights and remedies available to
it as Agent under the Loan Documents or any other agreement;
provided, however, that upon the occurrence of any event specified in clause
(g) or (h) above, the obligation of each Bank to make Loans shall automatically
terminate and the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and
payable immediately and with respect to all Letters of Credit that shall not
have matured or with respect to which presentment for honor shall not have
occurred, the Company shall immediately deposit in the Cash Collateral Account
an amount equal to the aggregate undrawn amount of Letters of Credit (the
unused portions thereof, if any, shall be returned to the Company after the
respective expiration dates of the Letters of Credit and after all Notes and
other Obligations are paid in full), without further act of the Agent or any
Bank, including, without limitation, without any presentment, acceleration,
demand, protest, notice of protest, notice of intent to accelerate, notice of
acceleration, or other notice of any kind, all of which are hereby expressly
waived by the Company and its Subsidiaries.
8.2 Rights Not Exclusive. The rights provided for in this Article
are cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity.
ARTICLE IX
THE AGENT
9.1 Appointment. Each Bank hereby irrevocably appoints,
designates and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Bank, and no implied covenants,
functions,
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responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
9.2 Appointment of Additional Agent; Delegation of Duties.
(a) It is the purpose of this Agreement that there shall
be no violation of any law of any jurisdiction denying or restricting the right
of banking corporations or associations to transact business as agent in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or the Loan Documents and in particular in case of the enforcement thereof on
Default, or in case the Agent deems that by reasons of any present or future
law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein or therein granted to the Agent or take any other action which
may be desirable or necessary in connection therewith, the Agent, with the
consent of the Majority Banks, may appoint an additional individual or
institution as a separate or additional agent, in which event each and every
remedy, power, right, claim, demand, cause of action, immunity, interest and
lien expressed or intended by this Agreement or the Loan Documents to be
exercised by or vested in or conveyed to the Agent with respect thereto shall
be exercisable by and vest in such separate or additional agent, but only to
the extent necessary to enable such separate or additional agent to exercise
such powers, rights and remedies, and every covenant and obligation necessary
to the exercise thereof by such separate or additional agent shall run to and
be enforceable by either of them.
(b) Should any conveyance or instrument in writing from
the Banks be required by such separate or additional agent so appointed by the
Agent for more fully and certainly vesting in and confirming to him, her or it
such rights, powers, duties and obligations, any and all such conveyances and
instruments shall, on request, be executed, acknowledged and delivered by the
Majority Banks. In case any such separate or additional agent or a successor,
shall die, become incapable of acting, resign or be removed, all the rights,
powers, duties and obligations of such separate or additional agent, so far as
permitted by law, shall vest in and be exercised by the Agent until the
appointment of a successor to such separate or additional agent. Any such
separate or additional agent appointed by the Agent pursuant to this Section
9.2 may be removed by the Agent at any time, in which case all powers rights
and remedies vested in such separate or additional agent shall again vest in
the Agent as if no such appointment of additional agent had been made.
(c) The Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of
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any agent, additional agent or attorney-in-fact that it selects with reasonable
care.
9.3 Liability of Agent. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall
be (i) liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement (except for its own gross negligence or
willful misconduct), (ii) responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the Company or any of
its Subsidiaries or any officer of any of them contained in this Agreement or
in any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document or for the value of
any collateral, if any, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Company or any of its Subsidiaries to perform its
obligations hereunder or thereunder, or (iii) required to initiate or conduct
any litigation or collection proceedings hereunder or under any other Loan
Document. The Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment or
transfer thereof shall have been filed with the Agent pursuant to and in
compliance with Article XII, together with the approval of the Company, which
approval of the Company shall not be unreasonably withheld, to such assignment
or transfer. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of its Subsidiaries.
9.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, telecopy, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in
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accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Banks and all future holders of the Loans and Revolving Credit Exposure.
(b) For purposes of determining compliance with the
conditions specified in Sections 5.1 and 5.2, each Bank shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved by or
acceptable or satisfactory to the Banks unless an officer of the Agent
responsible for the transactions contemplated by the Loan Documents shall have
received notice from such Bank prior to the initial Borrowing specifying its
objection thereto and either such objection shall not have been withdrawn by
notice to the Agent to that effect or such Bank shall not have made available
to the Agent such Bank's ratable portion of such Borrowing.
9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
payable to the Agent for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Agent receives such a notice, the
Agent shall give notice thereof to the Banks. The Agent shall take such action
with respect to such Default or Event of Default as shall be requested by the
Majority Banks in accordance with Article VIII; provided, however, that unless
and until the Agent shall have received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
9.6 Credit Decision. Each Bank expressly acknowledges that
neither the Agent nor any of its Affiliates nor the Arranger nor any officer,
director, employee, agent, attorney-in-fact of any of them has made any
representation or warranty to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company and its Subsidiaries
shall be deemed to constitute any representation or warranty by the Agent or
the Arranger to any Bank. Each Bank represents to the Agent, the Arranger and
the other Banks that it has, independently and without reliance upon the Agent,
the Arranger and the other Banks and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries and made its own decision
to enter into this Agreement and extend credit to the Company hereunder. Each
Bank also represents that it will,
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independently and without reliance upon the Agent or the Arranger and the other
Banks and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Banks by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company and its Subsidiaries which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
9.7 Indemnification. The Banks agree to indemnify the Agent (to
the extent not reimbursed by or on behalf of the Company and without limiting
the obligation of the Company to do so), ratably according to the respective
amounts of their outstanding Loans and Revolving Credit Exposure, or, if no
Loans are outstanding and no Revolving Credit Exposure exists, their
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever which may at any time (including at any
time following the repayment of the Loans) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement, any other Loan Documents, or any document contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection with
any of the foregoing; provided however, that no Bank shall be liable for the
payment to the Agent of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. It is the express intention of the parties hereto that the Agent
shall be indemnified and held harmless against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind arising out of or resulting from the
ordinary negligence (whether sole or contributory) of the Agent. Without
limitation of the foregoing, each Bank agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including,
without limitation, the costs and expenses which the Company is obligated to
pay under Article XI) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any
other Loan Document, or any document contemplated by or referred to herein to
the extent
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that the Agent is not reimbursed for such expenses by or on behalf of the
Company.
9.8 Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from and generally engage in any kind of business with the
Company and its Subsidiaries as though Bank of America were not the Agent
hereunder and Bank of America and its Affiliates may accept fees and other
consideration from the Company for services in connection with this Agreement
or otherwise without having to account for the same to the Banks. The Banks
acknowledge that, pursuant to such activities, Bank of America or its
Affiliates may receive information regarding the Company or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Company or such Subsidiary) and acknowledge that the Agent shall
be under no obligation to provide such information to them. With respect to
its Loans, Bank of America (and any successor acting as Agent) shall have the
same rights and powers under this Agreement as any other Bank and may exercise
the same as though it were not the Agent, and the terms "Bank" and "Banks"
shall include Bank of America in its individual capacity.
9.9 Successor Agent. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon thirty (30) days' notice to the
Banks. If the Agent shall resign as Agent under this Agreement, the Majority
Banks shall appoint from among the Banks a successor agent for the Banks. If
no successor Agent is appointed prior to the effective date of the resignation
of the Agent, the Agent shall appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent,"
shall mean such successor agent and the retiring Agent's rights, powers and,
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article IX and Article XI shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Agent hereunder until such time, if any, as the Majority Banks appoint a
successor agent as provided for above.
ARTICLE X
AMENDMENTS AND WAIVERS
10.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any Loan Document and no consent
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with respect to any departure by the Company or any of its Subsidiaries
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver shall be effective only
in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all the Banks do any of the following:
(a) increase the Commitment of any Bank or subject any
Bank to any additional obligations;
(b) postpone or delay any date fixed for any payment of
principal, interest, fees or other amounts due hereunder or under any Loan
Document;
(c) reduce the principal of, or the rate of interest on
any Loan or of any fees or other amounts payable hereunder or under any Loan
Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans and outstanding Revolving Credit
Exposure which shall be required for the Banks or any of them to take any
action hereunder;
(e) amend this Section 10.1;
(f) release any Subsidiary Guaranty;
and provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks, affect the
rights or duties of the Agent under this Agreement.
ARTICLE XI
COSTS, EXPENSES, INDEMNIFICATION
11.1 Costs and Expenses. The Company agrees
(a) to pay or reimburse the Agent and the Arranger on
demand as agreed in the letter agreement dated as of March 7, 1995, for all its
out-of-pocket costs and expenses incurred in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement or modification to, or waiver of or consent with respect to, this
Agreement, any Loan Document and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel to the Agent (and the reasonable expenses and
hourly fees of in- house counsel) with respect thereto and with respect to
advising the Agent as to its
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rights and responsibilities under this Agreement and the other Loan Documents;
(b) to pay or reimburse each Bank, the Arranger and the
Agent on demand for all their reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, any Loan Document, and any such other documents, and in connection
with any refinancing of the Loans, including, without limitation, fees and
out-of-pocket expenses of counsel (and the allocated cost of staff counsel) to
the Agent and to the Arranger and to each of the Banks; and
(c) to pay or reimburse the Agent and the Arranger on
demand for (i) all appraisal, audit, search and filing fees, incurred or
sustained by the Agent in connection with the matters referred to under
paragraphs (a) and (b) above, and (ii) the reasonable costs and expenses of the
Arranger in connection with the syndication by the Arranger of the Loans, the
Revolving Credit Exposure and the Commitments.
11.2 Indemnity.
(a) The Company agrees to indemnify and hold harmless the
Agent, the Arranger and each Bank and each of their respective officers,
directors, agents and employees from and against any and all claims, damages,
liabilities, costs and expenses (including, without limitation, reasonable
fees, expenses and disbursements of counsel and the reasonable expenses and
hourly fees of in-house counsel) which may be incurred by or asserted against
the Agent, the Arranger, any Bank or any such other indemnified Person in
connection with or arising out of any investigation, litigation or proceeding
related to this Agreement, the Commitments, or their negotiation and the
preparation of documentation in connection therewith, whether or not the Agent
or such Bank is a party thereto; provided, however, that the Company shall not
be required to indemnify any such indemnified Person from or against any
portion of such claims, damages, liabilities or expenses arising out of gross
negligence or willful misconduct of such indemnified Person. It is the express
intention of the parties hereto that each indemnified Person shall be
indemnified and held harmless against any and all such claims, damages,
liabilities, costs and expenses arising out of or resulting from the ordinary
negligence (whether sole or contributory) of such indemnified Person.
(b) The Company hereby agrees to indemnify, defend and
hold harmless the Agent, the Arranger and each Bank, and each of their
respective officers, directors, employees and agents, from and against any and
all claims, losses, liabilities, actions, consequential damages, costs and
expenses, (including, without limitation, reasonable attorneys fees and
expenses and the reasonable expenses and hourly fees of in-house counsel),
which may be incurred by or asserted against the Agent, the Arranger, any
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Bank or any such other indemnified Person in connection with or arising out of
any investigation, litigation or proceeding, or any action taken by any Person,
with respect to any Environmental Claim (including, without limitation, any
Environmental Claim arising out of or relating to any (i) release of Hazardous
Materials on, upon or into any such property or (ii) damage to real or personal
property or natural resources and/or harm or injury to Persons alleged to have
resulted from such release of Hazardous Materials on, upon or into any such
property); provided, however, that the Company shall not be required to
indemnify, defend or hold harmless any such indemnified Person from or against
any portion of such loss, liability, damage or expense arising out of the gross
negligence or willful misconduct of such indemnified Person. The claims,
losses, liabilities, actions, consequential damages, costs and expenses
included in the indemnity in this Section 11.2(b) shall include, without
limitation, amounts paid in settlement of claims, all consultant, expert and
legal fees and expenses of any indemnified Person's legal counsel costs and
expenses and the reasonable expenses and hourly fees of in-house counsel
incurred in connection with any investigations of site conditions, or any
abatement, cleanup, remediation, removal, or restoration work, or any damages
or injuries to the person or property of any third parties or to land, air,
water or other natural resources. It is the express intention of the parties
hereto that each indemnified Person shall be indemnified and held harmless
against any and all such claims, losses, liabilities, actions, consequential
damages, costs and expense arising out of or resulting from the ordinary
negligence (whether sole or contributory) of such indemnified Person.
(c) The Agent and each Bank agree that in the event that
any such investigation, litigation or proceeding is asserted or threatened in
writing or instituted against it or any of its officers, directors, agents and
employees, or any remedial, removal or response action is requested of it or
any of its officers, directors, agents and employees, for which the Agent or
any Bank may desire indemnity or defense hereunder, the Agent or such Bank
shall promptly notify the Company in writing.
(d) The Company at the request of the Agent, the Arranger
or any Bank shall have the obligation to defend against such investigation,
litigation or proceeding or requested remedial, removal or response action, and
the Agent, in any event, may participate, in the defense thereof with legal
counsel of the Agent's choice. In the event that the Agent, the Arranger or
any Bank requests the Company to defend against such investigation, litigation
or proceeding or requested remedial, removal or response action, the Company
shall promptly do so and the Agent or the affected Bank shall have the right to
have legal counsel of its choice participate in such defense. No action taken
by legal counsel chosen by the Agent, the Arranger or any Bank in defending
against any such investigation, litigation or proceeding or
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requested remedial, removal or response, action shall vitiate or any way impair
the Company's obligation and duty hereunder to indemnify and hold harmless the
Agent, the Arranger and each Bank.
(e) In no event shall site visit, observation, or testing
by the Banks be a representation that Hazardous Materials are or are not
present in, on, or under such site, or that there has been or shall be
compliance with any law, regulation, or ordinance pertaining to Hazardous
Materials or any other applicable governmental law. Neither the Company nor
any other party is entitled to rely on any site visit, observation, or testing
by any Bank. The Banks owe no duty of care to protect the Company or any other
party against, or to inform the Company or any other party of, any Hazardous
Materials or any other adverse condition affecting any site. The Banks shall
not be obligated to disclose to the Company or any other party any report or
findings made as a result of, or in connection with, any site visit,
observation, or testing by the Banks.
(f) In consideration of the Agent and the Banks
permitting the Company to make facsimile requests for Loans and Letters of
Credit, the Company covenants and agrees to assume liability for and to
protect, indemnify and save the Agent and each Bank, and each of their
respective officers, directors, employees and agents harmless from, any and all
liabilities, obligations, damages, penalties, claims, causes of action, costs,
charges and expenses, including, but not limited to, reasonable attorneys' fees
(including the reasonable expenses and hourly fees of in-house counsel) and
expenses of employees, which may be imposed, incurred by or asserted against
the Agent or any Bank by reason of any loss, damage or claim howsoever arising
or incurred because of, out of or in connection with (i) any action of the
Agent or any Bank pursuant to facsimile requests for Loans or Letters of
Credit, or (iii) the transfer of funds pursuant to such facsimile requests. It
is the express intention of the parties hereto that each indemnified Person
shall be indemnified and held harmless against any and all such liabilities,
obligations, damages, penalties, claims, causes of action, costs, charges and
expenses arising out of or resulting from the ordinary negligence (whether sole
or contributory) of such indemnified Person. The Agent is entitled to rely
upon and act upon facsimile requests made or purportedly made by any of the
officers or employees specified in the resolutions delivered to the Agent or
any Bank of even date herewith, as supplemented in writing from time to time
and accepted by the Agent or any Bank, and the Company shall be unconditionally
and absolutely estopped from denying (x) the authenticity and validity of any
transaction so acted upon by the Agent or any Bank once the Agent or any Bank
has advanced funds or issued Letters of Credit, as applicable, and has
deposited or transferred such funds as requested in any such facsimile, and (y)
the Company's liability and responsibility therefor.
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ARTICLE XII
ASSIGNMENTS, PARTICIPATIONS
12.1 Assignments, Participations, etc.
(a) Any Bank may, with the written approval of the
Company, the Agent and the Issuing Banks, which approval of the Company shall
not be unreasonably withheld and shall be executed on the Assignment and
Acceptance in the form of Exhibit E, and notice to the Agent, at any time
assign and delegate to one (1) or more banks, insurance companies, finance
companies, financial institutions, funds, or other entities and, with notice to
the Agent but without the consent of the Company or the Agent, may assign to
any of its 100% owned Affiliates (each an "Assignee") all or an equal
percentage of all of the Loans, the Revolving Credit Exposure and the
Commitments and any other rights or obligations of such Bank hereunder in a
minimum amount of Ten Million dollars ($10,000,000) or 100% of such Bank's
Commitment, if less, provided, however, that the Company, the Issuing Bank and
the Agent shall be entitled to continue to deal solely and directly with such
Bank in connection with the interests so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses and related information with respect to such Assignee, shall have
been given to the Company and the Agent by such Bank and such Assignee and (ii)
such Bank and its Assignee shall have delivered to the Company and the Agent an
Assignment and Acceptance in the form of Exhibit E, together with any Note or
Notes subject to such assignment; and (iii) the processing fees of Two Thousand
Five Hundred dollars ($2,500) shall have been paid to the Agent.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received the Assignment and Acceptance, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Bank under the Loan
Documents and (ii) the assignor Bank shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
the Loan Documents.
(c) Within five (5) Business Days after its receipt of
notice by the Agent that it has received an executed Assignment and Acceptance,
the Company shall execute and, deliver to the Agent, new Notes evidencing such
Assignee's assigned Loans, and Commitment and, if the assignor Bank has
retained a portion of its Loans and its Commitment, replacement Notes in the
principal amount of the Loans retained by the assignor Bank (such Notes to be
in exchange for, but not in payment of, the, Notes held by such Bank).
Immediately upon each Assignee's making its payment under the
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Assignment and Acceptance, this Agreement and Schedules I and II, shall be
deemed to be amended to the extent, but only to the extent, necessary to
reflect the addition of such Assignee Bank and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Bank pro tanto. Promptly after each
Assignee's making its payment under the Assignment and Acceptance, a copy of
the Assignment and Acceptance executed and delivered, together with amended
Schedules I and II, and the existing Notes exchanged pursuant to this Section
12.1(c) marked "Exchanged," shall be delivered by the Agent to the Company.
(d) Any Bank may at any time sell to one (1) or more
banks or other entities (a "Participant") participating interests in any Loans,
the Revolving Credit Exposure, the Commitment of such Bank or any other
interest of such Bank hereunder, in a minimum amount of Ten Million Dollars
($10,000,000), provided, however, that (i) such Bank's obligations under this
Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company and the
Agent shall continue to deal solely, and directly, with such Bank in connection
with such Bank's rights and obligations under this Agreement and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
shall have rights to approve any amendment to, or any consent or waiver with
respect to this Agreement except to the extent such amendment, consent or
waiver would require unanimous consent as described in the first proviso to
Section 10.1. In the case of any such participation, the Participant shall not
have any rights under this Agreement, or any of the other documents in
connection herewith, and all amounts payable by the Company hereunder shall be
determined as if such Bank had not sold such participation, except that the
Company agrees that if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement.
(e) Each Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public information provided to it by the Company or any Subsidiary of the
Company or by the Agent or the Arranger on the Company's or such Subsidiary's
behalf in connection with this Agreement or any Collateral Document and agrees
and undertakes that neither it nor any of its Affiliates shall use any such
information for any purpose or in any manner other than pursuant to the terms
contemplated by this Agreement. Any Bank may disclose such information (i) at
the request of any bank regulatory authority or in connection with an
examination of such Bank by any such
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authority; (ii) pursuant to subpoena or other court process; (iii) when
required to do so in accordance with the provisions of any applicable law; (iv)
at the express direction of any agency of any State of the United States of
America or of any other jurisdiction in which, such Bank conducts its business;
and (v) to such Bank's independent auditors and other professional advisors.
Notwithstanding the foregoing, the Company authorizes the Agent and each Bank
to disclose to any Participant or Assignee (each, a "Transferee") and any
prospective Transferee such financial and other information in such Bank's
possession concerning the Company or its Subsidiaries which has been delivered
to or obtained by the Agent or the Banks pursuant to this Agreement or which
has been delivered to the Agent or the Banks by the Company or its Subsidiaries
or obtained by the Agent or the Banks from the Company or its Subsidiaries;
provided that such Transferee agrees in writing to the Agent or such Bank, as
the case may be, to keep such information confidential to the same extent
required of the Banks hereunder.
ARTICLE XIII
NO WAIVER, WAIVERS AND RELEASE
13.1 No Waiver. The Company agrees that no Event of Default and no
Default under the Prior Credit Agreement has been waived or remedied by the
execution of this Agreement by the Agent and the Banks and any such Default or
Event of Default heretofore arising and currently continuing shall continue
after the execution and delivery hereof.
13.2 Waivers and Release of Claims. As additional consideration to
the execution, delivery, and performance of this Agreement by the parties
hereto and to induce the Agent and the Banks to enter into this Agreement, the
Company represents and warrants that (a) the Company knows of no defenses,
counterclaims or rights of setoff to the payment of any indebtedness of the
Company to the Agent or any of the Banks, and (b) the Company for itself, its
Subsidiaries, their respective representatives, agents, officers, directors,
employees, shareholders, and successors and assigns, hereby fully, finally,
completely, generally and forever releases, discharges, acquits, waives and
relinquishes the Agent and each of the Banks and their respective
representatives, agents, officers, directors, employees, shareholders, and
successors and assigns, from any and all claims, actions, demands, and causes
of action of whatever kind or character, whether joint or several, whether
known or unknown, for any and all injuries, harm, damages, penalties, costs,
losses, expenses, attorneys' fees, and/or liability whatsoever and whenever
incurred or suffered by any of them prior to the execution of this Agreement or
arising from the Company's inability to meet the conditions precedent set forth
in Article V of this Agreement or the Prior Credit Agreement. Notwithstanding
any provision of this Agreement, the Prior Credit
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Agreement or any other Loan Document, this Section 13.2 shall remain in full
force and effect and shall survive the delivery of the Notes, this Agreement
and the other Loan Documents and the making, extension, renewal, modification,
amendment or restatement of any thereof.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices, requests and other communications
provided for hereunder shall be in writing (including telegraphic, telex,
facsimile transmission or cable communication) and mailed, telegraphed,
telexed, telecopied or delivered, if to the Company or any of its Subsidiaries
to the Company's address specified on the signature pages hereof with a copy to
Cox & Smith Incorporated, Attn: Mr. Ward T. Blacklock, Jr., 112 East Pecan
Street, Suite 1800, San Antonio, Texas 78205, Telephone No. (210) 554-5235,
Telecopy No. (210) 226-8395; if to any Bank, to its address for notice as
specified opposite its name on Schedule I; and if to the Agent, to its address
for notice specified on the signature pages hereof; or, as to the Company or
the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as to each other party at such other
address as shall be designated by such party in a written notice to the Company
and the Agent. All such notices and communications shall, when mailed by
overnight delivery, telegraphed, telexed, cabled, be effective when delivered
for overnight delivery or to the telegraph company, transmitted by telecopier,
confirmed by telex answerback or delivered to the cable company, respectively,
or if delivered, upon delivery, except that notices pursuant to Article II or
VIII shall not be effective until received by the Agent.
14.2 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
14.3 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of each Bank.
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14.4 Set-off. In addition to any rights and remedies of the Banks
provided by law, upon the occurrence and during the continuance of any Event of
Default, each Bank is hereby authorized at any time and from time to time,
without prior notice to the Company, any such notice being expressly waived by
the Company to the fullest extent permitted by applicable law, to set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Bank
to or for the credit or the account of the Company against any and all
obligations of the Company now or hereafter existing under this Agreement, or
any Loan Document and any Loan held by such Bank irrespective of whether or not
the Agent or such Bank shall have made demand under this Agreement or any Loan
Document and although such obligations may be unmatured. Each Bank agrees
promptly to notify the Company and the Agent after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. The
rights of each Bank under this Section 14.4 are in addition to the other rights
and remedies (including without limitation, other rights of set-off) which such
Bank may have.
14.5 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Agent in writing of any changes in the address to which
notices to such Bank should be directed, of addresses of its Eurodollar Lending
Office and its Domestic Lending Office, of payment instructions in respect of
all payments to be made to it hereunder and of such other administrative
information as the Agent shall reasonably request.
14.6 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, each
of which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Agent.
14.7 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
14.8 Interest. It is the intention of the parties hereto to comply
with applicable usury laws, if any; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, the Notes,
the other Loan Documents or in any of the documents securing payment thereof or
otherwise relating thereto, in no event shall this Agreement or such
instruments or documents require or permit the payment, charge, taking,
reserving or receipt of any sums constituting interest, as defined under
applicable
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usury laws, if any, in excess of the maximum amount permitted by such laws. If
any such excess of interest is contracted for, charged, taken, reserved or
received under this Agreement, any Note, the other Loan Documents or under the
terms of any of the documents securing payment thereof or otherwise relating
thereto, or in any communication by the Banks or any other person to the
Company or any other party liable for payment of the Notes, or if the maturity
of the indebtedness evidenced by any Note is accelerated in whole or in part,
or in the event that all or part of the principal of or interest on any Note
shall be prepaid, so that under any of such circumstances the amount of
interest contracted for, charged, taken, reserved or received under this
Agreement, any Note, the other Loan Documents or under any of the documents
securing payment thereof or otherwise relating thereto, on the amount of
principal actually outstanding from time to time under any Note shall exceed
the maximum amount of interest permitted by applicable usury laws, if any, then
in any such event (i) the provisions of this Section shall govern and control,
(ii) any such excess shall be deemed an accidental or bona fide error and
cancelled automatically to the extent of such excess, and shall not be
collected or collectable, (iii) any such excess which may have been collected
either shall be applied as a credit against the then unpaid principal amount on
such Note or refunded to the Person paying the same, at the holder's option,
and (iv) the effective rate of interest shall be automatically reduced to the
maximum lawful rate of interest permitted under applicable usury laws as now or
hereafter construed by the courts having jurisdiction thereof. It is further
agreed that, without limitation of the foregoing, all calculations of the rate
of interest contracted for, charged, taken, reserved, or received under this
Agreement, any Note, the other Loan Documents or under such other documents or
instruments which are made for the purpose of determining whether such rate
exceeds the maximum lawful rate of interest shall be made, to the extent
permitted by applicable usury laws, by amortizing, prorating, allocating and
spreading in equal parts during the period of the full stated term of the
indebtedness evidenced by such Note, including all prior and subsequent
renewals and extensions, all interest at any time contracted for, charged,
taken, reserved or received from the Company or otherwise by the holder or
holders thereof in connection with such Note, the other Loan Documents or this
Agreement. The terms of this Section shall be deemed to be incorporated in
every Loan Document, security instrument, and communication relating to this
Agreement, the Notes, the other Loan Documents and the Loans. The term
"applicable usury laws" shall mean such laws of the State of Texas or the laws
of the state where the applicable Bank is located or the laws of the United
States, whichever laws allow the higher rate of interest, as such laws now
exist.
89
<PAGE> 90
14.9 GOVERNING LAW.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, EXCEPT TO
THE EXTENT PROVIDED IN SECTION 14.9(b) HEREOF AND TO THE EXTENT THAT THE
FEDERAL LAWS OF THE UNITED STATES OF AMERICA MAY OTHERWISE APPLY.
(b) NOTWITHSTANDING ANYTHING IN SECTION 14.9(a) HEREOF TO
THE CONTRARY, NOTHING IN THIS AGREEMENT, THE NOTES, OR THE OTHER LOAN DOCUMENTS
SHALL BE DEEMED TO CONSTITUTE A WAIVER OF ANY RIGHTS WHICH THE AGENT OR ANY OF
THE BANKS MAY HAVE UNDER THE NATIONAL BANK ACT OR OTHER APPLICABLE FEDERAL LAW,
INCLUDING WITHOUT LIMITATION THE RIGHT TO CHARGE INTEREST AT THE RATE PERMITTED
BY THE LAWS OF THE STATE WHERE THE APPLICABLE BANK IS LOCATED.
14.10 SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS
OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, AND THE BANKS
HEREBY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND THE BANKS HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY AND
THE BANKS HEREBY WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
14.11 ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT
AND UNDERSTANDING AMONG THE COMPANY, THE BANKS AND THE AGENT AND SUPERSEDES ALL
PRIOR OR CONTEMPORANEOUS AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL
OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF EXCEPT FOR THE FEE LETTER AND
ANY PRIOR ARRANGEMENTS MADE WITH RESPECT TO THE PAYMENT BY THE COMPANY OF (OR
ANY INDEMNIFICATION FOR) ANY FEES, COSTS OR EXPENSES PAYABLE TO OR INCURRED (OR
TO BE INCURRED) BY OR ON BEHALF OF THE AGENT OR THE BANKS.
THIS WRITTEN AGREEMENT, THE NOTES, THE FEE LETTER, THE OTHER LOAN
DOCUMENTS, AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed and delivered by their proper and
90
<PAGE> 91
duly authorized officers as of the day and year first above written.
BORROWER:
KINETIC CONCEPTS, INC. Address:
By_______________________________ 8023 Vantage Drive
Name: San Antonio, Texas 78230
Title:
Attn: Ms. Bianca A. Rhodes,
and
Mr. Martin Landon
Telephone No. (210)524-9000
Telecopy No. (210)308-3993
(210)308-3997
AGENT:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent Address:
By______________________________ 1455 Market Street, 12th Floor
Name: San Francisco, California 94103
Title: Attn: Frank Woo, #5596
Vice President
Telephone No. (415)622-6614
Telecopy No. (415)622-4894
BANKS:
BANK OF AMERICA ILLINOIS
By______________________________ 333 Clay Street, Suite 4550
Name: Houston, Texas 77002
Title: Attention: Melinda Nickens
Vice President
Telephone No. (713) 651-4876
Telecopy No. (713) 651-4841
91
<PAGE> 92
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By______________________________ 1020 N.E. Loop 410
Name: San Antonio, Texas 78209-1218
Title: Attention: David P. McGee
Senior Vice President
Telephone No.: (210) 829-6126
Telecopy No.
NATIONSBANK OF TEXAS, N.A.
By______________________________ 901 Main Street, 67th Floor
Name: Dallas, Texas 75202
Title: Attention: Douglas E. Hutt
Senior Vice President
Telephone No.: (214) 508-0957
Telecopy No.
92
<PAGE> 93
EXHIBIT "A"
REVOLVING NOTE
$_____________________ May 8, 1995
KINETIC CONCEPTS, INC., a Texas corporation (the "Borrower"), promises
to pay to the order of _________________________________________ (the "Bank"),
for the account of its Lending Office, the principal amount of ___________
MILLION ____________________________ THOUSAND AND NO/100 DOLLARS
($______________) or the aggregate unpaid principal amount of all Revolving
Loans made by the Bank to the Borrower pursuant to Section 2.1(a) of the Credit
Agreement hereinafter referred to, whichever is less, in immediately available
funds at Bank of America National Trust and Savings Association, Global Agency
#5596, 1455 Market Street, 12th Floor, San Francisco, California 94103, at the
times and in the amounts as set forth in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal balance of the Revolving
Loans, from time to time outstanding, at the rates and on the dates set forth
in the Credit Agreement. The aggregate unpaid principal amount of all
Revolving Loans shall be due and payable on the Revolving Maturity Date.
All Revolving Loans, the maturities thereof and all repayments of the
principal of this note shall be recorded by the Bank in its internal records,
but, prior to any transfer hereof, the principal amount of the Revolving Loans
shall be noted by the Bank on the reverse side of this note, or on any
continuation of such record attached hereto and made a part hereof.
This note is one of the notes issued pursuant to and entitled to the
benefits of the Credit Agreement dated as of May 8, 1995, among the Borrower,
Bank of America National Trust and Savings Association, as Agent (the "Agent"),
and the Banks now or hereafter a party thereto (as the same may be amended,
modified and restated from time to time being hereinafter referred to as the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
It is contemplated that by reason of prepayments hereon prior to the
Revolving Maturity Date, there may be times when no indebtedness is owing
hereunder prior to such date, but notwithstanding such occurrence this note
shall be in full force and effect as to the Revolving Loans made pursuant to
the Credit Agreement subsequent to each such occurrence.
<PAGE> 94
It is the intention of the Borrower and the Bank to comply with
applicable usury laws, if any; accordingly, it is agreed that notwithstanding
any provisions to the contrary in this note, the Credit Agreement and the other
Loan Documents or in any of the documents relating hereto, in no event shall
this note or such instruments or documents require or permit the payment,
charging, taking, reserving or receiving of any sums constituting interest
under applicable usury laws, if any, in excess of the maximum amount permitted
by such laws. If any such excess of interest is contracted for, charged,
taken, reserved or received under this note, the Credit Agreement, the other
Loan Documents or under the terms of any of the documents otherwise relating
hereto, or in any communication by the Bank or any other person to the Borrower
or any other party liable for payment of this note, or in the event all or part
of the principal or interest evidenced by this note shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstances whatsoever the amount of interest contracted for, charged, taken,
reserved, or received on the amount of principal actually outstanding from time
to time under this note shall exceed the maximum amount of interest permitted
by applicable usury laws, if any, then in any such event it is agreed as
follows: (i) the provisions of this paragraph shall govern and control, (ii)
any such excess shall be deemed an accidental or bona fide error and canceled
automatically to the extent of such excess, and shall not be collected or
collectible, (iii) any such excess which is or has been paid or received shall
be credited against the then unpaid principal balance under this note or
refunded to the Borrower, at Bank's option, and (iv) the effective rate or
interest shall be automatically reduced to the maximum lawful rate allowed
under applicable laws as construed by courts having jurisdiction hereof or
thereof. Without limiting the foregoing, all calculations of the rate of
interest contracted for, charged, taken, reserved, or received in connection
with this note, the Credit Agreement, and the other Loan Documents, or in any
of the documents otherwise relating hereto which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate, if any, shall be
made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of the loan,
evidenced by this note, including all prior and subsequent renewals and
extensions, all interest at any time contracted for, charged, taken, reserved,
or received. The terms of this paragraph shall be deemed to be incorporated in
every Loan Document, and the communication relating to this note, the other
Loan Documents and the loans. The term "applicable usury laws" shall mean such
laws of the State of Illinois or the laws of the state where the Bank is
located or the laws of the United States, whichever laws allow the higher rate
of interest, as such laws now exist; provided, however, that if such laws shall
hereafter allow higher rates of interest, then the applicable usury laws shall
be the laws allowing the higher rates, to be effective as of the effective date
of such laws.
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<PAGE> 95
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT PROVIDED IN THE PRECEDING
SENTENCE AND IN THE FOLLOWING SENTENCE AND TO THE EXTENT THAT THE FEDERAL LAWS
OF THE UNITED STATES OF AMERICA MAY APPLY. NOTWITHSTANDING ANYTHING IN THE
IMMEDIATELY PRECEDING SENTENCE TO THE CONTRARY, NOTHING IN THIS NOTE SHALL BE
DEEMED TO CONSTITUTE A WAIVER OF ANY RIGHTS WHICH THE BANK MAY HAVE UNDER THE
NATIONAL BANK ACT OR OTHER APPLICABLE FEDERAL LAW.
The Borrower and any and all sureties, guarantors and endorsers of
this note and all other parties now or hereafter liable hereon, severally
waive, except as otherwise provided in the Credit Agreement, grace, demand,
presentment for payment, protest, notice of any kind (including, but not
limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in accelerate and notice
of acceleration) and diligence in collecting and bringing suit against any
party hereto, and agree (i) to all extensions and partial payments, with or
without notice, before of after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for the Bank, in order to enforce payment of this note,
to first institute or exhaust the Bank's remedies against the Borrower or any
other party liable therefor or against any security for this note.
KINETIC CONCEPTS, INC.
a Texas corporation
By__________________________________
Name:
Title:
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<PAGE> 96
EXHIBIT B
NOTICE OF BORROWING
Date:_________________
Bank of America National Trust and
Savings Association, as Agent for the
Banks from time to time parties to the
Credit Agreement dated as of May 8, 1995
(the "Credit Agreement") by and
among Kinetic Concepts, Inc., the Banks
which are, or may from time to time
become, a party thereto, and the Bank of
America National Trust and Savings
Association, as Agent for the Banks
Ladies and Gentlemen:
The undersigned Kinetic Concepts, Inc. (the "Company") hereby refers
to the Credit Agreement and hereby gives you notice irrevocably, pursuant to
Section 2.3 of the Credit Agreement, of the Borrowing(s) specified below:
REVOLVING LOAN:
1. Aggregate Total Amount: $______________
2. Revolving Loan advance date: ______________, 19__.
3. Requested rate and applicable Dollar amount:
Rate Selection
(a) Reference Rate Loan for $____________
(b) Eurodollar Rate Loan with Interest Period of:
(i) one month for $_______________
(ii) two months for $______________
(iii) three months for $____________
(iv) six months for $______________
The Company hereby represents, warrants and agrees, pursuant to Section 5.1 and
5.2 of the Credit Agreement, that the delivery of this Notice of Borrowing and
the acceptance by the Company of the proceeds of the Loans constitute a
representation and warranty by the Company that, on the date of such Loans, and
before and after giving effect thereto and to the application of proceeds
therefrom,
<PAGE> 97
all conditions precedent set forth in Article V of the Credit Agreement have
been satisfied.
Immediately after the Loan(s) to which this Notice of Borrowing
relates, no Default or Event of Default shall have occurred and be continuing.
The Company agrees that if prior to the time of the making of the
Loans requested hereby any matter certified to by it will not be true and
correct at such time as if then made, it will immediately so notify the Agent.
The proceeds of the Revolving Loan(s) which are the subject of this
Notice of Borrowing will be used for __________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
KINETIC CONCEPTS, INC.
By________________________
Name:
Title:
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<PAGE> 98
EXHIBIT "C"
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date:________________
Bank of America National Trust and Savings Association, as Agent for the Banks
from time to time parties to the Credit Agreement dated as of May 8, 1995 (the
"Credit Agreement") by and among Kinetic Concepts, Inc., the various Banks
which are, or may from time to time become, a party thereto and Bank of America
National Trust and Savings Association, as Agent for the Banks
Ladies and Gentlemen:
The undersigned Kinetic Concepts, Inc. (the "Company") hereby refers
to the Credit Agreement and hereby gives you notice irrevocably, pursuant to
Section 2.4 of the Credit Agreement, of the conversion or continuation of the
Loan specified below:
A. Loan to be converted or continued:
(1) Amount: $__________________
(2) Loan Date: _________________
(3) Existing rate: Check applicable blank
(a) Reference Rate __________________
(b) Eurodollar Rate
Interest Period
(i) one month __________________
(ii) two months __________________
(iii) three months __________________
(iv) six months __________________
(4) Date Loan matured: ____________________, 199____
B. Proposed conversion or continuation date:___________________, 199____.
C. Loan described in (A) above is to be converted or continued as
follows:
(1) Amount: $_________________
(2) Loan Date: ____________________, 199___
<PAGE> 99
(3) Requested rate and applicable Dollar amount:
(a) Reference Rate for $ ______________________________
(b) Eurodollar Rate with an Interest Period of:
(i) one month for $ _________________
(ii) two months for $ _________________
(iii) three months for $ _________________
(iv) six months for $ __________________
The Company hereby represents, warrants and agrees pursuant to Section
5.1 and 5.2 of the Credit Agreement, that the deliver of this Notice of
Conversion/Continuation and the acceptance by the Company of the proceeds of
the Loan constitute a representation and warranty by the Company that, on the
date of such Loan and before and after giving effect thereto and to the
application of proceeds therefrom, all conditions precedent set forth in
Article V of the Credit Agreement have been satisfied.
Immediately after the Loan to which this Notice of
Conversion/Continuation relates, no Default or Event of Default shall have
occurred and be continuing.
The Company agrees that if prior to the time of the conversion or
continuation of the Loan requested hereby any matter certified to by it will
not be true and correct at such time as if then made, it will immediately so
notify the Agent.
Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
KINETIC CONCEPTS, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
2
<PAGE> 100
EXHIBIT D
OFFICER'S CERTIFICATE
The undersigned, the __________________________ of Kinetic Concepts,
Inc., a Texas corporation (the "Company"), hereby certifies to Bank of America
National Trust and Savings Association, as agent ("Agent") for the "Banks" as
that term is defined in that certain Credit Agreement (the "Credit Agreement")
dated as of May 8, 1995, by and among the Company, the Agent and the Banks from
time to time a party thereto, that:
(a) a review of the activities of the Company has been
made to ascertain whether the Company, and its Subsidiaries, have
kept, observed, performed and fulfilled all of the Company's
covenants, conditions, representations and warranties under the Credit
Agreement; and
(b) to the best of the undersigned's knowledge,
information and belief:
(i) each of the Company and its Subsidiaries have kept,
observed, performed and fulfilled each and every covenant, condition,
representation and warranty contained in the Credit Agreement and the
Loan Documents and the Company is not in violation of any of the terms
and conditions contained in the Credit Agreement;
(ii) as of the date hereof, no Default or Event of Default
exists under the Credit Agreement or any of the Loan Documents;
(iii) (A) the Consolidated Net Worth of the Company
calculated pursuant to Section 7.12 of the Credit
Agreement (as shown on Exhibit A hereto) as of
__________, _________ is $_____________;
(B) The Leverage Ratio calculated pursuant to
Section 7.13 of the Credit Agreement (as shown
on Exhibit A hereto) as of _______________ is _______
(for purposes of calculating the Leverage Ratio the
amount of Indebtedness of KCI Financial is
$__________;
(C) The Debt/EBITDA Coverage Ratio, calculated
pursuant to Section 7.14 of the Credit Agreement (as
shown on Exhibit A hereto) as of
________________________, is _________.
<PAGE> 101
Capitalized terms used herein have the same meanings assigned to them
in the Agreement.
EXECUTED AND DELIVERED ON ________________________.
KINETIC CONCEPTS, INC.
By____________________________
Name:
Title:
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<PAGE> 102
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as
of _________________, 199_ is made between ___________________________________
_________________________ (the "Assignor") and ______________________________
_____________________ (the "Assignee").
R E C I T A L S
WHEREAS, the Assignor is party to that certain Credit Agreement (the
"Credit Agreement") dated as of December 17, 1993, among Kinetic Concepts,
Inc., a Texas corporation (the "Company"), the several financial institutions
from time to time a party thereto (including the Assignor, the "Banks") and
Bank of America National Trust and Savings Association, as Agent for the Banks
(terms defined in the Credit Agreement are used herein with the same meaning);
WHEREAS, as provided in the Credit Agreement, the Banks have committed
to extend credit to the Company in an aggregate amount not to exceed FIFTY
MILLION AND NO/100 Dollars ($50,000,000); and
WHEREAS, the Assignor wishes to assign to the Assignee part of the
rights and obligations of the Assignor under the Credit Agreement in respect of
its Commitment, together with a corresponding portion of each of its
outstanding Loans and its Commitment Percentage of the outstanding Revolving
Credit Exposure (herein called "Credit Exposure"), in a total amount equal to
____________________________________________ United States dollars
(U.S.$_____________________) (the "Assigned Amount") on the terms listed on
Annex I hereto and subject to the conditions set forth herein and in the Credit
Agreement, and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such
conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Assumption.
(a) Before giving effect to this Agreement, Assignor's
(a) Commitment is $_______________, (b) outstanding aggregate principal amount
of its outstanding Loans is $_________________, (c) outstanding aggregate
Credit Exposure is $_________________ and (d) Commitment Percentage is ______%.
With effect on and after the
<PAGE> 103
Effective Date (as defined in Section 4 hereof), the Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, the Assigned Amount, which shall be equal to _______ percent (____%)
(the "Assignee's Percentage Share") of all of the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
Assignee's Percentage Share of the Assignor's (i) Commitment, and (ii)
outstanding Loans and Credit Exposure. After giving effect to this Agreement
on the Effective Date, the Commitment, Outstanding Loans and Credit Exposure,
and Commitment Percentage of Assignor and Assignee, respectively, are set forth
as follows:
<TABLE>
<CAPTION>
Outstanding
Outstanding Credit Commitment
Loans Exposure Percentage Commitments
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Assignor $__________ $__________ _________% $__________
Assignee $__________ $__________ _________% $__________
</TABLE>
The assignment set forth in this Section 1(a) shall be without
recourse to, or representation or warranty (except as expressly provided in
this Agreement) by, the Assignor.
(b) With effect on and after the Effective Date, the
Assignee shall be a party to the Credit Agreement, shall become a "Bank" for
all purposes as therein defined and contemplated, and shall succeed to all of
the rights and be obligated to perform all of the obligations of a Bank under
the Credit Agreement with a Commitment in an amount equal to the Assigned
Amount. The Assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank. It is the intent of the parties
hereto that the Commitment of the Assignor shall, as of the Effective Date, be
reduced by an amount equal to the Assigned Amount and the Assignor shall
relinquish its rights and be released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee.
2. Payments.
(a) As consideration for the sale, assignment and
transfer contemplated in Section 1 hereof, the Assignee shall pay to the
Assignor on the Effective Date in immediately available funds an amount equal
to ________________________________________ Dollars ($________________),
representing the Assignee's Percentage Share of the principal amount of all
Loans previously made, and currently owned, by the Assignor under the Credit
Agreement and outstanding
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<PAGE> 104
on the Effective Date. The difference between the Assigned Amount and the
amount paid to Assignor under this Section 2(a) represents the amount of
outstanding Credit Exposure assumed by Assignee pursuant to the terms hereof as
of the Effective Date.
(b) The Assignee further agrees to pay to the Agent a
processing or transfer fee in the amount of $2,500.00.
(c) To the extent payment to be made by the Assignee
pursuant to Section 2(a) hereof is not made when due, the Assignor shall be
entitled to recover such amount together with interest thereon at the Federal
Funds Rate per annum accruing from the date such amounts were due.
3. Reallocation of Payments. Any interest, commissions, fees and
other payments accrued to but excluding the Effective Date with respect to the
Assignor's Commitment Percentage of the Loans and Credit Exposure, shall be for
the account of the Assignor. Any interest, fees and other payments accrued on
and after the Effective Date with respect to the Assigned Amount shall be for
the account of the Assignee. Each of the Assignor and the Assignee agree that
it will hold in trust for the other party any interest, commissions, fees and
other amounts which it may receive to which the other party is entitled
pursuant to the preceding sentence and pay to the other party any such amounts
which it may receive promptly upon receipt. The Assignor's and the Assignee's
obligations to make the payments referred to in this Section 3 are
non-assignable.
4. Effective Date; Notices; Notes.
(a) The effective date for this Agreement shall be
_______________________ (the "Effective Date"); provided that the following
conditions precedent have been satisfied on or before the Effective Date:
(i) this Agreement shall be executed and delivered by the
Assignor and the Assignee;
(ii) the consent of the Company required for an effective
assignment of the Assigned Amount by the Assignor to the Assignee
shall have been duly obtained in the form set forth on Annex II hereof,
and shall be in full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts
due to the Assignor under this Agreement; and
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<PAGE> 105
(iv) the processing or transfer fee referred to in Section
2(b) shall have been paid to the Agent.
(b) Promptly following the execution of this Agreement,
the Assignor shall deliver to the Agent for acceptance by the Agent, the
notices, agreements or other documents as may be required under the Credit
Agreement.
(c) Promptly following payment by the Assignee of the
consideration as provided in Section 2 hereof, the Assignor shall deliver its
promissory note(s) to the Agent and shall request that new notes be issued to
the Assignor and the Assignee dated the Effective Date to properly reflect the
respective amounts of the Loans and Credit Exposure held by each party.
[5. Agent INCLUDE ONLY IF ASSIGNOR IS AGENT].
(a) The Assignee hereby appoints and authorizes the
Assignor to take such action as Agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Agent by the Banks pursuant
to the terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations
held by the Assignor in its capacity as Agent under the Credit Agreement.]
6. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any lien, security interest or
other adverse claim; (ii) it is duly organized and existing and it has the full
power and authority to take, and has taken, all action necessary to execute and
deliver this Agreement and any other documents required or permitted to be
executed or delivered by it in connection with this Agreement and to fulfill
its obligations hereunder, (iii) no notices to, or consents, authorizations or
approvals of, any person are required (other than any already given or
obtained) for its due execution, delivery and performance of this Agreement,
and apart from any agreements or undertaking or filings required by the Credit
Agreement, no further action by, or notice to, or filing with, any person is
required of it for such execution, delivery or performance; and (iv) this
Agreement has been duly executed and delivered by it and constitutes the legal,
valid and binding obligations of the Assignor, enforceable against the Assignor
in accordance with the terms hereof, except subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
appli-
-4-
<PAGE> 106
cation relating to or affecting creditors' rights and to general equitable
principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto. The Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of the Company or any guarantor or the
performance or observance by the Company or any guarantor of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is
duly organized and existing and it has full power and authority to take, and
has taken, all action necessary to execute and deliver this Agreement and any
other documents required or permitted to be executed or delivered by it in
connection with this Agreement, and to fulfill its obligations hereunder; (ii)
no notices to, or consents, authorizations or approvals of, any person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Agreement; and apart from any agreements or
undertaking or filings required by the Credit Agreement, no further action by,
or notice to, or filing with, any person is required of it for such execution,
delivery or performance; (iii) this Agreement has been duly executed and
delivered by it and constitutes the legal, valid and binding obligations of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
except subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is eligible
under the Credit Agreement to be an assignee in accordance with the terms
hereof.
7. Further Assurances. The Assignor and the Assignee each hereby
agree to execute and deliver such other instruments, and take such other
action, as either party may reasonably request in connection with the
transactions contemplated by this Agreement, including, without limitation, the
delivery of any notices or other documents or instruments to the Company, the
Agent or any guarantor which may be required in connection with the assignment
and assumption contemplated hereby.
8. Indemnity. The Assignee agrees to indemnify and hold harmless
the Assignor against any and all losses, costs, expenses
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<PAGE> 107
(including, without limitation, reasonable attorneys' fees and the allocated
costs and expenses for in-house counsel) and liabilities incurred by the
Assignor in connection with or arising in any manner from the non-performance
by the Assignee of any obligation assumed by the Assignee under this Agreement.
9. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Agreement shall be in writing signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Agreement shall be without prejudice to any rights with
respect to any other or further breach hereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) All communications among the parties or notices in
connection herewith shall be in writing, hand-delivered, telex or facsimile
transmitter, addressed as follows: (i) if to the Assignor or the Assignee, at
their respective addresses set forth on the signature pages hereof and (ii) if
to the Company, the Agent or any guarantor, at their respective addresses set
forth in the Credit Agreement or other documents or instruments. All such
communications and notices shall be effective upon receipt. The Assignee
specifies as its Domestic and Eurodollar Lending Office(s) the offices set
forth beneath its name on the signature pages hereof.
(d) The Assignor and the Assignee shall each pay its own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement.
(e) The representations and warranties made herein shall
survive the consummation of the transactions contemplated hereby.
(f) Subject to the terms of the Credit Agreement, this
Agreement shall be binding upon and inure to the benefit of the Assignor and
the Assignee and their respective successors and assigns; provided, however,
that no party shall assign its rights hereunder without the prior written
consent of the other party and any purported assignment, absent such consent,
shall be void. The preceding sentence shall not limit or enhance the right of
the Assignee to assign or participate all or part of the Assignee's Percentage
Share and the Assigned Amount and any outstanding Loans and Credit Exposure
attributable thereto in the manner contemplated by the Credit Agreement.
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<PAGE> 108
(g) This Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(h) This Agreement shall be governed by and construed in
accordance with the law of the State of _________ and applicable federal law.
The Assignor and the Assignee each irrevocably submits to the non-exclusive
jurisdiction of any ________ State or Federal court sitting in the ____________
District of ________ over any suit, action or proceeding arising out of or
relating to this Agreement or the Credit Agreement and irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such ________ State or Federal court. Each party to this Agreement hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding.
(i) This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto, and together with the Credit
Agreement constitutes the entire agreement and understanding between the
parties hereto and supersedes any and all prior agreements and understandings
related to the subject matter hereof. In the event of any conflict between the
terms, conditions and provisions of this Agreement and the Credit Agreement,
the terms, conditions and provisions of the Credit Agreement shall prevail.
(j) In the event of any inconsistency between the
provisions of this Agreement and Annex I hereto, this Agreement shall control.
Headings are for reference only and are to be ignored in interpreting this
Agreement.
(k) The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not
in any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
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<PAGE> 109
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
[_____________________________]
By_____________________________
Name:
Title: Vice President
- ASSIGNOR -
______________________________
By_____________________________
Name:
Title:
Domestic Lending Office:
_______________________________
_______________________________
Eurodollar Lending Office:
_______________________________
_______________________________
- ASSIGNEE -
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<PAGE> 110
ANNEX I
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
1. Company: Kinetic Concepts, Inc.
2. Date of Credit Agreement:
3. Assignor:
4. Assignee:
5. Date of Assignment Agreement:
6. Effective Date:
7. Fees paid by Assignee to Assignor:
8. Interest paid by Assignee to Assignor:
(i) Reference Rate
Loan
(ii) Eurodollar Loan
9. Payment Instructions:
Assignor:
Assignee:
10. Assignee's Notice:
Instructions
11. Other Information:
<PAGE> 111
ANNEX II
TO
FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, 199_
Bank of America National Trust
and Savings Association,
as Agent
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: #5596 Global Agency
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230
Attention: Treasurer
Dear Sirs:
We refer to the Credit Agreement dated as of December 17, 1993 (the
"Credit Agreement") by and among Kinetic Concepts, Inc. (the "Company"), the
Banks from time to time a party thereto and Bank of America National Trust and
Savings Association, as Agent for the Banks. Terms defined in the Credit
Agreement are used herein as therein defined.
1. We hereby give you notice of, and request the approval of the
Company to, the assignment by ____________ ____________ (the "Assignor") to
________________________________ (the "Assignee") of ______% of the right,
title and interest of the Assignor in and to the Credit Agreement (including
without limitation the right, title and interest of the Assignor in and to the
Commitments of the Assignor and all outstanding Loans made by and Revolving
Credit Exposure (herein called "Credit Exposure") of the Assignor). Before
giving effect to such assignment the Assignor's (a) Commitment is $__________,
(b) Commitment Percentage is _________%, (c) aggregate principal amount of its
outstanding Loans is $___________, and (d) the aggregate principal amount of
its outstanding Credit Exposure is $_______________. After giving effect to
such assignment, the Assignor's and Assignee's respective Loans, Credit
Exposure, Commitment and Commitment Percentage are as follows:
<PAGE> 112
<TABLE>
<CAPTION>
Outstanding
Outstanding Credit Commitment
Loans Exposure Percentage Commitments
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Assignor $__________ $__________ _________% $__________
Assignee $__________ $__________ _________% $__________
</TABLE>
2. The Assignee agrees that upon receiving the consent of the
Company to such assignment and from and after the effective date of the
Assignment, the Assignee will be bound by the terms of the Credit Agreement,
with respect to the interest in the Credit Agreement assigned to it as
specified above, as fully and to the same extent as if the Assignee were the
Bank originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Eurodollar Lending Office:
Assignee name: _____________________
Address: ___________________________
___________________________
___________________________
Attention: ________________________
Telephone: ( ) ___________________
Telecopier: ( ) __________________
(B) Domestic Lending Office:
Assignee name: _____________________
Address: ___________________________
___________________________
___________________________
Attention: ________________________
Telephone: ( ) ___________________
Telecopier: ( ) __________________
(C) Notice Address:
Assignee name: _____________________
Address: ___________________________
___________________________
___________________________
Attention: ________________________
Telephone: ( ) ___________________
Telecopier: ( ) __________________
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<PAGE> 113
(D) Payment Instructions:
Account No.: ______________________
At: ______________________
______________________
______________________
Reference: ______________________
Attention: ______________________
4. The tax forms to be delivered by the Assignee pursuant to
Section 3.8 of the Credit Agreement, if any, will be promptly provided in
compliance therewith.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[Name of Assignor]
By ________________________________
Title:
[Name of Assignee]
By ________________________________
Title:
KINETIC CONCEPTS, INC.
hereby grants its approval
of the foregoing assignment:
KINETIC CONCEPTS, INC.
By ____________________________
Name:
Title:
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<PAGE> 114
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By ____________________________
Name:
Title:
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<PAGE> 115
EXHIBIT "F"
FORM OF CREDIT REQUEST
Date:__________________
Bank of America National Trust and
Savings Association, as Agent for the
Banks from time to time parties to the
Credit Agreement dated as of May 8,
1995, (the "Credit Agreement") by and
among Kinetic Concepts, Inc., the Banks
which are, or may from time to time
become, a party thereto, and Bank of
America National Trust and Savings
Association, as Agent for the Banks
Ladies and Gentlemen:
The undersigned Kinetic Concepts, Inc. (the "Company") hereby refers
to the Credit Agreement and hereby requests, pursuant to Section 2.3(f) of the
Credit Agreement, issuance of the Letter of Credit specified below:
LETTER OF CREDIT REQUEST:
1. Letter of Credit issuance date: _______________,
199____.
2. Amount of Letter of Credit: $_______________.
3. Letter of Credit expiration date: _______________,
199____.
4. Name of Issuing Bank: _______________.
5. Name and address of beneficiary of Letter of Credit:
__________________________________
__________________________________
__________________________________
__________________________________
6. Documents to be presented by the beneficiary of the
Letter of Credit in the event of a drawing
thereunder:
a. __________________________________
b. __________________________________
<PAGE> 116
c. __________________________________
7. Text of certificate to be presented by the
beneficiary of the Letter of Credit in the event of a
drawing thereunder:
"____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________."
8. The purpose of the Letter of Credit is ______________
_____________________________________________________
____________________________________________________.
9. The Letter of Credit requested is to be (check one):
(____) A Financial Letter of Credit.
(____) A Performance Letter of Credit.
(____) A Commercial Letter of Credit.
10. (a) The undrawn face amount of all Letters of
Credit outstanding (including the Letter of
Credit requested hereby) is equal to
$___________________.
(b) The total Revolving Credit Exposure, to be
outstanding on the date of issuance of the
Letter of Credit hereby requested, including
the Letter of credit requested hereby, is
equal to $____________.
(c) The total Revolving Loans to be outstanding
on the date of issuance of the Letter of
Credit hereby requested is equal to
$________________.
The Company hereby certifies, represents and warrants to the Agent and
Issuing Bank that the issuance of the Letter of Credit hereby requested will
not and does not cause the sum of the amounts referred to in Paragraphs 10(a)
and 10(b) above to exceed the Revolving Commitment.
The Company hereby represents, warrants and agrees, pursuant to
Section 5.1 and 5.2 of the Credit Agreement, that the delivery of this Letter
of Credit Request constitutes a representation and warranty by the Company
that, on the date of this Request and on the Letter of Credit issuance date,
and before and after giving effect to the issuance of the Letter of Credit, all
conditions
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<PAGE> 117
precedent set forth in Article V of the Credit Agreement have been satisfied.
Immediately after the issuance of the Letter of Credit to which this
Letter of Credit Request relates, no Default or Event of Default shall have
occurred and be continuing.
The Company agrees that if prior to the time of the issuance of the
Letter of Credit requested hereby any matter certified to by it will not be
true and correct at such time as if then made, it will immediately so notify
the Agent.
Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
KINETIC CONCEPTS, INC.
By:________________________________
Name:
Title:
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<PAGE> 118
EXHIBIT H
GUARANTY AGREEMENT
THIS CONTINUING GUARANTY AGREEMENT (this "Guaranty") by
[_________________________], a _______________ corporation (the "Guarantor"),
is in favor of each of the Banks (herein defined) from time to time a party to
the Credit Agreement (herein defined) and in favor of Bank of America National
Trust and Savings Association (together with its successors and assigns herein
called the "Agent"), as the Agent for and on behalf of the Banks (the "Banks")
now or hereafter parties to that certain Credit Agreement dated as of May 8,
1995, by and among the Agent, Kinetic Concepts, Inc., a Texas corporation (the
"Borrower") and the Banks from time to time parties thereto, (as the same may
be modified, amended and restated from time to time and at any time being
herein referred to as the "Credit Agreement"). All capitalized terms used but
not defined herein shall have the meaning assigned to them in the Credit
Agreement.
W I T N E S S E T H:
WHEREAS, the Banks have extended and will extend credit and financial
accommodations to the Borrower, in a principal amount not to exceed at any
given time, from time to time, $50,000,000 (collectively, the "Loans") pursuant
to the terms of the Credit Agreement;
WHEREAS, Guarantor is a wholly-owned subsidiary of the Borrower and
will derive direct and indirect economic benefits from the Borrower as a result
of the Loans;
NOW, THEREFORE, (i) to induce the Banks, at any time from time to
time, to loan monies, with or without security to or for the account of
Borrower, (ii) at the special insistence and request of the Agent and the
Banks, and (iii) for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Guarantor hereby agrees as
follows:
1. Guarantor hereby absolutely and unconditionally guarantees the
prompt and punctual payment and performance when due (whether at its maturity,
by lapse of time, by acceleration or otherwise) of the Guaranteed Obligations
(hereinafter defined). This is a continuing guaranty applicable to and
guaranteeing any and all indebtedness, obligations, and liabilities of every
kind and character of Borrower to the Agent and the Banks, or any one or more
of them, whether now existing or hereafter arising, whether due and owing or to
become due and owing, whether joint or several, or joint and several, whether
absolute or contingent, as created and evidenced by, and arising under, the
Credit Agreement and the Notes, and all renewals, extensions, increases, and
rearrangements
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<PAGE> 119
of such indebtedness, obligations or liabilities, including any and all amounts
owing or which may hereafter become owing thereon or in connection therewith,
including, without limitation, any and all amounts of principal, interest,
attorneys' fees, costs of collection and other amounts owing thereunder
(hereinafter collectively called the "Guaranteed Obligations").
2. Guarantor hereby waives marshalling of assets and liabilities,
sale in inverse order of alienation, notice of acceptance of this Guaranty and
of any indebtedness, obligation or liability to which it applies or may apply,
and waives presentment and demand for payment thereof, notice of dishonor or
nonpayment thereof, notice of intention to accelerate, notice of acceleration,
protest, and notice thereof and all other notices and demands, collection or
instigation of suit or any other action by the Agent or the Banks in collection
thereof, including any notice of default in payment thereof or other notice to,
or demand of payment therefor on, any party. Further, Guarantor expressly
waives each and every right to which it may be entitled by virtue of the
suretyship law of the State of Texas including without limitation, any rights
it may have pursuant to Rule 31, Texas Rules of Civil Procedure, Articles 1986
and 1987, Revised Civil Statutes of Texas and Chapter 34 of the Texas Business
and Commerce Code.
3. Guarantor agrees to pay to each of the Agent and the Banks its
collection costs, including any additional amount for reasonable attorneys'
fees (including, but not limited to, reasonable expenses and hourly fees of
in-house counsel of Agent and counsel to the Agent), but in no event to exceed
the maximum amount permitted by law, if the Guaranteed Obligations are not paid
by Guarantor upon demand when due as required herein or if this Guaranty is
enforced by suit or through probate or bankruptcy court or through any judicial
proceedings whatsoever, and should it be necessary to reduce the Banks' and the
Agent's, or any one or more of their, claims to judgment, such judgment shall
bear interest at the lesser of (i) the Highest Lawful Rate, if any or (ii) the
Reference Rate plus two percent (2%).
4. This is an absolute and unconditional guaranty of payment and
not of collection, by Guarantor, jointly and severally with any guarantor of
the Guaranteed Obligations in each and every particular, and Guarantor waives
any right to require that (a) any action be brought against Borrower or any
other person or entity, (b) the Agent or any Bank enforce its rights against
any other guarantor of the Guaranteed Obligations, (c) the Agent or any Bank
proceed or enforce its rights against or exhaust any security given to secure
the Guaranteed Obligations, (d) the Agent or any Bank have Borrower joined with
Guarantor or any other guarantor of all or part of the Guaranteed Obligations
in any suit arising out of
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<PAGE> 120
this Guaranty and/or the Guaranteed Obligations, or (e) the Agent or any Bank
pursue any other remedy in the Agent's or any Bank's powers whatsoever.
Neither the Agent nor any Bank shall be required to mitigate damages or take
any action to reduce, collect or enforce the Guaranteed Obligations. Guarantor
waives any defense arising by reason of any disability, lack of corporate
authority or power, or other defense of Borrower or any other guarantor of the
Guaranteed Obligations, and shall remain liable hereon regardless of whether
Borrower or any other guarantor be found not liable thereon for any reason.
Should the Agent or any Bank seek to enforce the obligations of Guarantor by
action in any court, Guarantor waives any necessity, substantive or procedural,
that a judgment previously be rendered against Borrower or any other person or
entity or that Borrower or any other person or entity be joined in such cause
or that a separate action be brought against Borrower or any other person or
entity. The obligations of Guarantor hereunder are several from those of
Borrower or any other person or entity (including without limitation any other
surety for Borrower), and are primary obligations concerning which Guarantor is
the principal obligor. All waivers herein contained shall be without prejudice
to each of the Agent and the Banks at its option to proceed against Borrower or
any other person or entity, whether by separate action or by joinder.
5. Guarantor agrees that suit may be brought against Guarantor
and any other guarantors of the Guaranteed Obligations, jointly and severally,
and against one or more of them, less than all, without impairing the rights of
the Agent and the Banks, or any one or more of them, against the other
guarantors; nor shall the Agent or any Bank be required to join Borrower or any
other guarantor or liable party in a suit against a particular guarantor; and
the Agent may release Borrower and/or one or more guarantor(s) or settle with
such persons or entities as the Agent deems fit without releasing or impairing
the rights of the Agent and the Banks, or any one or more of them, to demand
and collect the balance of such indebtedness from the other remaining
guarantors not so released.
6. Guarantor hereby consents and agrees to each of the following
to the fullest extent permitted by law, and agrees that the Guarantor's
obligations under this Guaranty shall not be released, diminished, impaired,
reduced or adversely affected by any of the following, and waives any rights
(including without limitation rights to notice) which Guarantor might otherwise
have as a result of or in connection with any of the following:
(a) Any renewal, extension, modification, increase,
decrease, alteration or rearrangement of all or any part of the Guaranteed
Obligations or any instrument executed in connection
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<PAGE> 121
therewith, or any contract or understanding between (i) Borrower and the Agent,
(ii) Borrower and the Banks, or any of them, or (iii) Borrower, the Agent and
the Banks, or any of them, or any other person or entity, pertaining to the
Guaranteed Obligations;
(b) Any adjustment, indulgence, forbearance or compromise
that might be granted or given by the Agent and the Banks, or any one or more
of them, to Borrower or Guarantor or any person or entity liable on the
Guaranteed Obligations;
(c) The insolvency, bankruptcy arrangement, adjustment,
composition, liquidation, disability, dissolution, death or lack of power of
Borrower or Guarantor or any other person or entity at any time liable for the
payment of all or part of the Guaranteed Obligations; or any dissolution of
Borrower or Guarantor, or any sale, lease or transfer of any or all of the
assets of Borrower or Guarantor, or any changes in the shareholders, partners,
or members of Borrower or Guarantor; or any reorganization of Borrower or
Guarantor;
(d) The invalidity, illegality or unenforceability of all
or any part of the Guaranteed Obligations, or any document or agreement
executed in connection with the Guaranteed Obligations, for any reason
whatsoever, including without limitation the fact that the Guaranteed
Obligations, or any part thereof, exceed the amount permitted by law, the act
of creating the Guaranteed Obligations or any part thereof is ultra vires, the
officers or representatives executing the documents or otherwise creating the
Guaranteed Obligations acted in excess of their authority, the Guaranteed
Obligations violate applicable usury laws, Borrower has valid defenses, claims
or offsets (whether at law, in equity or by agreement) which render the
Guaranteed Obligations wholly or partially uncollectible from Borrower, the
creation, performance or repayment of the Guaranteed Obligations (or the
execution, delivery and performance of any document or instrument representing
part of the Guaranteed Obligations or executed in connection with the
Guaranteed Obligations, or given to secure the repayment of the Guaranteed
Obligations) is illegal, uncollectible, legally impossible or unenforceable, or
the documents or instruments pertaining to the Guaranteed Obligations have been
forged or otherwise are irregular or not genuine or authentic;
(e) Any full or partial release of the liability of
Borrower on the Guaranteed Obligations or any part thereof, of any
co-guarantors, or any other person or entity now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and severally, to pay,
perform, guarantee or assure the payment of the Guaranteed Obligations or any
part thereof, it being recognized, acknowledged and agreed by Guarantor that
Guarantor may
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<PAGE> 122
be required to pay the Guaranteed Obligations in full without assistance or
support of any other person or entity, and Guarantor has not been induced to
enter into this Guaranty on the basis of a contemplation, belief, understanding
or agreement that other parties other than Borrower will be liable to perform
the Guaranteed Obligations, or the Agent will look to other parties to perform
the Guaranteed Obligations;
(f) The taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for all or any part of
the Guaranteed Obligations;
(g) Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations;
(h) The failure of the Agent or the Banks, or any one or
more of them, or any other person or entity to exercise diligence or reasonable
care in the preservation, protection, enforcement, sale or other handling or
treatment of all or any part of such collateral, property or security;
(i) The fact that any collateral, security, security
interest or lien contemplated or intended to be given, created or granted as
security for the repayment of the Guaranteed Obligations shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by Guarantor
that Guarantor is not entering into this Guaranty in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Guaranteed Obligations;
(j) Any payment by Borrower to the Agent (whether for
sums owing to the Agent or to the Agent for the benefit of the Banks) is held
to constitute a preference under the bankruptcy laws, or for any reason Bank is
required to refund such payment or pay such amount to Borrower or someone else;
(k) Any other action taken or omitted to be taken with
respect to the Guaranteed Obligations, or the security and collateral therefor,
whether or not such action or omission prejudices Guarantor or increases the
likelihood that Guarantor will be required to pay the Guaranteed Obligations
pursuant to the terms hereof; it being the unambiguous and unequivocal
intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed
Obligations when due, notwithstanding any occurrence, circumstance,
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<PAGE> 123
event, action, or omission whatsoever, whether contemplated or uncontemplated,
and whether or not otherwise or particularly described herein, except for the
full and final payment and satisfaction of the Guaranteed Obligations; or
(l) The fact that all or any of the Guaranteed
Obligations cease to exist by operation of law, including without limitation by
way of a discharge, limitation or tolling thereof under applicable bankruptcy
laws.
7. In the event any payment by Borrower or any other guarantor of
all or part of the Guaranteed Obligations to the Agent (whether for sums owing
to the Agent or to the Agent for the benefit of the Banks) is held to be a
preference under the bankruptcy laws, or if for any other reason the Agent or
the Banks are required to refund such payment or pay the amount thereof to any
other party, such payment by Borrower or by such guarantor to the Agent shall
not constitute a release of Guarantor from any liability respecting payment of
the Guaranteed Obligations, and Guarantor agrees to pay such amount to the
Agent upon demand.
8. The usury savings clause set forth in Section 14.8 of the
Credit Agreement is hereby incorporated by reference into this Guaranty and is
made a part hereof for all purposes; it being agreed that all rights and
remedies of the Agent and the Banks, or any one or more of them, hereunder are
subject to the usury savings clause.
9. This Guaranty is for the benefit of the Agent and the Banks,
and for such other persons and entities as may from time to time become or be
the holders of any Guaranteed Obligations; and this Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent as the Guaranteed Obligations may be transferable, it being understood
that upon the assignment or transfer by the Agent and the Banks, or any one or
more of them, of any Guaranteed Obligations, the legal holder of such
Guaranteed Obligations shall have all of the rights granted to the Agent and
the Banks under this Guaranty.
10. Payment of all amounts hereunder shall be made at the offices
of the Agent.
11. As security for payment of the Guaranteed Obligations and
other amounts now or hereafter owing hereunder, Guarantor hereby grants to the
Agent and to each Bank a security interest in, and a contractual pledge and
assignment of, any and all money, property, accounts, securities, documents,
chattel paper, claims, demands, instruments, items or deposits of Guarantor, or
to which Guarantor is a party, now held or hereafter coming within any of the
Banks'
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custody or control, including by way of example and not of limitation all
certificates of deposit and other depository accounts, whether such have
matured or the exercise of a Bank's rights results in loss of interest or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon Guarantor, the Agent and the
Banks, or any one or more of them, may instruct any one or more of the Banks to
exercise its rights granted above, as well as other rights and remedies at law
and equity (all of which are cumulative), at any time on or after the
occurrence and during the continuance of a Default or Event of Default. If any
notice is required by law, five (5) day's notice shall be deemed reasonable.
In addition, the Agent shall have the right to file this Guaranty as a Uniform
Commercial Code financing statement naming Guarantor, as Debtor, and the Agent,
as secured party, and indicating therein the types, or describing the items of
security herein specified. The Agent and the Banks, individually and
collectively, shall have all the rights and remedies of a secured party under
the Uniform Commercial Code and shall have the right after five (5) day's
notice, which the parties agree is reasonable, to sell at a private or public
sale, any of the collateral or other property held by any of the Banks pursuant
hereto to enforce the obligations of Guarantor hereunder. The Agent's and the
Banks' rights and remedies hereunder shall be in addition to and cumulative of
any other rights and remedies at law and equity, including, without limitation,
any rights of setoff to which the Agent or the Banks may be entitled.
12. Any notice, request or other communication required or
permitted to be given hereunder shall be given as provided in the Credit
Agreement. Guarantor will comply with and perform all affirmative and negative
covenants and agreements made by the Borrower in the Credit Agreement with
respect to the Guarantor. All representations and warranties made by the
Borrower in the Credit Agreement with respect to the Guarantor are true and
correct as of the Closing Date. Agent and the Banks shall be entitled to rely
on all of the representations and warranties made by the Borrower in the Credit
Agreement with respect to the Guarantor with the same force and effect as
though they were incorporated in this Guaranty and made by the Guarantor for
the Agent and the Banks herein.
13. This Guaranty shall not be wholly or partially satisfied or
extinguished by Guarantor's payment of any amount hereunder, including payment
of all amounts due as of any specified date, but shall continue in full force
and effect as against Guarantor for the full amount, except as otherwise
specified herein, as to all Guaranteed Obligations created, incurred or arising
prior to the time when notice of termination is given by the Guarantor to the
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<PAGE> 125
Agent as specified herein, or which thereafter may be incurred for which the
Banks have, prior to the effective date of such notice, committed to lend to
Borrower, and until payment in full thereof. Any and all extensions of credit
and financial accommodations concurrently herewith or hereafter made by the
Banks to Borrower shall be conclusively presumed to have been made in
acceptance hereof.
14. This Guaranty shall be binding upon Guarantor, its successors
and assigns and shall inure to the benefit of, and be enforceable by, the Agent
and the Banks, or any one or more of them, and their respective successors and
assigns and each and every other person who shall from time to time be or
become the owner or holder of any of the Guaranteed Obligations, and each and
every reference herein to the "Agent" or the "Banks" shall also include each
and every successor, assign, owner or holder. Guarantor shall not assign or
delegate its obligations hereunder without the prior written consent of the
Agent.
15. The undersigned guaranteeing corporation does hereby
acknowledge that it has investigated fully the benefits and advantages which
will be derived by the undersigned from execution of this Guaranty, and the
Board of Directors of the undersigned corporation has decided that, and the
undersigned corporation does hereby acknowledge, warrant and represent that, a
direct or an indirect economic benefit will accrue to the undersigned by reason
of execution of this Guaranty.
16. The release by the Banks of Borrower or one or more of the
Other Guarantors (defined below) or any other Person who guarantees payment and
performance of all or any part of the Guaranteed Obligations shall not affect
the Guarantor, who shall remain fully liable in accordance with the terms of
this Guaranty.
17. This Guaranty shall be in addition to and cumulative of, and
not in substitution, novation or discharge of, any and all prior or
contemporaneous guaranty agreements by Guarantor or other persons or entities,
in favor of the Banks or assigned to the Banks by others.
18. Guarantor represents and warrants that (i) this Guaranty is
not given with actual intent to hinder, delay or defraud any entity to which
Guarantor is or will become, on or after the date hereof, indebted; (ii)
Guarantor has received at least a reasonably equivalent value in exchange for
the giving of this Guaranty; (iii) Guarantor is not Insolvent on the date
hereof and will not become Insolvent as a result of the giving of this
Guaranty; (iv) Guarantor is not engaged in a business or transaction, nor is
about to engage in a business or transaction, for which any
-8-
<PAGE> 126
property remaining with Guarantor constitutes an unreasonably small amount of
capital; and (v) Guarantor does not intend to incur debts that will be beyond
the Guarantor's ability to pay as such debts mature. For the purposes of
making the representations set forth in Paragraph 18(iii) above, Guarantor has
taken into account its right of contribution as set forth in Paragraph 28 below
and its value as a going concern.
19. Guarantor shall furnish to the Agent all such financial
statements and other information relating to the financial condition,
properties and affairs of Guarantor as the Banks may from time to time request.
20. Guarantor will not change its address, name or identity
without notifying the Agent of such change in writing at least thirty (30) days
prior to the effective date of such change.
21. No delay on the part of the Agent or the Banks in exercising
any right hereunder or failure to exercise the same shall operate as a waiver
of such right, nor shall any single or partial exercise of any right, power or
privilege bar any further or subsequent exercise of the same or any other
right, power or privilege.
22. This Guaranty shall not be changed orally, but shall be
changed only by agreement in writing signed by the person against whom
enforcement of such change is sought.
23. The masculine and neuter genders used herein shall each
include the masculine, feminine and neuter genders and the singular number used
herein shall include the plural number. The words "person" and "entity" shall
include without limitation individuals, corporations, partnerships, joint
ventures, associations, joint stock companies, trusts, unincorporated
organizations, and governments and any agency or political subdivision thereof.
24. This Guaranty may be executed in multiple counterparts, and
each counterpart executed by any party shall be deemed an original and shall be
binding upon the person or entity executing the same, irrespective of whether
any other Guarantor has executed this or any other counterpart of this
Guaranty. Production of any counterpart other than the one to be enforced
shall not be required.
25. If any provision of this Guaranty is determined to be invalid
by any court of competent jurisdiction or to be in violation of any applicable
law, such invalidity or violation shall have no effect on any other provisions
of this Guaranty (which shall remain valid and binding and in full force and
effect)
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<PAGE> 127
or in any other jurisdiction, and to that end the provisions of this Guaranty
shall be considered severable.
26. Guarantor expressly waives any and all rights of subrogation,
reimbursement and contribution (contractual, statutory or otherwise) against
the Agent and the Banks, individually and collectively, including without
limitation, any claim or right of subrogation under the Bankruptcy Code (Title
11 of the U.S. Code) or any successor statute, arising from the existence or
performance of this Guaranty and the Guarantor irrevocably waives any right to
enforce any remedy which the Agent and the Banks, or any one or more of them,
now have or may hereafter have against the Borrower and waives any benefit of,
and any right to participate in, any security now or hereafter held by the
Agent and the Banks, or any one or more of them, until the Guaranteed
Obligations have been paid in full and until all commitments of the Agent and
the Banks, individually and collectively, to extend credit to the Borrower
under the Credit Agreement and the other Loan Documents have terminated.
27. Guarantor hereby expressly covenants and agrees for the
benefit of the Agent and the Banks that all obligations and liabilities of the
Borrower and the Other Guarantors (as that term is defined hereinafter), or any
one or more of them, to the Guarantor of whatsoever description (including,
without limitation, all intercompany receivables of the Guarantor from the
Borrower) shall be subordinated and junior in right of payment to the
Guaranteed Obligations. Following the occurrence of an Event of Default, any
indebtedness of the Borrower to the Guarantor shall, if the Agent shall so
request, be collected and received by the Guarantor as trustee for the Agent
and the Banks and paid over to the Agent and the Banks, or any one or more of
them, as the case may be, on account of the Guaranteed Obligations, but without
reducing or affecting in any manner the liability of the Guarantor under this
Guaranty.
28. Guarantor acknowledges that other Subsidiaries of the Borrower
have guaranteed the payment and performance of the Guaranteed Obligations
(collectively, the "Other Guarantors") and to the extent Guarantor is required
to satisfy all or any part of the Guaranteed Obligations pursuant to the terms
of this Guaranty, Guarantor shall have and be entitled to rights of
contribution against the Other Guarantors; provided, however, this sentence is
intended only to define the relative rights of the Guarantor and all Other
Guarantors, and nothing set forth in this sentence is intended to or shall
impair the obligations of the Guarantor and Other Guarantors, jointly and
severally, to pay to the Agent and the Banks, or any one or more of them, as
the case may be, the
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<PAGE> 128
Guaranteed Obligations as and when the same shall become due and payable in
accordance with the terms of this Guaranty.
29. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT
PROVIDED IN PARAGRAPH 29(b) BELOW AND TO THE EXTENT THAT THE FEDERAL LAWS OF
THE UNITED STATES OF AMERICA MAY OTHERWISE APPLY.
(b) NOTWITHSTANDING ANYTHING IN PARAGRAPH 29(a) ABOVE TO THE
CONTRARY, NOTHING IN THIS GUARANTY SHALL BE DEEMED TO CONSTITUTE A WAIVER OF
ANY RIGHTS WHICH THE AGENT OR ANY OF THE BANKS MAY HAVE UNDER THE NATIONAL BANK
ACT OR OTHER APPLICABLE FEDERAL LAW.
30. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY
BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES OF
AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF
THIS GUARANTY, GUARANTOR HEREBY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. GUARANTOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. GUARANTOR HEREBY
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
31. THIS GUARANTY EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING
OF GUARANTOR AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS AND
UNDERSTANDINGS OF GUARANTOR, VERBAL OR WRITTEN, RELATING TO THE SUBJECT MATTER
HEREOF.
THIS WRITTEN GUARANTY AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
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<PAGE> 129
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED effective as of December 17, 1993.
"Guarantor"
KCI FINANCIAL SERVICES, INC.,
a Delaware corporation
By:___________________________
Name:
Title:
Address:
8023 Vantage Drive
San Antonio, Texas 78230
Attn: Ms. Bianca A. Rhodes
Telephone No. (210) 524-9000
Telecopy No. (210) 308-3998
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<PAGE> 130
EXHIBIT I
FINANCIAL CONDITION CERTIFICATE
THIS FINANCIAL CONDITION CERTIFICATE (this "Certificate") is delivered
in connection with and pursuant to Section 5.1 (l) of the Credit Agreement
dated as of May 8, 1995 (the "Credit Agreement"), by and among KINETIC
CONCEPTS, INC. (the "Company"), the "Banks" from time to time parties thereto
and Bank of America National Trust and Savings Association, as Agent for the
Banks. Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement. The under-signed hereby certifies
as follows:
1. The undersigned is familiar with the properties, business and
assets of the Company, its Subsidiaries and their respective business
plans.
2. The undersigned has carefully reviewed the contents of this
Certificate, and the undersigned has conferred with counsel for the Company
and its Subsidiaries for the purpose of discussing the meaning of its
contents.
3. The undersigned has caused or supervised the preparation of a
proforma summary of the impact of the consummation of the transactions
contemplated by the Loan Documents (the "Contemplated Transactions"). The
undersigned has caused or supervised the preparation of various projections
(the "Projections") for 1995 through 2000 for the Company. A copy of the
Projections is attached hereto as Exhibit "I-1".
4. The undersigned has conducted a fair value valuation (described
below) of the Company's and its Subsidiaries' assets on a going concern
basis, such fair value valuation was prepared on the basis of information
available to the undersigned on the date of this Certificate. The
undersigned is not aware of any additional information which could
reasonably be expected to have a Material Adverse Effect.
5. In connection with the preparation of this Certificate, the
undersigned has (i) relied on historical information, revenues, expenses
and other data supplied by supervisory personnel directly responsible for
the various functions involved and other officers of the Company and its
Subsidiaries, (ii) made such inquiries and investigations as the under-
signed has deemed necessary and prudent, and the undersigned knows of no
inaccuracies in such data nor any reason why such reliance would be
unreasonable for the purposes hereof. To the best of the undersigned's
knowledge, the financial information and assumptions which underlie and
form the basis for the representations made in this Certificate were
reasonable when made and continue to be reasonable as of the date hereof.
<PAGE> 131
While projections by their nature are uncertain and can not be guaranteed,
the undersigned is familiar with the financial information and assumptions
which underlie the Projections and knows of no reason why the Projections
should not be used as a reasonable basis to predict the future financial
condition of the Companies.
6. Based on the foregoing and the reasons set forth in this
Certificate, the undersigned believes that the Company and its
Subsidiaries, taken as a whole (collectively the "Companies") and the
Company individually, both before and after the completion of the
Contemplated Transactions are not Insolvent and that each of the U.S.
Subsidiaries on a going concern basis and taking into account their
respective rights of contribution and reimbursement from the Company and ,
if applicable other Subsidiaries, are not Insolvent, both before and after
the completion of the Contemplated Transactions. This conclusion is
supported by four different approaches to valuation of the Companies - the
freely traded market capitalization of the Companies, the audited financial
statements of the Companies, a fair value valuation of the Companies'
assets based on historical performance, and a fair value valuation of the
Companies' assets based on the Projections, all as described below:
(i) The Company's common stock is freely traded under the
symbol KNCI on the NASDAQ exchange. On March 31, 1995, the common
stock of the Company closed at $7.75 per share indicating an equity
market capitalization of approximately $341,900,000. This price is
determined daily in arms length transactions and is therefore strong
evidence of fair value of the equity of the Companies. The claims of
the common shareholders of the Companies are subordinate to those of
all secured and unsecured creditors of the Companies. The Companies
total liabilities on March 31, 1995 were $45,810,000. The total
market capitalization of the assets of the Companies defined as total
liabilities plus equity capitalization is approximately $387,710,000.
After completion of the Contemplated Transactions and assuming all
Loans are fully funded, the total liabilities of the Companies will be
approximately $95,810,000. Therefore the total publicly determined
valuation of the Companies' assets is higher than the total
liabilities of the Companies, both before and after completion of the
Contemplated Transactions, demonstrating solvency and fair value in
excess of total liabilities.
(ii) The Companies' December 31, 1994 Balance Sheet was audited
by KPMG Peat Marwick in accordance with generally accepted auditing
practices. The audited statements and the accompanying Independent
Auditors' report signed by KPMG Peat Marwick represents that based on
their work the Companies' Balance Sheet is free of material mis-
statement. The December 31, 1994 Balance Sheet shows a total value of
the Companies' assets of $232,731,000 versus total liabilities of
$47,308,000 implying a shareholder or book value in excess of total
liabilities of $185,423,000.
In the audit work performed by KPMG Peat Marwick, the value of all
significant assets on the Balance Sheet was reviewed to determine
whether or not the book values of such assets were overstated due to
impairment of such assets.
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<PAGE> 132
The financial statements show a value according to generally accepted
auditing practices which is substantially in excess of the total
liabilities of the Companies, again evidencing solvency.
(iii) The undersigned has conducted a fair value valuation of
the Companies' assets based on historical performance and the
following parameters:
(A) The valuation was based on the Companies' audited December
31, 1994 Balance Sheet;
(B) Cash was valued at 100% of stated value;
(C) Accounts receivable were valued at 70% of stated value;
(D) All other current assets were valued at 50% of stated
value;
(E) All non-current assets were valued at the present value of
the cash flow provided by operations in the calendar year
1994 discounted at a 11% risk adjusted cost of capital.
For purposes of this valuation the Companies' cash flow
is assumed to be flat in the foreseeable future.
The detail of this valuation is provided in Exhibit "I-2"
attached hereto.
This fair value valuation of the Companies is summarized
below:
<TABLE>
<CAPTION>
Value Stated Value Fair Value
----- ------------ ----------
<S> <C> <C>
Cash $ 43,241,000 $ 43,241,000
Receivables 69,521,000 48,664,000
Other Current Accounts 22,641,000 11,320,500
------------ ------------
Total Current Assets 135,403,000 103,225,500
Non-current Assets 97,328,000 467,273,000
------------ ------------
Total Asset Valuation 232,731,000 570,498,500
Less: Total Liabilities
(including Preferred stock
& minority interest subject
to put option) 47,308,000 47,308,000
------------ ------------
Excess Asset Value 185,423,000 523,190,500
============ ============
</TABLE>
Based on historical performance, the total asset valuation of
the Companies' ($570,498,500) is substantially in excess of the
total liabilities of the Companies, evidencing solvency.
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<PAGE> 133
(iv) The undersigned has conducted a fair valuation of the
Companies' assets based on the 1995 Projections. Using the same
parameters described in (iii) and Exhibit "I-2". This fair value
valuation of the Companies is summarized below:
<TABLE>
<CAPTION>
Projected 1995
Value Stated Value Fair Value
----- ------------ --------------
<S> <C> <C>
Cash $ 59,847,000 $ 59,847,000
Receivables 60,398,000 42,278,600
Other Current Accounts 33,542,000 16,771,000
------------ ------------
Total Current Assets 153,787,000 118,896,600
Non-current Assets 95,624,000 380,000,000
------------ ------------
Total Asset Valuation 249,411,000 498,896,600
Less: Total Liabilities 42,836,000 42,836,000
------------ ------------
Excess Asset Value 206,575,000 456,060,600
============ ============
</TABLE>
Using the Projections, the total asset valuation of the
Companies is substantially in excess of the total liabilities of
the Companies, evidencing solvency.
7. The Companies do not intend, in consummating the Contemplated
Transactions, or otherwise, to delay, hinder or defraud either present or
future creditors or other persons to which the Companies, or any of them,
will become, on or after the date hereof, indebted.
8. The undersigned understands that Agent and the Banks are relying
on the truth and accuracy of the foregoing in connection with the extension
of credit to the Company pursuant to the Credit Agreement.
9. As of the date hereof, after giving effect to the incurrence of
the obligations under the Credit Agreement and the Loan Documents, the
Companies anticipate (and believe that such anticipation is reasonable)
that they will continue to be able to realize upon their assets and pay
their liabilities (including contingent liabilities) as such liabilities
mature.
IN WITNESS WHEREOF, the undersigned has caused its duly authorized
officer to execute and deliver this Certificate as of May 8, 1995.
KINETIC CONCEPTS, INC.
By:_______________________________
Bianca A. Rhodes,
Senior Vice President and Chief
Financial Officer
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<PAGE> 134
EXHIBIT "I-2"
FAIR VALUATION OF CURRENT ASSETS
Accounts Receivable were valued at seventy percent (70%) of stated
value. Historically, less than five percent (5%) of the Companies' accounts
are ultimately written off. After taking into account a reserve for bad
accounts, it is felt that valuing receivables at seventy percent (70%) of their
stated value is a very conservative approach.
All other current assets were valued at fifty percent (50%) of stated
value. Other current assets consist primarily of raw materials and inventory
used for construction of new beds and for repair of existing beds. This
inventory supports products that the Companies continue to rent and if the
Companies discontinue manufacture of certain products, probably half of the raw
materials and inventory could continue to be used in the manufacture of the new
products and in the continuing support of products which are in the field.
Further, the Companies have no present intention of discontinuing the
manufacture of any product or group of products which would make it likely that
fifty percent (50%) or more of the Companies' raw materials and inventory could
not be used in the manufacture of new products or in the continuing support of
products which are in the field. The inventory has a long shelf life and is
non-perishable. The replacement cost of this inventory is stable and not
declining. Further, anyone who wanted to continue with the Companies' business
would require this inventory.
FAIR VALUATION NON-CURRENT ASSETS
The Companies used a eleven percent (11%) capitalization rate to
determine the present value of the Companies' non-current assets based on
present and projected cash flows. The eleven percent (11%) rate was chosen
because it is a conservative estimate of the Companies' risk adjusted cost
of capital. Generally, the Companies' debt capital costs approximate four
percent (4%) per annum while the cost of equity capital is fourteen to
fifteen (14 to 15%) percent per annum. Accordingly, the Companies' blended
cost of capital of the Companies' is eleven percent (11%).
HISTORICAL PERFORMANCE
Assumption: The non-current assets of the Companies consist primarily
of the net property, plant and equipment of the Companies' rental equipment
fleet and goodwill incurred in acquisitions. With these assets, the
Companies generate cash flow shown in the Companies' financial statements.
The fair value valuation of these assets is the present value of the cash
flow produced by these assets discounted to the present using an 11% cost
of capital.
<PAGE> 135
The cash flow provided by operations in 1994 excluding the effect of
unusual items was approximately $64,200,000. Maintenance capital
expenditure requirements are estimated to be 20% of the cash flow from
operations, or $12,800,000 in 1995. For the purposes of this fair value
valuation, the cash flows and maintenance capital expenditure requirements
are projected to be flat at the 1995 level.
The fair value valuation of the Companies' non-current assets by this
method is $467,273,000 ($64,200,000 less $12,800,000 divided by .11 =
$467,273,000).
PROJECTIONS
Assumption: The non-current assets of the Companies consist
primarily of the net property, plant and equipment of the Companies' rental
equipment fleet and goodwill incurred in the acquisitions. With these
assets, the Companies generate cash flow shown in the Companies' financial
statements. Using the Projections, the value of these assets is the
discounted present value of the future cash flow produced by these assets,
net of maintenance capital expenditure requirements, assumed to be 20% of
cash flow from operations. Based on the Projections, the net cash flow
from operations, net of maintenance capital requirements is projected to be
$40,100,000 in 1995, $36,500,000 in 1996, $43,500,000 in 1997, $51,300,000 in
1998, $57,700,000 in 1999, $60,100,000 in 2000 and the next nine years.
Discounting these projected cash flows using an 11% cost of capital yields a
present value of approximately $380,000,000. The fair valuation of the
Companies' non-current assets by this method is thus estimated to be
$380,000,000.
All fair value valuations set forth in this Certificate have taken
into account the present and projected business prospects of the health
care industry and the economic environment generally. Further, the
Projections assume a reasonable growth (3% per annum) in revenues and
reasonable margins. These assumptions are believed to be reasonable in
light of the historical performance of the Companies and their future
prospects.
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<PAGE> 136
SCHEDULE 4.8
PLANS
(a) 1. All Plans maintained or sponsored by the Company:
1. Kinetic Concepts, Inc. Employee Stock Ownership Plan
2. Kinetic Concepts, Inc. 1987 Key Contributor Stock Option Plan
3. Kinetic Concepts, Inc. 1988 Eligible Director Stock Option Plan
4. Kinetic Concepts, Inc. Cash or Deferred Profit Sharing Plan
5. Kinetic Concepts, Inc. Employee Group Health Plan
6. Kinetic Concepts, Inc. Employee Group Term Life Insurance Plan
7. Kinetic Concepts, Inc. Employee Long Term Disability Insurance Plan
8. Kinetic Concepts, Inc. Employee Short Term Disability Insurance
Plan
9. Medirec Cash or Deferred Profit Sharing Plan
10. Humana Health Plan of San Antonio - Group Contract for Employees
of Kinetic Concepts, Inc.
11. United Dental Care of Texas, Inc. - Group Contract for Employees
of Kinetic Concepts, Inc.
12. PacifiCare of Texas, Inc. - Group Contract for Employees of Kinetic
Concepts, Inc.
13. Hawaii Medical Services Association - Blue Cross Blue Shield of
Hawaii - Group Contract for Employees of Kinetic Concepts, Inc.
14. Kinetic Concepts, Inc. Employee Benefits Trust
15. Denticare, Inc. - Group Contract for Employees of Kinetic
Concepts, Inc.
16. Prudential Healthcare, Inc. Group Contract for Employees of Kinetic
Concepts, Inc.
17. Commercial Life Insurance Co. Group Universal Life
2. Plans to which the Company is obligated to contribute:
1. Kinetic Concepts, Inc. Employee Stock Ownership Plan
2. Kinetic Concepts, Inc. Eligible Director Stock Option Plan
3. Kinetic Concepts, Inc. Cash or Deferred Profit Sharing Plan
4. Kinetic Concepts, Inc. Employee Group Health Plan
5. Kinetic Concepts, Inc. Employee Benefits Trust
3. Qualified Plans:
1. Kinetic Concepts, Inc. Employee Stock Ownership Plan
2. Kinetic Concepts, Inc. Cash or Deferred Profit Sharing Plan
(b) Outstanding Liabilities under ERISA:
1. Incurred but not reported or paid claims under the Employee Group
Health Plan
2. Cash or Deferred Profit Sharing Plan matching contributions for the
current month
(c) Unfunded Pension Liabilities:
1. Employee Stock Ownership Plan outstanding loan balance
(d) Plans providing medical or other welfare benefits and extended coverage
related to such benefits beyond the date of a participant's termination of
employment;
1. COBRA extensions for Employee Group Health Plan
<PAGE> 137
Schedule 4.8
Page 2
(e) ERISA Events that have occurred:
None
(f) 1. Section 4201 and 4243 liabilities:
None
2. Title IV liabilities:
None
(g) Transferred Unfunded Pension Liabilities and transactions subject to
Section 4069 or 4212(c) of ERISA:
None
<PAGE> 138
SCHEDULE 4.13
ENVIRONMENTAL DISCLOSURES
The below disclosures should not be considered as reflecting any
conclusion that the Company or any of its Subsidiaries is or has been
in non-compliance with the Environmental Laws or is otherwise liable
for any Environmental Claims:
(a) NON-COMPLIANCE WITH THE ENVIRONMENTAL LAWS:
I. Records indicate that in December or 1987, preliminary to the
Company's purchase of real property located at 4958 Stout Drive, San
Antonio, Texas 78219 ("Stout Facility"), authorities of the City of
San Antonio required removal of two underground storage tanks (USTs).
The requirement was apparently met, but there is no indication that
notice of the removal was given to the Texas Water Commission (TWC),
possibly in violation of statutory provisions believed to have become
effective three months earlier. On May 7, 1991, the Company received
the results of a chemical analysis of the site where the USTs are
believed to have been removed. Those results indicate hydrocarbon
levels of 6800 ppm TPH and of 30.2 ppm total BTEX at approximately 15
feet subsurface. Groundwater was not encountered. The Company
notified TWC of all the foregoing by letter dated June 6, 1991,
following discovery thereof. The Company has proceeded with a
comprehensive site assessment and the development of a remedial
action plan, in compliance with TWC requirements. The TWC has not
required any further actions at this time.
II. Correspondence has been received from the National Rivers Authority
in the united Kingdom addressed to the occupiers of Unit 10, Atlas
Court, Hermitage Industrial Estate, Coalville, Leicestershire
concerning the alleged disposal of contaminated water by the
occupiers following the cleaning of beds on the site. The occupiers
were asked to cease washing down equipment to surface water drains,
and they have ceased to do so.
III. Property recently acquired by Mediscus Products GmbH (now owned by
the Company's international subsidiary) at Lappacher Weg 30 in
Hoechstadt, Germany, reportedly evidenced superficial oil
contaminations. A report obtained from the expert Dr. R. Funke dated
December 12, 1990 confirmed that such contamination was found.
IV. By letter dated October 5, 1990 the U.S. Environmental Protection
Agency (EPA) requested permission to access real property at 11900
Steele Creek Road, Charlotte, North Carolina 28217, which was then in
possession of a wholly-owned subsidiary of the Company, Kinetic
Concepts Manufacturing, Inc., d/b/a Simmons Healthcare (KCMI). The
letter advised that EPA had reason to
<PAGE> 139
believe a release of hazardous substances had occurred or might occur
from the location and requested access to the property to do
monitoring, sampling and testing, all pursuant to 42 U.S.C. 9604(e)
(the "Superfund Stature"). The Company voluntarily granted such
permission to the EPA which reportedly completed its site
investigation through a contractor on October 23 and 24, 1990.
The Company obtained a copy of the study plan for the "Phase II Site
Inspection" prepared by EPA's contractor, NUS Corporation. The study
plan indicates that the primary focus of the investigation was to
determine whether there was an authorized dumping of paint wastes at
the facility as was indicated in a 1979 report. There was also a
reference in the study plan to a 1982 analysis of wastes from the
site. All of these circumstances predate KCMI's association with the
site by five to seven years. Because it is the Company's
understanding that KCMI only leased this property, the facts do not
seem to indicate that KCMI is being considered a responsible party
or that the alleged contamination was the result of KCMI's operations
as opposed to operations which predate KCMI's operation of the site.
On February 1, 1991 Katherine Compton of Cox & Smith Incorporated
spoke to Sam Betts (704/542-3627) who was an employee of Simmons
Healthcare prior to Simmons Healthcare being purchased by KCMI, and
was retained as an employee during KCMI's ownership of same. He
recalled when the EPA visited the Simmons Healthcare site. He
indicated that on October 23-24, 1990, one woman and three men who
were subcontractors of the EPA out of Atlanta came to the Simmons
Healthcare leased site. They drilled one test well. Mr. Betts
indicated that the test well was about four feet deep. He indicated
that the EPA said it would take at least six months to one year
before they would get a report back to Simmons Healthcare. However,
Mr. Betts asked on of the subcontractors what the results of the
report were. The subcontractor indicted that although "legally he
could not say anything, it did not look like there was any problem".
Apparently, the EPA study was cut short because nothing was found.
Mr. Betts also indicated that about seven or eight years ago the
local EPA came out to the Simmons Healthcare plant on a one-time
review of the property indicating that they needed to "scoop up"
about four inches of paint right at the back door of the plant which
had been spilled. The paint was picked up and moved to a landfill.
Once the paint was moved to a landfill, Simmons Healthcare never
heard again from the local EPA.
The assets of KCMI were sold to Omni Manufacturing, Inc. on November
6, 1990. Omni Manufacturing, Inc. is an entity unrelated to Kinetic
Concepts, Inc. or any of its subsidiaries. The Company has contacted
the EPA and asked them for a final report. This report has not yet
been received.
<PAGE> 140
V. Prior to the Company purchasing Medirec (now KCI Medical Services,
Inc.), Medirec owned an interest in property located at 4731-4735
South State, Murray, Utah 84107. Reportedly, the property was
originally the site of the Murray City Fire Station, and at least one
UST was located on the property to hold petroleum products used by
the Murray City Fire Department, and has since been the site of a
BMW sales and service center. Although it is unknown how Murray City
disposed of discarded engine oil or whether such disposal was in
compliance with law, the Company believes that all discarded oil is
presently being placed in above-ground containers and is pumped out
and removed from the premises. An office/warehouse space also on the
property has a hydraulic lift which may be classified as an
underground tank. The hydraulic lift and the underground storage
tanks are not believed to have ever been registered under federal or
state law or regulation.
In July of 1990, the former shareholders of Medirec caused the
removal of the UST and commissioned testing of the soil at the site
of the UST for environmental hazards. The former shareholders of
Medirec have agreed to indemnify KCI for the cost of removing any
hazardous substance found on the site in relation to the UST,
although no excessive contamination has been found on the property.
The Company sold the property on or about April 1, 1991.
VI. In 1991, KCI Properties LTD. (a Texas Limited Liability Company
wholly owned by the Company) purchased from the RTC a 15-story
commercial office building with an attached multi-story parking
garage (collectively known as the Victoria Tower) and related real
property located at 8023 Vantage Drive, San Antonio, Texas. Based on
information and belief, gasoline vapors at the site ignited during
construction of the Victoria Tower in 1984, and a legal dispute
ensued and was eventually settled with Mobil Oil Co. (which owned an
adjacent service station uphill from the Victoria Tower property) and
other properties.
Thereafter, french drains, a vent system, monitoring wells, and
explosimeters were installed on or around the Victoria Tower property
for facilitating monitoring and remediation. Since 1991, KCI Real
Property Ltd. (a Texas Limited Liability Company) purchased a vacant
lot adjacent the Victoria Tower property from the FDIC. Engineering
reports and verbal information from the TWC have since confirmed that
groundwater contamination has been present on both the Victoria Tower
property and the adjacent lot but that the Mobil service station is
the confirmed source of contamination. Although the company believes
that any liability upon the Company is highly remote in connection
with the contamination, others have expressed the possibility that
the
<PAGE> 141
contamination may never be completely removed. The TWC is treating
Mobil as the responsible party, and everything indicates that Mobil
will continue as the responsible party. Access to check monitoring
wells has been granted by KCI Properties Ltd. to Mobil, and remedial
activities are continuing on adjacent sites, apparently in compliance
with the TWC.
(b) Required Permits not obtained:
None at present, unless in relation to (a) above.
(c) Orders to which the Company, it Subsidiaries
or any of their properties are subject:
None at present, unless in relation to (a) above.
(d) Environmental Claims associated with any
property of the Company of its Subsidiaries
(or their predecessors in title):
None at present, unless in relation to (a) above.
(e) Environmental Claims associated with
operations of the Company or any of its
Subsidiaries:
None at present, unless in relation to (a) above.
VII. By TWC letter dated August 26, 1993, KCI has received notice that
KCI may be a potentially responsible party with respect to a J.C.
Pennco Waste Oil Service Site, located at 4927 Higdon Rd., San
Antonio, Texas, which has been referred to the Superfund Discovery
and Assessment Team of the Pollution Cleanup Division. Records
indicate that KCI disposed of six 55 Gallon drums of regulated waste
(classified 17H DOT) on July 16, 1991 and one 50 Gallon drum of used
oil (classified as "Waste Oil") on February 7, 1992 at the J.C.
Pennco site. Based upon information received from the Texas Natural
Resource Conservation Commission (TNRCC), KCI considers any liability
it may have in connection with the J.C. Pennco site to be de minimis.
No further actions have been taken.
<PAGE> 142
SCHEDULE 4.22
KCI SUBSIDIARIES
A. Kinetic Concepts, Inc., a Texas corporation
Subsidiaries:
1 KCI Therapeutic Services, Inc., a Delaware corporation
2 KCI International, Inc., a Delaware corporation
a. KCI Medical Canada Inc., a Canadian corporation
b. Mediscus International Limited, a United Kingdom
corporation
(i) KCI Medical United Kingdom Limited, a United
Kingdom corporation
c. Mediscus Products Limited, a United Kingdom
corporation
(i) Home-Care Medical Products Limited, a United
Kingdom corporation
(ii) KCII Medical Limited, a United Kingdom
corporation (formerly Lingard Leasing
Limited), [Lingard Plastics Ltd. dissolved]
d. KCI Medical Holding GMBH (formerly) KCI Medical
GmbH, a Federal Republic of Germany GmbH and
(formerly KCI Handels GmbH)
(i) KCI Mediscus Produkte GmbH
e. Equipement Medical KCI, S.A.R.L., a French
corporation
f. KCI Medical B.V., a Netherlands corporation
g. KCI-Mediscus AG, a Swiss corporation
h. Mediscus medizinisch-technische Gerate
Handelsgesellschaft mbH Austria
i. KCI Europe Holding B.V., a Netherlands corporation
<PAGE> 143
j. KCI International-Virgin Islands, Inc., a Virgin Islands
corporation
k. KCI Medica Espana, S.A., a Spanish corporation
l. KCI Medical Australia PTY, Ltd., an Australian corporation
m. KCI Medical S.r.l., an Italian corporation
[KCI-Mediscus Klinikausstattung Gesellschaft mbH, an
Austrian corporation - DISSOLVED IN 1994]
3. KCI Financial Services, Inc., a Delaware corporation
4. KCI New Technologies, Inc., a Delaware corporation
(d/b/a NuTech)
5. KCI Properties Limited, a Texas limited liability
company
6. KCI Real Property Limited, a Texas limited liability company,
(d/b/a Premier Properties)
7. KCI Clinical Systems, Inc., a Delaware corporation
<PAGE> 144
SCHEDULE 7.1
EXISTING LIENS
AS OF MAY 8, 1995
<TABLE>
<CAPTION>
Date of
Property Under Release
Lien Lien Held by Securing of Lien
-------------- ------------ -------- -------
<S> <C> <C> <C> <C>
A. Telephone System AT&T Credit AT&T Lease Nos. Estimated
M3002 5/95
Schedule 10020 7/95
</TABLE>
<PAGE> 145
SCHEDULE 7.5
EXISTING INDEBTEDNESS
AS OF MAY 3, 1995 (EXCEPT AS OTHERWISE NOTED BELOW)
A. Capital Lease Obligations
The following capital lease obligations of KCI and KCI Therapeutic Services,
Inc.:
<TABLE>
<CAPTION>
Remaining
Gross Maturity NBV of
Lessor Lease No. Date Payments Date Equipment
------ --------- ---- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1. AT&T Credit M3002 06/01/90 $ 10,334 05/01/95 $ 9,384
at 3/31/95 Sch 10020 08/01/93 2,053 07/31/95 7,963
--------- ---------
$ 12,387 $ 17,347
</TABLE>
2. Citicorp North America, N.A. Master Lease Agreement No. 753283-001 through
006 were assumed by Mediq/PRN Life Support Services-I, Inc. as part of the
sale of the Medical Services Division. The remaining gross payments are
approximately $1,053,238. These leases mature at various times beginning in
May 1995 and ending in November 1995. KCI is obligated to Citicorp under a
guaranty agreement.
B. Credit Facility of $50,000,000 pursuant to proposed Credit Agreement dated
May 5, 1995 between Kinetic Concepts, Inc. and Bank of America National
Trust and Savings Association, as Agent, and the several financial
institutions which are parties to the agreement.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 47,509,540
<SECURITIES> 0
<RECEIVABLES> 74,933,217
<ALLOWANCES> (7,700,377)
<INVENTORY> 19,656,408
<CURRENT-ASSETS> 139,625,845
<PP&E> 167,661,439
<DEPRECIATION> (113,356,014)
<TOTAL-ASSETS> 238,012,680
<CURRENT-LIABILITIES> 41,954,735
<BONDS> 0
<COMMON> 44,111
0
0
<OTHER-SE> 192,159,181
<TOTAL-LIABILITY-AND-EQUITY> 238,012,680
<SALES> 8,605,692
<TOTAL-REVENUES> 57,027,445
<CGS> 3,916,214
<TOTAL-COSTS> 43,533,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (47,881)
<INTEREST-EXPENSE> (532,757)
<INCOME-PRETAX> 10,110,169
<INCOME-TAX> 4,012,000
<INCOME-CONTINUING> 6,098,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,098,169
<EPS-PRIMARY> $0.14
<EPS-DILUTED> $0.14
</TABLE>
<PAGE> 1
EXHIBIT 99
Kinetic Concepts, Inc.
San Antonio, Texas
Gentlemen:
Re: Registration Statement Nos. 33-26673, 33-26674
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated April 21, 1995 related to our
review of interim financial information.
Pursuant to Rule 436 (c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
KPMG Peat Marwick LLP
San Antonio, Texas
May 12, 1995
